French fashion house Pierre Cardin (Cardin) and one of its oldest licensees, Ahlers Group (Ahlers), agreed to restrict cross-border sales and sales to specific customers. This is a clear breach of EU antitrust law, said the European Commission (Commission) in a preliminary statement of objections issued over the summer.

The news provided context to previous Commission statements, such as one on June 22, 2021¹, that alluded to "unannounced inspections" related to antitrust violations at an unnamed apparel manufacturer and distributor, causing an immediate stir in the fashion industry. The Commission then launched a formal investigation focused on Cardin and Ahlers².

As detailed in its most recent communiqué, the Commission's concerns center around anti-competitive clauses in licensing agreements between Cardin and its other licensees that prohibit the sale of Cardin products in European territories appointed to Ahlers. The agreements also allegedly prevent sales by discount retailers in such territories. The Commission concluded its report with a finding that Cardin and Ahlers intended to reserve the entire European Economic Area for Ahlers. However, the inquiry is ongoing, and the Commission was careful to note that "sending a Statement of Objections does not prejudge the outcome of an investigation³."

That outcome is one Cardin, Ahlers and Cardin's other licensees are no doubt anxiously awaiting. If the Commission concludes that the parties' behavior has infringed EU antitrust laws, the anti-competitive agreements in question will be automatically void. Further, the businesses could be exposed to fines of up to 10 percent of their turnover in the last financial year. Third parties, such as other Cardin licensees who have suffered losses, can also bring private damages actions before national courts.

The Commission's preliminary view serves as a reminder to companies entering into intellectual property license agreements of the importance of hiring experts to review provisions that may be considered anti-competitive under EU law. What may seem like a fair commercial term in a deal could end up costing hundreds of thousands of pounds, while also casting a shadow on a company's reputation.