From October 2016 to March 2017 the team is joined by Guest Kats Rosie Burbidge and Eibhlin Vardy, and by InternKats VerĂ³nica RodrĂ­guez Arguijo, Tian Lu and Hayleigh Bosher.

Friday, 30 October 2015

A parasite does what it says on the tin

On Wednesday, fellow Kat Nicola the Katonomist wrote this thoughtful if provocative piece on lookalike packaging -- a subject on which economists, lawyers, consumers. brand owners and their competitors have not always shared identical views. This Kat was a little surprised that Nicola's post did not prompt an immediate discussion, but he has now received the following response from John Noble of British Brands Group, an organisation representing brand manufacturers and which, as the small print at the bottom of its logo suggests, has been speaking out for 20 years. In keeping with the BBG's tradition of speaking out, John writes as follows:
It is disappointing when things don’t meet expectations, particularly after years of consistency. In this instance it is the recent post from the Katonomist that was, rarely, far from insightful. Some aspects were simply wrong. I refer to “Living together: the symbiosis of lookalike packaging”.

There is a level of unconventional thinking here that suggests she is either being mischievous or that someone else wrote the post – a lookalike? Perhaps she’s just a confused Kat?

Terminology

The terminology she contributes, presumably to be helpful, is not correct: 
-          Products carrying supermarket names, or affiliated to a supermarket, are indeed called “private labels” or “own labels” and we use these terms ourselves. Where these are distinctively packaged products they compete on their own merits and are not implicated, affected or otherwise involved in concerns over similar packaging. It is wrong to conflate the two; 
-           “Lookalikes”, “copycats” or “parasitic copies” are terms that refer to products that mimic the packaging of familiar brands in order to steal sales. They have a further defining feature in our definition – they are illegal under existing law. Many such copies are supermarket products but this is not exclusively the case. Another manufacturer may well produce a copy.

The term “parasitic copying”, the preferred description of the British Brands Group, is not some pejorative term created for manipulative lobbying purposes but a recognised ‘wrong’ in unfair competition law on mainland Europe. We use it as it is both descriptive and highlights the contrast in available effective remedies between the continent (good) and the UK (bad).

Harm to brands

The Kat argues that parasitic copies, far from harming brands, actually grow the market. This is new thinking. It would be a point to debate were she talking about supermarket products but she is talking about parasitic copies (judging from the title of her piece).

To survive and thrive, branded products must add value and benefits to the individual over and above the commodity alternative. They must then communicate that added value through differentiation and be distinctive on shelf to draw shoppers’ attention. The enemy of branding is commoditisation. Where all products in a category look the same, the signal to shoppers would be that they are the same. Shoppers will be unable to distinguish between them and see no reason to pay more for any added value or benefit. There would be less incentive for the brand owner to innovate or build reputation as the benefits could not be communicated from the supermarket shelf.

Ironically, evidence cited by the Kat that parasitic copies don’t harm brands is actually evidence of harm. This is research she knows well as she had some responsibility for it as an Intellectual Property Office (IPO) employee. For example, one of the IPO’s conclusions from this research is that “Consumers are more likely to make mistaken purchases if the packaging of products is similar and there is strong evidence that consumers in substantial numbers have made mistakes” [emphasis added]. This is a consistent finding over two decades of research.

Showers can be fun even
when there's no gel ...
When a shopper buys a copy by mistake, there is a clear and direct loss and harm. Despite the Kat’s argument to the contrary, this does look like a zero sum transaction. Either one product or the copy is purchased. There is no evidence that someone who never buys, say, shower gel suddenly enters the market and buys on seeing packaging that looks like a familiar brand, or that a shower gel buyer, on seeing a copy, buys two packs instead of one. There is also no evidence that a shower gel user showers more often, and thereby uses more gel, driven solely by similar packaging. Such effects would indeed grow the market but just don’t seem plausible.

