More on Merchandising Agreements and cross-border sales restrictions – Hello Kitty
News    ·   24-07-2019
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AUTHOR: Ron Galea Cavallazzi; Lisa Abela; Katya Gatt

Hello Kitty producer Sanrio Company Ltd. (Sanrio) has been fined €6.2 million for banning its licensed traders from selling merchandise, including its popular Hello Kitty figure, across borders to other countries within the European Economic Area (EEA). This decision comes just a few months after the European Commission (Commission) imposed a €12.5 million fine on Nike for likewise restricting cross-border sales within the EEA (please refer to our article at <http://camilleripreziosi.com/en/news-resources/1/3571/european-commission-fines-nike-215-million-fo>). Universal Studios’ merchandising arrangements are also currently under scrutiny by the Commission.

The Commission’s investigation into Sanrio’s non-exclusive licensing agreements concluded that Sanrio imposed a number of direct and indirect measures to restrict out-of-territory sales by licensees, breaching EU competition law.

Amongst its direct measures, Sanrio included clauses explicitly prohibiting cross-border sales, obligations to refer orders for out-of-territory sales to Sanrio, and limitations on languages used on products, in its licensing agreements. Indirect measures such as carrying out audits and non-renewal of contracts if the mentioned conditions were breached indirectly encouraged compliance with the restrictions.

These measures, the Commission concluded, which were in force for around 11 years, “partitioned the Single Market and prevented licensees in Europe from selling products cross-border, to the ultimate detriment of European consumers”.

As in Nike, the Commission set its fine on the basis of the infringement’s duration, gravity and value of sales. Once again, a 40% fine reduction was granted to Sanrio for its extensive cooperation in the investigation, providing the Commission with important information and evidence, and expressly acknowledging the facts and infringements, bringing the fine down to €6,222,000.

European Commission press release may be accessed on <http://europa.eu/rapid/press-release_IP-19-3950_en.htm>

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