Brand Protection and Competition : 27 January 2010

Download the event programme (including attendee list) (pdf 226kb)

Back to top

Event background

Competition law and intellectual property law both recognise the importance of brand value, and both play a role in the protection of brands. They also share certain goals, such as promoting innovation and consumer choice. However, there has been relatively little interaction and cross-fertilisation between the two legal communities on how they approach the same issues. They sometimes appear to have conflicting objectives, with intellectual property law seeking to protect the investment made in a brand by conferring exclusive rights on its owner, and competition law seeking to protect the consumer by preventing the exploitation of monopoly power and by encouraging inter-brand competition at brand manufacturer level and intra-brand competition at distribution level.

On 27 January 2010 the OFT hosted a joint seminar with University College London's Institute of Brand and Innovation Law on Brand Protection and Competition. Philip Collins chaired a panel of expert speakers who set out their views and answered questions on the protection of brand value under competition law and the interaction of competition law and intellectual property law in this context.

The purpose of the seminar was to provide a forum which brought together the competition law and intellectual property law communities, to explore common themes and areas of conflict between the two legal disciplines, with particular reference to recent legal developments in both fields in relation to brand protection.

The seminar represents the beginning of a constructive dialogue between the two legal communities, which the OFT hopes will act as a first step to greater interaction on the topic of brand protection and on other areas of common interest in the future.

Contact details for feedback questions

If you have any comments, feedback or questions regarding the Brand Protection and Competition seminar, please contact Steven Preece (steven.preece@oft.gsi.gov.uk or 020 7211 8364), Paul Gilbert (paul.gilbert@oft.gsi.gov.uk or 020 7211 8234) or Adam Labbett-Ainsworth (adam.labbett-ainsworth@oft.gsi.gov.uk or 020 7211 8353).

Back to top

Synopsis of Brand Protection and Competition seminar

This section summarises a selection of personal opinions and observations expressed by the individual participants at the Brand Protection and Competition seminar. (Please note that these do not necessarily reflect the OFT's views.)

Watch a video of the Brand Protection and Competition seminar.

Back to top

The Business of Brands

• Brands are essential for competition and for the consumer. Brands drive product innovation, give consumers choice and drive quality and safety.
  
  
• Brands are the lifeblood of innovation. Companies recognise the need to satisfy consumer demand with their brands and the importance of continually innovating and developing their products. They invest heavily to achieve this.
  
  
• A product creates an experience for the consumer, which results in consumers connecting with that brand. Consumers view brands as a promise by the company and remain loyal to a brand so long as that promise is kept.
  
  
• Brands are important for reputation and trust. Once consumers know that they can trust a brand, their shopping experience is easier and faster. When trust is lost, the consumer is also lost. In this way, the brand is a form of equity for a company.
  
  
• Brand value and the incentives to invest in brands are eroded if brand owners do not have adequate legal protection from counterfeiting and copycat packaging. A key justification for this protection, according to brand owners, is to avoid free-riding on their investments (which is harmful to competition, erodes the strength of the brand and damages brand equity).

Back to top

Competition law - Distribution agreements and selective distribution

Back to top

Competition law and intellectual property law 
 

• The enforcement of competition law in the context of distribution agreements is more often carried out at national level than at European level. In recent years the role of the European Commission has been more focused on policy formation through the introduction and renewing of Vertical Agreements Block Exemptions and Guidelines on Vertical Restraints.
  
  
• In contrast, the European Court has recently heard a number of significant intellectual property cases, involving issues ranging from trademarks to comparative advertising. European case-law may be seen to be driving intellectual property law forward with respect to brand protection.
  
  
• Competition law and intellectual property law approach the issues from different jurisprudential angles. Competition law limits the practices of brand owners, to ensure competition from third parties is not unduly restricted and also to promote intra-brand competition at times. Trademarks seek to limit the practices of third parties, to ensure the rights of the mark owners are not damaged.
  
  
• The notion of 'the brand' has not been the main focus of intervention. Brands (and trademarks in particular) do not confer monopoly rights, they act as a guarantee of origin. The key concern under intellectual property law is the prospect of customer confusion. Brands and trademarks are therefore considered less likely to raise competition problems than traditional intellectual property rights. Competition law's interaction with brands has mainly focussed on distribution arrangements and similar contractual arrangements (such as franchising).

Back to top

Development of the approach to brands under competition law

• The case-law of the European Court has long recognised that competition law can apply to the exercise of intellectual property rights (dating back to Consten and Grundig v. Commission in 1966). It also recognises the importance of selective distribution and franchise agreements in protecting brand value.
  
  
• The succession of Block Exemption Regulations has shaped the practical approach to the law, parties have been less concerned with whether their practices are restrictive or exempt, and more focussed on ensuring the provisions are within the Block Exemption Regulation safe harbour and do not contain hardcore restrictions. The current Vertical Block Exemption Regulation allows brand manufacturers to choose to adopt a selective distribution model - only supplying retailers meeting specified selection criteria - in order to protect the retail environment in which their product is sold. In addition, franchising models are possible under competition law.
  
  
• The European Court and the Commission have sought to achieve a compromise which gives flexibility to commercial agreements (allowing a manufacturer to choose a distribution system that it deems appropriate to the product) but also aims to prevent manufacturers from abusing the selective distribution model as a means of implementing harmful practices (such as retail price maintenance, market foreclosure or restrictions that are contrary to the principles of single market integration).

