On 9 July 2019 the EU Commission imposed a fine of €6.2 million on Japanese company Sanrio for restricting cross-border sales in the EU of its Hello Kitty merchandising products. In addition to direct sales the Hello Kitty products are distributed in Europe through licensed distributors, and Sanrio’s merchandising agreements contained clauses that expressly restricted out-of-territory sales by the licensees. These contractual restrictions were reinforced through indirect measures, such as regular audits carried out by Sanrio and a refusal to renew licensing contracts for licensees who did not comply with the restrictions. This is the second infringement decision relating to cross-border sales restrictions in merchandising agreements in the last few months. A third investigation into Universal Studios’ merchandising arrangements is ongoing. The cases are a strong reminder to brand owners that they should not exploit their intellectual property rights (IPRs) in such a way as to restrict cross-border sales of their goods in the EU in breach of the EU competition rules.
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