European Commission fines Sanrio €6.2 million for restricting cross-border sales of licensed Hello-Kitty-products in the EEA
On July 9, 2019, the Commission imposed a fine of €6.2 million on Sanrio, manufacturer of Hello-Kitty-products, for vertical sales restrictions (see press release here).
Sanrio licenses its brand and other IP rights for use in several Hello Kitty merchandising products in the EEA. In the (non-exclusive) licensing agreements in the EEA, Sanrio prohibited licensees to engage in cross-border sales of the licensed merchandise products, on the one hand by direct means (through clauses explicitly prohibiting these sales, obligations to refer orders for out-of-territory sales to Sanrio and limitations to the languages used on the merchandising products). On the other hand, Sanrio also implemented these prohibitions in an indirect way, i.e., through audits and the non-renewal of contracts if licensees did not comply with the out-of-territory restrictions. The Commission qualified the agreements as market partitioning within the EEA. Typically, market partitioning is viewed as an antitrust infringement by object or as hardcore restriction, which means that for example the vertical block exemption regulation cannot apply, and that relying on an individual exemption is very difficult.
Sanrio cooperated with the Commission and thus obtained a reduction of its fine by 40%. This was a cooperation outside of the leniency notice, which only covers horizontal cartels. In vertical cases, a procedure for cooperation with the Commission has been recently developed and takes place on a similar basis as under the cartel settlement notice. There is an overview on the procedure in a factsheet published on the Guess case (see here).
The case is another example that the Commission investigates and sanctions vertical infringements. This may on the one hand be due to the results of the e-commerce sector inquiry. On the other hand, the Commission seems to seek to take on cases in order not to leave this area of antitrust enforcement to the national competition authorities only. Silke Heinz was quoted to possible reasons and the background to this in Global Competition Review (see here).