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Unfair Commercial Practices: Stamping out Misleading Packaging

VANESSA MARSLAND1

1. INTRODUCTION—THE THESIS OF THIS PAPER

CONSUMERS ARE MISLED by copycat packaging, and measures to prevent this in the UK are overdue. The Unfair Commercial Practices Directive (UCPD) recognises that copycats are cases where consum-

ers may be misled. It states that the problem must be addressed. Enforcement through Trading Standards is unlikely to be an effective

method of avoiding consumers being misled by copycat products, as consumers do not complain about occasional mistaken purchases. Meanwhile, there are no effective self-regulatory mechanisms for dealing with the copycat issue.

With respect to copycat products, passing off is not equivalent to unfair competition law and similar remedies in other countries. Even if a competitor brings an action for passing off, consumers do not enjoy equivalent protection in the UK to that in other Member States.

The UK government has an obligation under Article 11(1) of the UCPD to ensure that there are adequate remedies. To achieve equivalent protection for consumers across the EU as envisaged by the Directive, competitors should have the right to bring action in respect of misleading practices which involve consumers being misled by copycat products, regardless of whether this also amounts to passing off. To allow this is not to diverge from the consumer protection purpose of the Directive, but merely to facilitate its achievement, based on experience across Europe that enforcement by competitors whose packs are copied is likely to provide the most effective protection against consumers being misled.

1 Vanessa Marsland, partner Clifford Chance LLP, assisted the British Brands Group in putting this chapter together. The British Brands Group represents the interests of branded manufactures in the UK. This chapter is published with their consent. The analysis of remedies in the UK contained in Annex 1 was prepared with significant input from Paul Walsh of Bristows.

192Vanessa Marsland

2.BRANDS—WHY THEY ARE TARGETS

Brands rest in the minds of individual consumers and are built when a product (or service) delivers superior, differentiated performance consistently over time. As a consumer’s expectations are continuously met (or exceeded), a strong reputation is created that leads to greater levels of consumer satisfaction and loyalty. To sustain this reputation against competitors requires continual investment, innovation and communication. Evidence supports this, showing that branded companies innovate significantly more than non-branded companies and deliver more economic value added.2

Concern for reputation drives brand manufacturers to sustain quality and avoid disappointment (and when things go wrong, to resolve problems quickly). Brands therefore provide a powerful mechanism for consumer protection. Brands only succeed if they meet consumer expectations; if they do not, consumers stop buying.

3. THE COPYCAT PROBLEM

Copycats mimic product designs and packaging created by others. With copycat packaging, a competitor deliberately adopts design features that are very similar to those of familiar branded products. Typically, the copycat does not copy the exact product name or pack design. Instead, copycats typically use a combination of similar colours and colour combinations, similar on-pack imagery and similar pack format to the brand leader. In some cases, the name of the copycat product may also be evocative of the branded product—eg ASDA’s use of PUFFIN for its private label competitor to the PENGUIN bar.3

4. THE IMPACT ON CONSUMERS OF COPYCAT PRODUCTS

Copycats cause consumers to buy the copycat in the belief that they are buying the branded product. Research shows that consumers frequently buy the wrong product because of similar packaging. In this research,4 around 17 per cent stated that they had purchased copycat products by mistake at some point in the preceding six months. Scaled up, this suggests that around 4–5 million UK consumers buy copycats by mistake in a sixmonth period.

2PIMS (Profit Impact of Market Strategy), of brands and growth (1988).

3United Biscuits v ASDA Stores [1997] RPC 513, one of the very few actions in the UK where passing off claims have been successful as regards copycats.

4NOP, for Marketing Magazine, Feb 1997.

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Copycats cause consumers to believe the makers of the branded product make the copycat when they do not. Research evidence repeatedly confirms that UK consumers are much more ready to assume that products are made by the manufacturers of the brand leaders where the packaging design is very similar. At the lowest level in the research samples (32 per cent),5 this suggests around 7.5 million shoppers in a six month period are misled by copycat packaging into assuming that products are made by the manufacturers of branded products, when they are not. Other research suggests that the number may be much larger.

