Summary of Commission Decision

of 25 March 2019

relating to proceedings under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the Agreement on the European Economic Area

(Case AT.40436 — Ancillary sports merchandise)

(notified under document number C(2019) 2172 final)

(Only the English text is authentic)

(Text with EEA relevance)

(2019/C 216/05)

On 25 March 2019, the Commission adopted a decision relating to a proceeding under Article 101 of the Treaty on the Functioning of the European Union and Article 53 of the Agreement on the European Economic Area. In accordance with the provisions of Article 30 of Council Regulation (EC) No 1/2003 (1), the Commission herewith publishes the names of the parties and the main content of the decision, including any penalties imposed, having regard to the legitimate interest of undertakings in the protection of their business secrets.

1. INTRODUCTION

(1) The Decision is addressed to Nike, Inc., and certain of its subsidiaries (hereafter ‘Nike’) for infringing Article 101 of the Treaty on the Functioning of the European Union (the ‘Treaty’) and Article 53 of the Agreement on the European Economic Area (‘EEA Agreement’).

(2) Between 1 July 2004 and 27 October 2017, Nike – in its role as licensor for certain football brands – participated in a single and continuous infringement which involved the implementation and enforcement within the EEA of a series of practices restricting active and passive cross-border sales of licensed merchandise.

2. CASE DESCRIPTION

2.1. The products concerned

(3) The Decision concerns Nike's activities as a licensor for the brands of certain football clubs and federations (jointly referred to as ‘clubs’). It concerns products of a varied nature (mugs, bedsheets, stationery, toys, etc.) all of which bear the brands or colours of clubs, but not the Nike brands. These products are often referred to as licensed merchandise products.

(4) To enable the manufacturing and sale of the licensed merchandise products, Nike grants manufacturing and distribution licences for the intellectual rights which it obtained from the clubs.

(5) The grant of these manufacturing and licensing rights by Nike is done either directly to the party that distributes them (‘licensee’) or indirectly by means of a ‘master licensee’ who, in exchange for a certain commission, further sublicenses the rights to final licensees. Regardless of the system used, the conditions for the licence are typically included in an agreement also governing the distribution of the products on which the licensed intellectual property right will be applied. These agreements are generally: a) Granting a non-exclusive licence: either explicitly stated in the agreement or implied because Nike reserves itself the right to appoint additional licensees; b) For a specific territory, often a group of countries; c) In exchange for a financial compensation (royalties) as compensation for the licence: the amount of royalties to be reported to Nike and paid is normally calculated as a percentage of the products' net sales during a certain period.

(6) These licensing and master licensing agreements, and more broadly, the relationships that are built on the basis of those agreements, are the focus of the Decision.

2.2. Procedure

(7) In September 2016, the Commission conducted unannounced inspections at Nike, Inc.'s European Headquarters in Hilversum, in the Netherlands.

(8) By decision of 14 June 2017, the Commission initiated proceedings in accordance with Article 2(1) of Commission Regulation (EC) No 773/2004 ( 2 ) against Nike, Inc. and all legal entities directly or indirectly controlled by it. The purpose of the initiation of proceedings was to investigate whether Nike had in place agreements and/or applied practices preventing or restricting the sale of licensed merchandise in the EEA.

(9) Subsequently, Nike submitted a formal offer to cooperate in view of the adoption of a decision pursuant to Article 7 and Article 23 of Regulation (EC) No 1/2003 (‘settlement submission’).

(10) On 14 February 2019, the Commission adopted a statement of objections addressed to Nike. On 28 February 2019, Nike submitted its reply to the statement of objections.

(11) The Advisory Committee on Restrictive Practices and Dominant Positions issued a favourable opinion on 20 March 2019.

(12) The Commission adopted this Decision on 25 March 2019.