Choice

The copy does not increase choice, as the Kat argues. The packaging suggests the product is the same so is no choice there. The copy may well be cheaper but that also does not increase choice of price. Copies are rarely cheapest on the market and the same product would be just as cheap, if not cheaper, were it packaged legally and distinctively. It is worth remembering that it is the retailer that controls the price of both the original and the copy. We have always made it plain that brand owners do not seek fines or damages. They just want illegally packaged products re-packaged legally and distinctively and returned to the market. This would preserve both choice and competition.

Category and brand cues

The Kat, worryingly, does not distinguish between category and brand cues. She argues that similar packaging makes shopping easier, quoting the example of different milk top colours to denote full fat, skimmed and semi-skimmed. These are ‘category cues’, do indeed help shoppers and are generic (i.e. used by many). Brand owners have no issue with these and indeed may use them themselves. They are very different from brand cues, such as red labels for Coca-Cola, the unusual asymmetric pack shape of Head & Shoulders or the tubby, dark glass container with a yellow top that signals Marmite. It is the brand cues that the parasites copy and which are at issue.

It is perhaps worth distinguishing between packaging that tells the truth and packaging that lies. If a product is packaged to look like a familiar branded product, has identical qualities and is made by the same company, then similar packaging would indeed be helpful to shoppers and would be lawful. Shoppers can trust the packaging signals and choose whether to buy accordingly. An example might be a branded product that is also supplied as a supermarket product as was the case with Weetabix and Asda’s Wheat Bisks, mentioned in the Penguin v Puffin case (1997).

In contrast, a product packaged to look like a familiar brand but without the same qualities and/or not made by the same company lies and sends wrong, highly misleading signals to shoppers. In grocery, shoppers make decisions fast and rely particularly on colour and shape of packs to inform their choices. The IPO research confirmed a correlation between similarity of packaging and people’s perceptions that the products came from the same company and/or have higher quality. It also confirmed that similar packaging increases people’s likelihood of buying the product.

That’s the nub. Parasitic packaging – which is packaging that lies and is illegal – increases sales, whether through more mistakes or increasing artificially the appeal of products. It is subtle, dupe marketing, is persistent and is going unchallenged.

Remedies

The Kat is wrong to imply that brand owners want Government to intervene and fight their battles for them. The truth is the opposite. Brand owners want effective tools to deal with the problem themselves. In the UK there are three potential remedies, all with flaws:

-       IP rights may look to offer sufficient protection on paper but using them in practice is challenging. This is due to the high evidentiary threshold required by courts, the difficulty of proving confusion (survey evidence is often not accepted) and difficulties in proving misrepresentation.

There are signs that passing off in particular is moving against brand owners, with the long-standing principle that someone should not seek to take another’s goodwill being replaced with the view that copies can “live dangerously” if they keep a safe distance away (Specsavers v ASDA, 2012). This was followed in the Moroccanoil v Aldi case and amounts to a judicial sanction of “living dangerously”.

Back in 2006, the Gowers Review, commissioned by Government, found that brands were not well protected in the UK and recommended that the new Consumer Protection from Unfair Trading Regulations (CPRs) be given a chance to work.

-       The CPRs provide broader protection than IP rights in making it unlawful to mislead over a product’s quality or equivalence and thereby influences the purchasing decision. However in the UK civil enforcement lies under the control of Trading Standards, not brand owners. Interestingly Government sees one enforcement action in seven years and statements from Trading Standards that they do not have the resources and will not enforce as strong, unchallengeable evidence that enforcement is effective as required in the underlying Directive;

-       Provisions against misleading comparative advertising are also relevant, as parasitic copies make a strong implicit comparative claim: “I am like the brand”. A lawful comparative claim must be objective and quantifiable, but the copy’s claim is broad, inferring it is like the brand in every respect, including ingredients, manufacture, reputation and image. While the Misleading Comparative Advertising Directive requires companies to be protected from such misleading advertising, in the UK only Trading Standards may enforce, not brand owners.

The UK Government has just decided not to grant brand owners civil enforcement powers under the CPRs. It fears unintended consequences and an increase in litigation. The potential to stamp out an illegal practice doesn’t seem to carry weight.

