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Why Diageo needs to sue the socks off Sainsbury’s

Oh no (yawn!), not another supermarket copycat product. The owner of Pimm’s is getting nasty with Sainsbury’s over something called Pitchers, which looks disturbingly similar – but is notably cheaper. Goes on all the time doesn’t it?

Well, yes it does. It’s the way you tell them, though. Let’s try again.

Spot the difference

Spot the difference

Diageo, the world’s most powerful drinks company, is taking Sainsbury’s to court over what amounts to alleged criminal theft. It marks the first time in 12 years that a brand owner has felt sufficiently aggrieved, and sufficiently invulnerable, to mount a legal challenge against a supermarket over the defence of its intellectual property rights. There, that’s more interesting isn’t it?

Last time, in the case of Penguin v Puffin (as it came to be known), Penguin’s owner United Biscuits successfully sued Asda for “passing off” its brand with a cheaper supermarket imitation. Asda was allowed to keep the own-label brand name temporarily, but forced to change the packaging – a decision which effectively neutered the purpose of the copycat in the first place.

Before moving on to how Diageo intends to ‘neuter’ Sainsbury’s, perhaps we’d better tackle an elephant lurking in the room. How come, if UB was so successful and created a legal precedent, that supermarkets have largely ignored the implications of the court ruling and blithely continued with imitations that are a hair-split away from the branded originals? I call to witness, for example, Tesco Temptations crisps, a flattering tribute to the success of Walkers Sensations (2003). Then, let me see, there’s Asda’s ‘You’d Butter Believe It’ margarine, spookily similar to Unilever’s ‘I can’t Believe It’s not Butter’; and Lidl’s ‘Jammy Rings’, so comfortingly close to Burton’s Biscuits ‘Jammie Dodgers’.

The supermarkets do it because they can. In the first place, the law on passing off is weak and ambiguous. Any brand owner taking a supermarket to court could not, heretofore, be certain of a positive outcome.

And that neatly brings me on to a second explanation. Which brand owner in its right mind would dare to do so? Answer: only a very powerful one. The reason is not hard to find. Supermarkets have an ambivalent relationship with brand owners. They  are at once principal customers and competitors (as own-label producers). Offend them, and you risk destroying your distribution.

Indeed, one way of viewing the copycat issue is that it is a symptom of the abuse of market power by our retailers. When I last checked, Tesco held about 31% share of the UK grocery market, and the next three grocers a further 45% between them. Supermarkets may be the main abusers, but they are not unique. Consider, for example, Boots Alliance. Are we seriously supposed to believe that Boots Foot Survival is not a rip-off of Scholl Party Feet? In short, copycatting is arguably as much of an issue for the competition authorities as it is for the passing-off specialists.

But I digress. We’ve looked at why brand owners fear challenging powerful retailers, but not whether, outside the interests of their own shareholders, they are right to do so. Surely we could turn the whole copycatting argument on its head and lionise the supermarkets. Are they not championing consumer interests against greedy manufacturers by producing own-label versions of desirable products at a more affordable, accessible price?

Well, no they are not – whatever they may say. While it is true that the consumer benefits in the short term from a lower price, in the longer run he or she is just as much of a loser as the brand owner. In effect unfettered copy-catting coat-tails on the success of brand-owners at a fraction of the original investment. But the easy ride comes at a high cost. That cost is the chilling effect on future product development by brand owners. If, after years of expensive product development, they are going to be ripped off and their brand premium undermined, why bother? Indeed, some may conclude that it’s better to get into generic production straightaway and form an explicit own-label alliance with the supermarkets; which at least has the merit of keeping the factory production line rolling. It is a process that Andy Knowles, founding partner of design consultancy Jones Knowles Ritchie, has dubbed “brand commoditisation” – the slow death of the brand premium.

Will the Diageo court case make any difference? Surprisingly – given the background – it may. The rights and wrongs of intellectual property law in this area have been left in a mess after a High Court judgement handed down by Lord Justice Jacob in December 2006. This particular case centred not on supermarket “knock-offs” but a dispute between two brand owners, Procter & Gamble and Reckitt Benckiser. Briefly, P&G claimed RB had copied its Febreze air freshener design. Despite the fact that there was an uncanny similarity between the two products (other than the price, that is), P&G lost. And it lost on the curious grounds, according to the judge, that because the RB product was a manifestly cheap imitation, it didn’t deceive anyone. It was the first time a UK court had been asked to decide the scope of a new piece of EC regulation, the so-called Registered Community Design (RCD), and by common account it fell down on the job – creating instead a “Charter for Copycats”.

So, why does Diageo think it might get lucky? Probably because there has been yet another subtle shift in the law that may allow it to have a shot at the problem from a different angle. Last May new consumer protection regulations came into force banning lookalike products which are packaged and marketed with the intention of misleading consumers.

So far they are untested. In the words of Nina Best, an expert in advertising and marketing law at legal practice Browne Jacobson: “…If Trading Standards were to decide to investigate this potential breach of the regulations, it would undoubtedly strengthen Diageo’s case as well as give them the right to apply to the criminal courts for the forfeiture of Sainsbury’s Pitchers.”

Sainsbury’s would enjoy that experience about as much as Admiral Byng his execution. Others, however, might be suitably encouraged.

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2 Responses to Why Diageo needs to sue the socks off Sainsbury’s

  1. […] remains to be seen how much of a shot across the bows this will be for future transgressors. Possibly related posts: (automatically […]

  2. scott b says:

    The way this is being reported makes no sense to me – does the fact that Pitchers tastes completely different to Pimms have no bearing whatsoever on this? Pimms is a horribly overrated foul tasting thing, whereas this Pitchers stuff is clean, refreshing, & most notably citrusy in a way that Pimms isn’t. Unless Pimms has the copyright on ‘drinks to which lemonade & fruit can be added’, surely this should count for something?

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