2.3. Summary of the infringement

(13) A series of practices restricting active and passive cross-border sales of licensed merchandise were put in place throughout Nike's football merchandising business. These practices concerned both offline and online sales of licensed merchandise products throughout the EEA. Four main types of restrictions are covered by the Decision: a) Direct measures restricting out-of-territory sales by licensees, such as (i) prohibitions of out-of-territory passive and active sales; (ii) obligations to refer orders for out-of-territory sales or queries to Nike; (iii) clauses clawing back royalties and revenues deriving from out-of-territory sales; and (iv) clauses imposing double royalties for out-of-territory sales; b) Indirect measures restricting out-of-territory sales by licensees such as threats to end the agreements for those licensees selling outside their allocated territories; c) Restrictive practices implemented vis-à-vis master licensees to compel them to stay within their territories and to enforce restrictions vis-à-vis their sub-licensees on behalf of Nike; and d) Obligations to pass on the restrictions regarding out-of-territory sales through practices including at times prohibiting sales by licensees to third parties selling out-of-territory the licensed merchandise of Nike's clubs.

(14) Through this set of practices, Nike restricted licensees' and master licensees' ability to sell licensed merchandise cross-border. This single and continuous infringement contributed to restoring the divisions between national markets and might have also led to a reduction in the choice available for consumers and to increased prices directly deriving from the lower level of competition. This conduct constitutes, by its very nature, a restriction of competition by object within the meaning of Article 101(1) of the Treaty.

(15) The Decision also finds that the conduct does not meet the conditions for exemption provided for in Article 101(3) of the Treaty.

2.4. Addressees and duration

(16) The Decision is addressed to Nike, Inc., the ultimate parent company of the Nike group of companies, as well as to certain of its subsidiaries involved in the merchandising business: Nike European Operations Netherlands B.V., F.C. Internazionale Merchandising S.r.l., French Football Merchandising SASU, Nike Barcelona Merchandising, S.L. (previously known as Futbol Club Barcelona Merchandising, S.L.), and North West Merchandising Limited (previously known as Manchester United Merchandising Limited).

(17) The duration of the single and continuous infringement spans the period during which the restrictions were present in Nike's agreements within the EEA, namely between 1 July 2004 and 27 October 2017 (date by which Nike had informed all its licensees and master licensees about the inapplicability of any out-of-territory restrictions in its agreements).

2.5. Remedies and fines

(18) The Decision finds that Nike brought the infringement to an end on 27 October 2017 and requires Nike to refrain from any agreement or concerted practice which might have the same or a similar object or effect. The Commission also considers that the infringement was committed intentionally, and if not at least negligently, and that a fine needs to be imposed.

2.5.1. Basic amount of the fine

(19) In setting the fines, the Commission in principle takes into account the value of sales during the last full business year of the undertaking's participation in the infringement. For the purposes of calculating the value of sales, the Decision uses the amount of royalties collected by Nike during the last full business year of each sponsorship agreement making up the infringement.

(20) Out-of-territory restrictions, by their very nature, restrict competition within the meaning of Article 101(1) of the Treaty. However, vertical restraints are generally less harmful than horizontal ones. Taking into account these factors and the EEA-wide impact of the restrictions, the percentage of the value of sales to be used for calculating the fine is set at 8 %.

2.5.2. Aggravating or mitigating circumstances

(21) There are no aggravating or mitigating circumstances in this case.

2.5.3. Specific increase for deterrence

(22) The fine is increased by a 1,1 multiplier to ensure a deterrent effect on Nike, an undertaking with a particularly large worldwide turnover beyond the sales of licensed merchandise products to which the infringement related.

2.5.4. Application of the 10 % turnover limit

(23) The calculated fine does not exceed 10 % of Nike's total worldwide turnover.

2.5.5. Reduction of the fine in view of cooperation

(24) In order to reflect the effective and timely extent of the cooperation provided by Nike, in particular its acknowledgement of the infringement and the submission of additional evidence extending the case beyond its initial scope, the amount of the fine is reduced by 40 % pursuant to point 37 of the Guidelines on Fines.

3. CONCLUSION

(25) Nike infringed Article 101(1) of the Treaty and Article 53 of the EEA Agreement by participating in a single and continuous infringement regarding licensed merchandise. The infringement covered the whole of the European Economic Area, and consisted in the implementation and enforcement of a series of agreements and practices aimed at restricting cross-border sales of licensed merchandise, both offline and online.

(26) The final amount of the fine imposed on the undertaking Nike pursuant to Article 23(2)(a) of Regulation (EC) No 1/2003 for the single and continuous infringement is EUR 12 555 000.

(1) OJ L 1, 4.1.2003, p. 1.

(2) OJ L 123, 27.4.2004, p. 18.