As a result, the CPRs will not have the effect anticipated in the Gowers Review and are unlikely to meet the enforcement performance threshold required by the Directive. That leaves the big underlying question unanswered: how are legitimate brand owning companies in the UK to have effective tools to protect themselves and their customers against illegal packaging? That ball remains firmly with Government.

The Kat, at the start of her post, states she was compelled to put in her two cents worth. She got her pricing just about right.
Readers, what is your view? Do please let us know!

26 comments:

A concerned shopper said...

Due to the source, I'm not surprised but this is perhaps the least balanced comment I've ever seen on this blog. The blanket statements are something to behold. My particular favourite is:

"Where all products in a category look the same, the signal to shoppers would be that they are the same. Shoppers will be unable to distinguish between them and see no reason to pay more for any added value or benefit."

I'm sorry but if I'm shopping in Alid, Lidl, or any other similar retailer and I see (for example) a packet of crisps that looks very similar to Monster Munch but has a different name I do not think they are the same. I know that, because of the very location I am shopping, that they are not Monster Munch but will be a cheaper and, most likely, inferior version of that product. I can then make a decision: do I want a cheaper and inferior version or do I want the actual brand, which will probably be a higher quality but also more expensive. Sometimes I'll be happy with the cheaper inferior version, sometimes I'll want the more expensive and higher quality brand. Regardless, at no point am I unable to distinguish between the two.

Modern shoppers are savvy to practices such as lookalike packaging and choose accordingly. Very occasionally people may make a mistake and buy a lookalike rather than the brand or vice-versa. However, shoppers are not the complete morons that British Brand Groups assume them to be.

ConfusedConsumer said...

"product packaged to look like a familiar brand but without the same qualities ... lies and sends wrong, highly misleading signals to shoppers."

That's nice to know. Can I therefore come to you to compain when a maufacturer reformulates a well-loved brand, or reduces the quality, or reduces the pack size, and keeps the packaging as a lookalike?

Anonymous said...

Excellent piece! Why would supermarkets go to such trouble to mimic the packaging of brands if they did not think they would be able to take sales from the originals?

Anonymous said...

I'm disappointed that the BBG is disappointed. I found Nicola's post a refreshingly balanced contribution to a debate that is too often dominated by the interests of brands. Can I suggest that the lack of immediate reaction to her post reflects that fact that it was not provocative in the slightest, but quite sensible and entirely agreeable? The BBG's knee-jerk reaction is, by contrast, smirkingly arrogant, predictably one-sided and unnecessarily personalised the matter.

Incidentally, the idea that own-brand products (or "parasitic copies" - but of course the language is not prejorative)actually grows the market is "new thinking" is astonishing (and says little for the BBG's grasp of the market). Poor.

Anonymous said...

A confused shopper wrote:

Many a time I have come back from a shop at my chosen supermarket to discover that I have purchased the wrong "branded" product because the distinguishing feature, be it garlic in tomato concentrate or conditioner instead of shampoo, is printed in a font which is too small to readily identify the nature of the goods over the dominating brand image.

Happily, Aldi does not operate such a policy.

Aaron Wood said...

Concerned shopper says of the Monster Munch copy in Aldi/Lidl:

" I know that, because of the very location I am shopping, that they are not Monster Munch but will be a cheaper and, most likely, inferior version of that product"

2 things:

1. The discounters DO advertise that their products are similar (if not better) - this has been Aldi's advertising strategy for some time: and
2. Why use the cues? The inevitable conclusion is that it is to suggest that the second product is in some way the same; it is to genericise the distinctiveness of the leader and turn that into the "category cue"; whilst a brand may need to acknowledge that an innovative product will spawn competition, it should not need to resign itself to its representation becoming the paradigm of that newly formed class of products.

I am afraid to say that in many cases it is crude misappropriation of goodwill. The use of these cues shortens the path to purchase to the benefit of the copycat, and it does so off the back of the positive associations attached to the brand leader, the attractive force of that business, which results either from clever marketing investment or from investment in product development.

