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EC hits Nike with fine in football merchandise case

The European Commission (EC) has today (Monday) fined Nike more than €12.5m ($14.15m) after ruling that the US sportswear giant imposed restrictive trading terms on the sale of merchandise for a host of top football clubs over a 13-year period.

The EC has fined Nike for banning traders from selling licensed merchandise to other countries within the European Economic Area. This restriction concerned merchandising products of clubs such as Spanish LaLiga outfit Barcelona, English Premier League team Manchester United, and Italian Serie A trio Juventus, Inter Milan and AS Roma, as well as national bodies like the French Football Federation, for which Nike held the licence.

In June 2017, the Commission opened an antitrust investigation into certain licensing and distribution practices of Nike to assess whether it illegally restricted traders from selling licensed merchandise cross-border and online within the EU Single Market.

The Commission’s investigation found that Nike’s non-exclusive licensing and distribution agreements breached EU competition rules. The probe ruled that Nike imposed a number of direct measures restricting out-of-territory sales by licensees, such as clauses explicitly prohibiting these sales.

Nike is said to have enforced indirect measures to implement the out-of-territory restrictions, for instance threatening licensees with ending their contract if they sold out-of-territory.

In some cases, the EC found that Nike used master licensees in each territory to grant sub-licences for the use of the different intellectual property rights (IPRs) to third parties. To secure the practice through the whole distribution chain, Nike imposed direct and indirect measures on master licensees. Through these measures, Nike compelled master licensees to stay within their territories and to enforce restrictions via their sub-licensees.

Nike was also found to have included clauses that explicitly prohibited licensees from supplying merchandising products to customers, often retailers, who could be selling outside the allocated territories.

The Commission concluded that Nike’s illegal practices, which were in force from approximately July 1, 2004 until October 27, 2017, partitioned the Single Market and prevented licensees in Europe from selling products cross-border, to the ultimate detriment of European consumers.

However, the EC did state that Nike cooperated with the Commission beyond its legal obligation to do so, resulting in it granting a 40 per cent reduction in the fine, the total amount of which is €12,555,000.

Commissioner Margrethe Vestager, in charge of competition policy, said: “Nike prevented many of its licensees from selling these branded products in a different country leading to less choice and higher prices for consumers. This is illegal under EU antitrust rules.

“Today’s decision makes sure that retailers and consumers can take full advantage of one of the main benefits of the Single Market: the ability to shop around Europe for a larger variety of products and for the best deals.”

The Nike fine represents the latest sanction in a wider EC inquiry into e-commerce as it seeks to boost online trade and economic growth.