Copycats cause consumers to believe the product is more similar to the branded product than they would otherwise have assumed (based on price, product description and less similar packaging). Research shows that, as well as increasing the likelihood that consumers will assume that products are made by the branded manufacturer, copycats increase consumer willingness to assume the product quality is as good as that of the branded product.6 The consequence of the greater likelihood of assumption of equivalent quality is to increase the perception that the copycat is good value for money, and therefore worth trying. In fact, similarity of pack design gives no guarantee as to quality or value. This means that the risk of disappointment is much higher.

In the case of retailer private label copycats, the effect of pack similarity is often further accentuated by other factors at point of sale including:

positioning of the copycat on the shelf adjacent to the brand which it copies, encouraging comparison/connection with the branded product;

display material at point of sale inviting comparisons; relative pricing of the brand leader and copycat; other factors, such as stock availability.

5. THE UNFAIR COMMERCIAL PRACTICES DIRECTIVE

The UCPD seeks to deliver a high level of consumer protection and contribute to the proper functioning of the internal market. It seeks to achieve these objectives by establishing uniform rules at Community level and by clarifying certain legal concepts in order to provide legal certainty.

Copycats fall explicitly within the scope of the UCPD. Annex 1 to the Directive sets out a list of practices which shall in all circumstances be regarded as unfair. Clause 13 of Annex 1 specifically mentions ‘promoting a product similar to a product made by a particular manufacturer in such

5RSGB, ‘Study of Lookalikes’, Mar 1998, for the British Brands Group.

6J-N Kapferer, ‘Stealing Brand Equity: Measuring Perceptual Confusion between National Brands and “Copycat” Own-label Products’, Marketing and Research Today, May 1995.

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While Trading Standards have authority to act against copycats under the Trade Descriptions Act 1968, as amended,9 it has not been possible to identify any instances where Trading Standards have pursued such a case. This is believed to be a reflection of the fact that they tend to focus their resources on acting on very clear-cut cases—such as infringement of registered trade marks by sale of blatant counterfeit products. One reason for this is that the tribunals in which Trading Standards prosecutions are typically brought are generalist tribunals covering a wide range of issues, and neither Trading Standards nor the Tribunals will have experience of dealing with the complex evidence that arises in copycat cases. Trading Standards’ practice in non-identical copying cases and cases not involving registered rights is to encourage such cases to be dealt with by civil action, by affected competitors.

6(b) Self Regulation

There is no general self-regulatory mechanism for addressing copycat packaging10 in the UK. That the copying and deception of consumers exemplified by copycat packaging is undesirable is recognised and addressed in The British Code of Advertising, Sales Promotion and Direct Marketing, administered by the Advertising Standards Authority.

Article 20.2, a provision against unfair advantage,11 and Article 21.1, a provision against imitation,12 would under normal circumstances provide some help in addressing copycats. However, while the code covers advertising, sales promotion and direct marketing, it does not cover packaging.

Packaging is arguably the most powerful of marketing tools, exerting its influence at point of sale where around 70 per cent of shoppers’ purchasing decisions are made. However packaging is excluded from the scope of the

9By s 2, a trade description is an indication, direct or indirect, and by whatever means given, of any of a list of matters. The list includes composition, fitness for purpose or any other physical characteristics, and person by whom manufactured or approved. S3 confirms that a false trade description is a trade description which is false to a material degree.

10There is a voluntary system in the grocery sector known as the IGD Dispute Resolution Procedure. As the name suggests, this is more a dispute resolution procedure than a self-regula- tory mechanism although it contains a provision calling on signatories not to use similar features to those of another product. Any such procedure is only as strong as its signatories and relies on the ability of the parties to agree. In this case, while some of the major supermarkets are signatories, most retailers are not and it is limited to the grocery sector. The procedure is shrouded in secrecy so it is impossible to know how often the procedure has been invoked. It is understood however, that it is rarely used.

11Marketers should not take unfair advantage of the reputation of trade marks, trade names or other distinguishing marks of organisations or of the designation of origin of competing products.

12No marketing communication should so closely resemble any other that it misleads, is likely to mislead or causes confusion.