John states that there is a zero sum game; I believe it is more problematic than that. A purchaser of the real product who tries the copycat is a lost sale, but possibly they return if the Concerned Shopper's theory of the lower quality product is correct. Someone who sees the copycat as being simply part of the "class of products" may have negative associations with this potentially lower-quality product, may associate this experience with the class as a whole and this may be a lost sale forever for the market leader. The attractive force of that business is reduced.

It is interesting that while cases such as "Ukelele Orchestra" underline the potential for secondary meaning to close out a market to use of descriptive terms, such a poor position remains for brand owners.

Whilst some may argue that trade mark registration is the answer, the "colour purple"/SCRABBLE tile cases make it clear that a trade mark owner who strays beyond the mere depiction of the paradigm version will find that their registration is invalid.

It would be interesting to see whether a brand owner could successfully use the "class" cases (CHAMPAGNE, vodka, etc) to succeed in the UK. If the defendant is seeking to use the representation to suggest that its product is part of a class with the brand leader, it should accept the consequences of this path. Sadly, the existence of the "CPR's" lends weight to the suggestion that passing off should not stray that way.

Why is everybody lying to me? said...

"It is perhaps worth distinguishing between packaging that tells the truth and packaging that lies."

It definitely is! Unfortunately, a significant proportion of branded food packaging have clear lies about the intended portion size printed on them. This is done solely in order to deceive consumers about how healthy the product is. For example, my bottle of Pepsi Max informs me that it contains a somewhat ridiculous 2.4 servings! Perhaps if the brands themselves didn't lie to us then we might not be so willing to accept the so-called lies of lookalike packaging.

Anonymous said...

Consumers purchase primarily on price point, not on brand. Purchases of look-a-likes is generally to the detriment of other similar products at the same price point, not the expensive branded version. Those who were invested in the brand remain so, unless they have become disillusioned by the reduced quality of the branded product, or the realisation that the product inside the branded package is likely indistinguishable from that inside the unbranded package.




Anonymous said...

So "passing off" is similar to patent law. In patents, I can redesign my widget to avoid a patent but keeping to the spirit of the invention. If I am unlucky I will be held to infringe and will need to make some changes to increase the differences over the protected product.

Kant

Anonymous said...

The alleged confusion also works to the brand owner's benefit: Several times it has happened that I bought the real thing instead of the intended parasite. Confusion or empty shelves of the intended product are the most frequent causes.

What an opportunity for the premium product to convince me of their superior quality!!!!

Was I convinced? Rarely.

Associate your brands with REAL, not perceived, quality. Perhaps then I'll feel some sympathy.

Anonymous said...

An attractive showergel (price point/look/smell) may tempt they soap bar or shampoo user to swap, and therefore will grow the market.

Anonymous said...

Anonymous @14:24 hasn't a clue. He or she writes "An attractive showergel (price point/look/smell) may tempt they soap bar or shampoo user to swap, and therefore will grow the market." If a person swaps one product for another, the same number of products is still being purchased. That hardly grows the market, does it?

Ron said...

If you buy goods at stores such as Lidl and Aldi, you would not expect to find branded goods, because that stores make clear that they are not selling such goods. The situation is different in mainstream supermarkets such as Tesco and Sainsbury's, where both own brand and branded goods are sold off the same shelf. I well remember a couple of decades ago my wife buying some Sainsbury's own brand custard that had a similar get up to the Birds tin. Due to the marked similarity she thought it was made by Birds, and was disappointed to find it was a markedly inferior product. I did say at the time that she should write and complain to Birds, but she couldn't be bothered. I guess complaints must have been made, as Sainsbury's changed the package not long after.

I seem to recall that at around that time, Kellogs failed in a passing-off action against one of the supermarkets regarding their cornflakes, mainly on the ground that the packs of the Kellogs product prominently an unambiguously stated "We don't make them for anyone else" rather than due to similarity of the carton get-up.

Anon of 1302 said...