Back to top

Brands and competition law - Alternative perspectives

• It may be that the protection of brands through intellectual property law will broaden as the case-law develops. The danger, however, is that as the rights of a brand owner expand, more concerns (from a competition perspective) arise about how those rights are exercised.
  
  
• Internet retailing introduces new considerations and perspectives.
  
  - Is the prevention of free-riding by internet retailers on the investment of bricks and mortar stores an adequate justification for restricting internet sales? Does this too readily assume that consumer satisfaction and trust is best achieved through bricks and mortar stores and that bricks and mortar stores innovate and develop products more effectively than internet retailers?
  
  - Does selling on the internet risk damaging the brand value and/or the reputation of a product (particularly for exclusive or luxury goods)? Are online boutiques capable of providing the unique look, feel and consumer experience of a luxury brand?
  
  
• Perhaps the economics supporting the assumptions and justifications for the way in which competition law traditionally looks at free-riding arguments in relation to branded goods need to be re-evaluated.
  
  - Do the benefits to consumers really outweigh the reduction in price competition at retail level in cases where the manufacturer excludes online or discount retailers from its selective distribution network? For instance, with luxury goods it is perhaps easier to accept, instinctively, the need for a selective retail experience where non-price parameters of competition may be more important than price. However, if the effect of selective distribution is to push prices up by more than is justified by the level of investment required of the retailer, is this beneficial for consumers?
  
  - Is there a new form of reverse free-riding with consumers taking advantage of the investment made by an internet retailer in its website to research and choose a product before purchasing in a bricks and mortar store?

Back to top

Brand Protection - Intellectual property law tools being deployed in the consumer interest?

• Whether intellectual property law tools are being used to protect brands in the consumer interest raises some preliminary points.
  
  - Brand protection cases involving different legal disciplines (intellectual property law and competition law) may raise issues of court procedure that need to be resolved.
  
  - Registered trademarks are just one intellectual property law tool which can be used to protect brands. Similarly, intellectual property law and competition law are not the only areas of law that are relevant to brand protection, for example, consumer protection law may have a role.
  
  - There is not necessarily an inherent conflict between brand owner and consumer. Both have an interest in preventing confusion, both in terms of proof of origin and misdescription.
  
  - The concept of the consumer in any given case needs exploring. Who is the consumer in question? This is often a difficult point resulting in conflicting views. How should short term and long term gains for consumers be assessed and weighted? Should it be assumed that it is in the consumer's interest to promote intra-brand competition.
  
  
• The debate on the intellectual property law tools that are available to protect brands can be split into two parts the considerations that are internal to intellectual property law, and the external facing issues prompted by the interaction of intellectual property law with other legal disciplines.

Back to top

Issues internal to intellectual property law

• Does intellectual property law go far enough (or, indeed, does it go too far) in deploying the tools that are available to it for protecting the brand?
  
  
• Should trademark protection be extended to include the protection of reputation? Reputation is very important for brand owners. If trademark enforcement extends to the protection of reputation, it will give brand owners stronger rights against their competitors. On the other hand, it is not clear whether this would be beneficial or harmful to consumers.
  
  
• How should intellectual property law respond to the development of the internet? Under English law, internet platform operators do not bear a high level of responsibility for preventing counterfeit sales via their websites. Case-law in some European countries, however, has established a duty on internet platform operators to take active measures to exclude a seller as soon as the internet platform operator has a suspicion that counterfeit goods are being offered. This is not necessarily the best way of tackling the problem, as it does not encourage co-operation between retailers and internet platform operators.
  
  
• What is the proper scope of the exhaustion doctrine? The European policy approach to exhaustion results in an increased risk of poor quality counterfeit goods being imported into the EU. To prevent this it may be preferable to adopt a policy of international exhaustion. However, there are social policy implications of adopting the principle of international exhaustion.
  
  
• Is the law too weak in its response to look-alikes? Brand owners feel that consumers are deceived by look-alikes and that whilst the tort of passing off is available in theory, it is not an effective means of protecting their rights. On the other hand, there is an argument that intellectual property law already gives a broad range of rights to brand owners. It may be that brand owners are reluctant to use the legal tools at their disposal for fear of damaging ongoing commercial relationships with their customers.

Back to top

Issues external to intellectual property law

• What should be the limits between trademark law (especially in the light of the European Court of Justice judgment in L'Oréal v. Bellure) and the rules on comparative advertising? Recent European case-law has considered this issue. However, the interaction of European Directives on trademarks and comparative advertising continues to result in legal uncertainty as to how far comparative advertisements can go.
  
  
• Parallel imports. It is often impossible to discover whether a product originated inside or outside of the EEA. These cases raise questions as to whether there is something lacking in the competition law response to such arrangements.

Back to top

The future direction of the interaction between competition law and intellectual property law

• Will there be a move towards divergence or convergence? For instance, brand protection in the context of the current European Commission review of the Vertical Agreements Block Exemption Regulation and Guidelines on Vertical Restraints is an interesting topic. Should competition law accept brands and trademarks as readily as other intellectual property rights? Should the investment that has been made in the brand be given greater weight under competition law or, put a different way, does such investment justify increased protection?
  
  
• Alternatively, it may be argued that the debate on the interaction between competition law and intellectual property law is settled (as demonstrated by the approach in the USA). Competition law and intellectual property law both seek to achieve the same aims: to drive innovation for the benefit of consumers. They may get to the result by different means, but that does not mean that there is a conflict. Intellectual property law gives exclusive rights. Competition law seeks to keep markets open and free. As long as each is reasonable in scope and application, the two can operate together.

Back to: Events