The European Commission recently fined Nike €12.5 million for the inclusion of anti-competitive provisions in its trade mark licence agreements with third party manufacturers and distributors.
The European Commission commenced investigations into Nike’s licensing and distribution practices in June 2017. Under licence agreements with various well-known European soccer clubs, Nike was granted the right to license each soccer club’s trade marks to third party merchandise manufacturers.
Nike’s licence agreements with it merchandisers imposed a number of restrictions on them including:
- prohibitions against out-of-territory sales; and
- prohibitions against the supply of merchandise to customers (often retailers) who could be selling outside the allocated territories.
Nike sought to enforce these prohibitions by threatening to end contracts with licensees who were suspected of breaching the above territorial restrictions.
The European Commission found Nike illegally restricted traders from selling licensed merchandise cross-border and online, to the ultimate detriment of European consumers and in breach of European Union competition laws. Such conduct, according to the European Commission, led to less choice and higher prices for consumers.
Important takeaway for Australian businesses
The ‘protection’ of a party’s IP rights (e.g. Nike’s trade mark rights, in the above case) does not provide an exemption to laws prohibiting anti-competitive conduct. In Australia, we can expect to see similar decisions as this European Union case following the repeal of section 51(3) of the CCA.
We encourage businesses to urgently review and update their existing contracts and arrangements before 13 September 2019 to ensure ongoing compliance with Australia’s competition laws. Please get in touch if you require further information about how these changes may impact your IP contracts.