Merchandising Monsters – European Commission imposes €14.3 million fine on NBCUniversal

26.02.2020

On 30 January 2020 the European Commission announced that it was fining NBCUniversal (and other companies in the Comcast group) €14.3 million for anti-competitive licensing and distribution practices.

We thought this decision was worth a comment on the blog for a couple of reasons. First, because merchandising involves trade mark and copyright licensing, which are not discussed often enough by competition lawyers; and secondly, because the Vertical Restraints Block Exemption (‘VRBE’) is currently under review, before it expires and will be replaced in 2022.

Those involved in merchandising tend to look at the VRBE for inspiration when considering how competition law might apply to their deals – even though technically merchandising agreements, and the crucial IP licences which underpin the merchandising model, are not within the scope of the VRBE (as is explicitly set out at paragraph 33(c) of the Vertical Restraints Guidelines). The VRBE is applicable only to agreements relating to the supply and purchase of goods and services. It covers licences only to the extent that they are ancillary to the supply/purchase relationship. Other licences of trademarks or copyright do not currently have a ‘block exemption’ safe harbour at all as the Technology Transfer Block Exemption applies to licences of technology (not including trademarks or non-software copyright) for manufacture only.

By way of background to this particular case, NBCUniversal licenses companies in Europe to make and sell merchandising products using the IP in the characters, themes and images of its movies (including “Minions”, “Jurassic World” and “Shrek”).  According to the Commission’s announcement, between the beginning of 2013 and September 2019, NBCUniversal’s merchandising agreements contained clauses limiting out-of-territory sales, specifying the customers to which the licensees were allowed to sell and restricting online sales. It is not clear exactly what sort of provisions were involved as the full decision is not yet available. However, the Commission concluded that NBC’s behaviour had divided up the European single market in a way that infringed the competition rules, and imposed significant fines for the interference with cross border sales.

This is the third antitrust decision from the Commission in the merchandising sector in less than a year (see also the Nike and Sanrio fines). It is particularly interesting that the Commission’s announcement explicitly refers to the growing importance of merchandising, noting that the merchandising sector in Europe was estimated to be worth more than 50 billion Euros in 2019. It reinforces the Commission’s message that merchandising agreements can be contrary to Article 101 and also re-emphasises the importance attached by the Commission to freedom of cross border trade.

While the Commission’s comments when announcing its decision suggest that the restrictions involved in this case would in any event have fallen outside of the VRBE, it is perhaps unfortunate that agreements which are so important to the EU economy do not benefit from any ‘safe harbour’ or guidance of the type provided by block exemptions (and the accompanying Commission guidelines) for other forms of vertical arrangement or licence. The recent run of cases certainly make clear how important competition law can be to those involved in merchandising. Given the review of the VRBE that is currently under way, perhaps this is something on which those with interests in the merchandising sector might wish to make their views known.

Pat Treacy

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Kathryn Hambly

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