The European Commission is on a roll in its fight against territorial sales restrictions. Just one month after fining broadcast network company NBCUniversal for restricting cross-border sales, it has also imposed a fine on hotel group Meliá for discriminating between customers based on nationality or place of residence. Meanwhile, the Commission is urging national consumer protection authorities to tackle cross-border issues, after an EU-wide screening of nearly 500 e-shops showed that one fifth of the flagged websites did not respect the Geo-blocking Regulation.
Time appears to be running out for companies to check their distribution contracts and conduct for potential cross-border trade restrictions. Companies are well-advised to review their commercial practices now, before the Commission or a national authority does it for them.
On 21 February 2020, the Commission announced it had imposed a fine of EUR 6.7 million on hotel group Meliá for concluding contracts (with tour operators) which restricted the active and passive sales of hotel rooms. A clause in Meliá’s standard terms and conditions stipulated that the tour operator contracts were valid only for reservations of consumers who were resident in specified countries within the European Economic Area (EEA). Consequently, tour operators were not free to offer hotel accommodation to consumers across all EEA countries (active sales) and were also prevented from responding to direct requests from consumers outside the specified EEA countries (passive sales). According to the Commission, this deprived consumers of the opportunity to shop around “for the best deal”. Nevertheless, in accordance with the Commission’s practice rewarding cooperation in antitrust cases (see our January 2019 Newsletter), Meliá obtained a 30% fine reduction because it (i) expressly acknowledged the facts and the infringement, and (ii) provided evidence. The Commission decided to close the proceedings against four tour operators “following a careful assessment of all the evidence and the circumstances of the case”.
Cross-border sales restrictions were also an issue in the Commission’s EUR 14.3 million fine imposed upon NBCUniversal; the third decision dealing with restrictions on sales of licensed merchandise (see our August 2019 Newsletter). According to the Commission, NBCUniversal restricted the sale of merchandise featuring the Minions, Jurassic World and other images and characters from NBCUniversal’s films. NBCUniversal’s non-exclusive licensing agreements contained clauses that (i) restricted out-of-territory sales by licensees, (ii) restricted sales beyond allocated customers or customer groups, such as clauses explicitly prohibiting these sales, (iii) restricted online sales, and (iv) obliged licensees to pass on these sales restrictions to their customers by telling them to not supply to customers who would likely sell the products outside the licensees’ allocated territories or customer groups. NBCUniversal kept tabs on the licensees’ compliance with these territorial restrictions by carrying out audits and refusing to renew contracts with non-abiding licensees. However, in line with the Commission's practice rewarding cooperation in antitrust cases, NBCUniversal obtained a 30% fine reduction because it (i) acknowledged the infringement, (ii) provided additional evidence and (iii) waived certain procedural rights, resulting in a more efficient administrative process.
The fines on Meliá and NBCUniversal fit into a long list of recent Commission fines for territorial restrictions (see the table below for more details on these decisions), and underline the determination of competition authorities, as well as consumer protection authorities, to tackle cross-border trade restrictions (see also our August 2019 Newsletter); surely reason enough for companies to double-check their commercial practices for potential cross-border trade restrictions.
Additionally, if an antitrust investigation is launched, companies should keep in mind that cooperation can pay off (see the table below for an overview of fine reductions obtained in exchange for cooperation in antitrust cases).
This article was published in the Competition Newsletter of March 2020. Other articles in this newsletter: