Parallel trade and export restrictions are in the spotlight (again)!

Enforcement against parallel trade restrictions and export bans is back in the spotlight in the EU. This renewed interest follows a number of recent developments (which are explored in more detail in this blog post), including:

• the European Commission’s Mondelēz decision, which marks the highest fine for illegal restrictions on parallel trade to-date; 
• statements by Commissioner Vestager citing the importance of the EU single market and signalling that further parallel trade cases are in the pipeline; and
• a call for action by several EU Member States to eliminate territorial supply constraints (a term being used frequently to describe parallel trade restrictions) within the EU single market.

Given the recent developments and continuing focus on these cross-border restrictions, we have updated our 2020 survey of the key EU cases so you have the most updated position on the types of cross-border restrictions that have attracted the EC’s attention and offer tips to avoid breaking the law in this respect.

Interest in parallel trade enforcement: not an (entirely) new phenomenon

Following the EC’s 2017 eCommerce inquiry and the European Parliament’s subsequent Report on Competition Policy 2018, the EC adopted five decisions in the space of eight months (between December 2018 and July 2019), and imposed fines of up to EUR 200 million. These decisions spanned a number of sectors and distribution systems, including selective distribution and licensing arrangements. Since then, the EC has opened four further investigations into cross-border restrictions, accepting commitments in one and imposing fines in three of these cases, issuing the largest fine for parallel trade restrictions to-date (EUR 337.5 million) in the most recent.

A summary of the pre-2020 decisions 

Three of the 2018/2019 decisions concerned territorial restrictions in the context of non-exclusive IP licences, in breach of Article 101 TFEU. In particular, Nike was fined EUR 12 million for banning licensees from making out-of-territory sales of licensed branded merchandise. The EC also imposed a fine of EUR 14.3 million on NBC Universal for restricting licensees from making out-of-territory sales of branded merchandise. Licensees were also required to pass on these restrictions to their own customers and were prohibited from supplying to customers who could sell outside the licensee’s allocated territories. Sanrio received the smallest fine of EUR 6.2 million for including cross-border sales restrictions in licensing agreements for branded merchandise, including Hello Kitty and Mister Men products, and enforcing compliance by means of audit rights and the non-renewal of contracts.

Guess received a fine of EUR 40 million for flouting the rules on selective distribution by restricting authorised wholesalers from selling outside their allocated territories, as well as restricting authorised retailers from making cross-border sales to end users, or cross-selling to other members of the selective distribution network within the EEA. Additionally, Guess was fined for resale price maintenance alongside restrictions on cross-border sales, which allowed it to maintain higher retail prices in Eastern Europe than Western Europe.

A fine of EUR 200 million, was imposed on AB InBev for abusing its dominance under Article 102 TFEU by implementing measures that prevented supermarkets and drinks wholesalers from procuring beer in the Netherlands and importing it into Belgium, where some beer brands are more expensive. Infringing measures included (i) using different packaging and labelling for different countries, (ii) reducing volumes sold to Dutch wholesalers in order to limit imports to Belgium, (iii) refusing to sell to Dutch retailers without agreement that they would not import to Belgium, and (iv) making promotions conditional on retailers not offering promotions in Belgium. This fine (the highest at the time) was awarded under Article 102 TFEU and not Article 101 TFEU, which meant the EC did not need to establish an agreement or concerted practice between AB InBev and others in its supply chain.

A summary of the post-2020 decisions

The EC’s active enforcement in the parallel trade space continues into the new decade. 

Mondelēz received a fine of EUR 337.5 million in May 2024. The EC found that Mondelēz infringed Article 101 TFEU through contracts with wholesale customers and exclusive distributors that prevented them from supplying in certain EU Member States – even in response to sales requests – and breached Article 102 TFEU by refusing to supply to certain brokers or EU Member States in order to prevent subsequent cross-border sales into EU Member States where Mondelēz had high prices. This decision is discussed in detail in our post here.

In the Video Games decisions, the EC fined Valve and five other video game publishers a total of EUR 7.8 million in January 2021 for collectively entering into “geo-blocking” practices which restricted cross-border sales of around 100 video games. The geo-blocking prevented publishers’ distributors from responding to unsolicited requests from distributors or users located outside the territory of certain EEA countries (restricting ‘passive sales’).

In the Transgaz investigation, the EC raised concerns that Transgaz was maintaining or creating barriers to the cross-border flow of natural gas from Romania to Hungary and Bulgaria (i.e. by underinvesting or delaying construction of infrastructure for gas exports, imposing interconnection tariffs for gas exports, and using unfounded technical arguments as a reason for restricting exports). While the EC ultimately accepted commitments from Transgaz to address these issues, this investigation assessed export restrictions under Article 101TFEU .

The EC is also currently investigating Pierre Cardin and its licensee Ahlers in relation to concerns that they restricted cross-border sales of Pierre Cardin-licensed clothing. While this investigation is still underway, the EC preliminarily found that Pierre Cardin and Ahlers agreed to restrict other Pierre Cardin licensees and their customers from selling both online and offline into Ahlers’ EEA licensed territories and to low-price retailers in those territories.

NCAs in the EU are also investigating cross-border trade restrictions, with the Cypriot authority fining Henkel EUR 3.3 million for breaches of Article 102 TFEU in May 2020, and the Greek authority fining six companies more than EUR 650,000 under Article 101 TFEU in August 2022.

Cross-border sales restrictions that may attract antitrust scrutiny

In the table below we have collated a summary of the types of measures and practices that have been investigated by the EC and may therefore pose a risk under EU competition law. 

At the outset, two notes of caution are in order. First, context will often be important. Case law suggests that the enforcer often looks at the broader context of a body of evidence and in particular, on the objectives pursued by the measures and practices. Second, the EC may sanction direct and indirect measures – indirect measures refer to actions to reinforce and encourage compliance with cross-border restrictions

Title
Explicit restrictions	Explicitly prohibiting cross-border sales, shipments or advertisements (outside of an exclusive distribution system where active sales restrictions are permitted) (Guess, Mondelēz, Pierre Cardin,Video Games) Requiring distributors to: (a) obtain the supplier’s consent to sell cross-border (Nike, Mondelēz, Video Games) or (b) refer cross-border sales to the supplier (Nike, Video Games)
Supply stoppages / limitations	Reducing volumes to distributors to hinder cross-border sales (AB InBev, Mondelēz) Refusing to sell (key) products unless the distributor agrees to limit cross-border sales of other (non-key) products (AB InBev) Requiring distributors to stop supplying to customers that sell cross-border (Nike) Requiring distributors to charge higher prices for exports compared to domestic sales (Mondelēz) Agreeing or coordinating to prevent access to customers outside certain EEA areas in response to consumer requests (i.e. passive sales) (Video Games) Underinvesting or delaying infrastructure to hinder cross-border sales (Transgaz)
Financial disincentives	Obliging distributors to pay the supplier revenues derived from cross-border sales (NBCUniversal) Offering distributors lower discounts or charging additional fees/royalties for cross-border sales (Nike, Transgaz) Expressly precluding distributors from using certain types of promotional spend outside an allocated territory (AB InBev)
Supply termination	Terminating or not renewing supply agreements with distributors that sell cross-border, even when the supplier is not dominant, as part of a strategy to limit cross-border sales (NBCUniversal, Mondelēz)
Threats	Threatening a distributor with termination if they continue making cross-border sales (Nike) Using audits and the threat of audits to obtain compliance with cross-border sales restrictions (Nike)
Reporting requirements	Requiring distributors to explain why their products are found across borders (Nike) Requiring distributors to notify the supplier of their customers’ cross-border sales (NBCUniversal, Video Games) Requiring distributors to notify the supplier if they purchased any products from cross-border sources (Guess)
Purchase obligations	Requiring distributors to purchase a minimum level of product directly from the supplier, with the aim of reducing their purchases from cross-border sources (Guess) Where a supplier sells in multiple jurisdictions, requiring distributors to purchase products from the supplier locally, with the aim of preventing the distributor from purchasing in the lower priced jurisdictions and reimporting into the higher priced local jurisdiction (Guess)
Package design	Refusing to supply “official product” holograms or security labels to distributors suspected of cross-border sales (Nike) Specifying what language a licensee can use on the licensed merchandise with the aim of preventing out-of-territory sales (NBCUniversal, Sanrio) Unilaterally changing packaging of products to make it harder to sell them in particular jurisdictions (e.g. by removing mandatory label information in a particular language or changing the design and size of the product – only where the supplier is dominant) (AB InBev)
Geo-blocking	Agreeing or coordinating to use activation keys which prevent activation of a product outside certain EEA territories (Video Games)

 

Tips

Since the EC’s appetite to pursue parallel trade cases is not waning, we set out a number of actions to consider below when your company has sales in multiple EU Member States:

• Conduct compliance training with the relevant businesses to ensure that they understand the specific position of the EU (regarding its single market) and can spot, escalate and address issues.
• Have the supply, distribution and/or licensing contracts vetted by the legal team to ensure that they do not contain problematic restrictions.
• Review pricing and product labelling policies to ensure they do not artificially seek to maintain price differences between EU Member States.
• Ensure that all practices limiting parallel trade or cross-border sales within the EU have a well-documented and proper rationale.
• Audit business communications on a regular basis inside the company and with resellers.
• Consider whether your business could be dominant (which is typically possible when your market share is >40%). Where dominance is possible, assess your unilateral behaviour to ensure it does not restrict parallel trade.