Author:
dr Christian Andrelang, LL.M.
Lawyer
Specialist lawyer for international business law
Specialist lawyer for commercial and corporate law
In mid-2019, the European Commission imposed a fine of EUR 6.2 million in fine proceedings against Sanrio, the trademark owner of "Hello Kitty", because Sanrio prevented its retailers from selling licensed "Hello Kitty" products across borders within the United States European Economic Area for sale. These trademark license restrictions are an antitrust violation.
Trademark license antitrust violation - what is it about?
Sanrio of Japan licenses the Hello Kitty trademark to retailers who sell products bearing the Hello Kitty logos. Sanrio does not manufacture these products itself and therefore does not operate a selective distribution system. However, antitrust law also applies to contracts for a trademark license.
The European Commission investigated how Sanrio's non-exclusive licensing agreements violated EU competition rules:
For one, Sanrio granted its licensees a specific contract territory but prevented dealers from selling outside of those territories. This is not permitted because the handling of customer inquiries from other areas, in particular via a web shop, must always be permitted.
On the other hand, Sanrio obliged the licensees to forward orders outside the contract area to Sanrio and gave the dealers specifications regarding the languages used on the Hello Kitty articles.
The European Commission also objected to control and monitoring measures intended to enforce these anti-competitive clauses. First, the dealers were required to perform audits, through which Sanrio could identify any deliveries to other contract areas. Second, Sanrio refused to renew license agreements with dealers who sold outside of their contract territory. Together, these measures led to significant market foreclosures within the European Economic Area and thus restricted competition.
Trademark License Antitrust Violation - What does that mean?
On the one hand, the proceedings against Sanrio and the comparatively low fine despite an ongoing antitrust violation of around 11 years show that the European Commission, in contrast to the past, also takes up supposedly insignificant cases of antitrust violations in distribution agreements. Even niche industries are no longer under the antitrust authorities' radar. When such violations attract the attention of the European Commission, so does the Bundeskartellamt.
On the other hand, the decisions confirm that antitrust regulations are not only enforced in classic sales relationships, but also in the area of licenses. This means that anti-trust restrictions on marketing via social media-Channels can be prosecuted. After all, attempts to circumvent this through measures that are supposedly neutral in terms of antitrust law are rarely successful. Changing labeling or packaging, or language restrictions, can also have anti-competitive effects and restrict intra-Community trade. The restriction of delivery quantities becomes particularly tricky under antitrust law if it serves to enforce prohibited measures such as restrictions on cross-border trade.
Trademark License Antitrust Violation – What is important to you now?
The antitrust authorities are increasingly picking up on restrictions in dealerships and other sales relationships and are not bothered by whether the trade restrictions are niche or only affect a small market segment. Companies can therefore fall into the crosshairs of the antitrust authorities if they do not adapt their sales practices to the limits of antitrust law.
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