European Commission sanctions Sanrio for restricting crossborder sales

Sanrio, the renowned Japanese company that owns the rights to characters such as Hello Kitty was fined €6.2 million by the European Commission (“EC”) on July 9 for restricting crossborder trade between European Union Member States and the online sales of merchandising products to its licensees.

This decision is the result of the investigations the EC started in June 2017, affecting other companies such as Nike, fined €12.5 million in March this year, and, Universal Studios, still open, as well as Sanrio. The three investigations refer to conduct consisting in restricting the crossborder sale of its products within the single market through its licenses system.

Sanrio has been sanctioned for imposing conditions on its licensees that directly or indirectly prevented them from being able to offer products licensed by the company in Member States other than that contractually determined. The EC states that those restrictions ranged from clauses expressly prohibiting sales to other Member States to limitations on the language used in the merchandising.In some cases, the renewal of the license agreement was subject to the licensees’ obligation to send Sanrio the crossborder orders. The restrictions imposed by Sanrio on the distributors lasted almost 11 years (from January 2008 to December 2018).

Source: European Commission

Sanrio grants licenses on many characters (My Melody, Keroppi and Chococat are some examples) that are used by its licensees in a wide variety of products beyond toys, such as mugs, bedding and stationery.

“Whether they buy a Hello Kitty mug or a Chococat toy, consumers will now be able to fully enjoy one of the main benefits of the single market: the capacity to buy throughout Europe at the best price.”

Margrethe Vestager, Commissioner for Competition, July 9, 2019.

Sanrio’s active cooperation with the EC has led to a 40% reduction in the amount of the fine for the Japanese company. This decision is added to other recent ones (Guess, ARA and electronic products manufacturers andAB InBev) in which the EC has resolved to reduce the penalty given the cooperation of the company investigated for vertical infringements of competition law. In the case of Sanrio, its cooperation allowed the EC to determine the timescale of the infringement.  

Currently, EC investigations remain open into similar practices in the PC video games market and the hotel and tourism sector. Regarding the former, the EC is investigating alleged bilateral agreements entered into by Valve, owner of the well-known Steam platform, and five video game publishers that limit the digital purchase and use of video games on that platform in accordance with the buyer’s country of residence. In the tourism sector, the EC is investigating Kuoni, REWE and Thomas Cook for price discrimination agreements in accordance with the nationality or origin of the consumer.

The EC’s press release is available here.