European Courts Yet To Come To A Conclusion On Global Prices For Branded Goods

A titanic struggle is taking place throughout Europe between manufacturers of branded products and the retailers who sell them to the consumer. At stake is the future retail prices of, amongst other things, pairs of Levi 501 jeans.

Last month, the Advocate General at the European Court of Justice delivered what some regard as a delphic opinion, giving cause for optimism to both sides, on a landmark case concerning the Tesco and Costco chains’ right to sell genuine Levi 501 jeans, and Davidoff ‘Cool Water’ toiletries at prices significantly lower than other UK-based outlets.

Supplies of both products were purchased outside the European Economic Area (EEA), by wholesalers to the chains. Davidoff and Levi Strauss brought legal cases against both the chains and an importing company, claiming that importation and sale of the goods in the UK represented an infringement of their registered trademarks.

The manufacturers’ aim is to prevent their trademarked goods becoming what is known as ‘parallel imports’, that is, branded goods imported by retailers who are not part of the manufacturer’s distribution chain, from markets, for example, South East Asia, where prices are lower. Before this case arose, Levi Strauss had consistently refused to sell these particular jeans to Tesco and Costco.

Retailers argue that the restrictions insisted upon by the manufacturers, essentially those of price, are unfair to consumers in that they deny them the opportunity to benefit from global competition. Manufacturers, for their part, take the view that parallel imports infringe their copyright and damage their business by reducing prices and, thereby, the margins on their goods sold in Europe where costs are higher because the market is regulated in terms of product standards, minimum wage legislation and payroll taxes.

The case is important, not least because it goes right to the heart of whether the European market should be open to the free global pricing of goods, or pricing should be regulated. Related issues have already had an impact on the mass market, especially in relation to the import and sale by British retail chains of branded, luxury toiletries at significantly less than their recommended retail price.

That battle for enhanced consumers’ rights has now been largely won, but in the specific issue of the parallel import of branded goods, a definitive legal conclusion is still by no means clear.

Up until now, as a result of a 1998 case concerning the import of Silhouette branded sunglasses, the view of most lawyers was that unless a manufacturer gave its permission on parallel importing to a retailer, it was not permissible to bring in and sell cheaper branded products from outside Europe.

When the Davidoff case went to the High Court in London, however, the judge ruled that since the company had failed to expressly prohibit the resale in Europe of its products in its supply agreement, it had given its implied consent to their parallel import.

The Advocate General appears to have rejected this view, stating that national courts, such as that in the UK, cannot make a ‘general presumption’ that the company owning the copyright to the branded goods has waived its rights. At the same time, she acknowledged that importers too, have rights which merit protection by the courts

Advocates General opinions are not binding on the Court; their role is to act independently, and to propose a legal solution to the case in question, so for both parties the ball is still in play, though informed opinion is on the side of the final judgement coming out against the consumer and in favour of the trademark owner.

Meanwhile, the case may only give comfort to those who argue that the European economy will never be able to compete effectively with the rest of the world while such legal protection on producer prices is provided within its boundaries.

US consumers, for example, suffer few if any such constraints and tend not to pay higher prices because of a court’s intervention. European consumers may have a very long time indeed to wait to see whether one of the main benefits of the global economy on their daily lives will be the ability to buy branded goods at a ‘global’ price.

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