Own-brand rules: What do retailers need to know?

Why are we talking about it now?

The European Commission’s Internal Market and Services Directorate General (DG Markt) has compared legislation across the 27 EU member states and called for consistency in the rules on so-called copycat brands and recommended that they be stamped out.

In Germany, for example, copycat brands are almost non-existent because of stricter laws while in the UK action can only be taken after trademark infringement. The UK Intellectual Property Office is producing an in-depth report on the matter due out in May.

What exactly is the problem?

‘Parasitic’ or copycat brands are own-brand products that sometimes mimic the market leader, particularly its packaging, and have been criticised for misleading customers.

The practice is particularly prevalent in ambient grocery and health and beauty, including energy drinks, cereal and hair care products.

How likely is stricter legislation?

In the UK, Trading Standards is in a position to address the issue under the Unfair Commercial Practices Directive but the matter is low on its agenda because it is a confrontation between owners of other companies rather than something that directly affect consumers.

Any legislation is likely to be at a European level. Sahira Khwaja, a partner at law firm Hogan Lovells which conducted research for DG Markt, says legislation could be on the table in Europe as early as the summer but it depends on the political will of the EU presidency.

How might infringements be penalised?

If bodies such as the British Brands Group get what they want, brand owners could be able to bring civil action against those that copy their packaging and claim significant damages. At the moment brands can only go through Trading Standards, which then might lead to court action.

What would be the ramifications?

Apart from the potential reputational and financial cost to retailers that are successfully sued, Shore Capital analyst Clive Black believes that tougher legislation may inhibit own-label progress over time in ambient grocery and frozen products.

“Don’t forget though that some of the most advanced product development is within chilled and fresh food, which is private-label dominated and where the UK is world leading,” he says.

Black says private-label accounts for about 45% to 60% of UK superstores’ food offer.