I've noticed in Aldi recently some branded products have crept in, like Mars bars, Stella Artois, and Rowse honey (not sure what that says about my shopping list!). The Mars bars were located at the tills so arguably separated from the Aldi equivalent (Venus?! or whatever they are called) so there could be an argument the consumer isn't likely to be deceived. The Stella and Rowse honey were both next to their dopplegangers though. Not sure how long this has gone on for, but doesn't appear to have caused a major fight yet. I guess if the brand is being sold at least they are receiving some profit (rather than Aldi not stock them at all).

Aaron Wood said...

I think my favourite Aldi copy at the moment is their DESPERADOS copy. I thought they had gone too far with CORONITA, but I've subsequently learned it is the Spanish version (and in a smaller bottle)

Another confused shopper said...

I've been caught out a couple of times at Tesco and ended up with the copy instead of the original branded goods I wanted to buy. Quite frankly I felt 'conned' and angry about it. I consider it to be fraudulent behaviour by the supermarkets.

Christopher Morcom QC said...

I agree with John Noble’s comments. There some fallacies in the arguments put forward by the Katanomist Nicola. She says that “there is no evidence that lookalike packaging systematically damages mainstream brands”. But the IPI study (see p 14, para 27 of the BIS Review) found that 57.2% of consumers have bought the wrong product due to similar packaging at least once. It is hard to understand how this is not evidence of damage to the imitated brand. The fact is that those who resort to copycat packaging do so to enhance their own sales. There is also the ‘efficiency argument’ espoused by Nicola, that “similar packaging for similar products more efficient”, and that “If packaging is dramatically different for similar products, it will be difficult for the shopper to identify the correct product”. As Jeremy Paxman might have said: “Oh, Really?” This is an astonishing proposition that does not even find support in the BIS Review.


There are several unsatisfactory aspects of the BIS Review. One is that, it is said, the lack of action under the CPRs indicates not that the system is failing but on the contrary that it is working well (p 12, para 22f). Given the lack of enthusiasm of the OFT (as has appeared from remarks by senior officials when that organisation was responsible for enforcement of the UCPD) and the well-known lack of resources at the disposal of Trading Standards authorities, it is difficult see how such a conclusion can be supported. Not unconnected with this ‘lack of action’ is the insistence that there is no ‘consumer detriment’ resulting from copycat packaging. But why is such detriment necessary? The Unfair Commercial Practices Directive (‘UCPD’) is not solely concerned with consumer detriment. If this had been the case, why give national legislatures the power to allow private enforcement? The UCPD is broader, being concerned with commercial practices that are unfair. Some of the provisions of the CPR that may be relevant are mentioned in the BIS Review (p 3).

Another aspect, which does not receive mention from supporters of copycat packaging, is the possible relevance of Articles 10bis of the Paris Convention, added in 1900. The obligations imposed by Article 10bis are among those reaffirmed by the TRIPS Agreement. It is noteworthy, as mentioned in the BIS Review (p 17) that the majority of EU Member States provide redress under a combination of laws against unfair competition and also unfair commercial practices provisions based on the UCPD, and that the UK is the only exception. It should be added that at least some of the traders responsible for using copycat packaging would probably not be able lawfully to do the same in their own countries.

So what is required is for the UK Government to think again about private enforcement under the UCPD and to fulfil its long overdue obligation to implement Article 10bis of the Paris Convention.

THE US anon said...

It is one thing to not want laws that protect trademarks - and it is quite another for those here pretending that such laws do not exist.

There is in fact NO "balance" with such pretending - or articles that invite this mindset.

Brand Rustler said...

Enough whingeing. What brand owners need is a more imaginative IP profession, competent to help them adjust to the reality of the twenty-first century, where retailers are bolder and where consumers are increasingly well-informed and sceptical.

Meldrew said...

I think there may be an error in Comment 1.

"However, shoppers are not the complete morons that British Brand Groups assume them to be."

should perhaps read

"However, shoppers are not the complete morons that British Brand Group wants them to be.".

The Hidden Persuaders get tetchy when the public see through their ruses, and want legal support in their efforts to manipulate consumers.

Anonymous said...

Anonymous 30 October 2015 at 14:43:00 thinks I haven't a clue.

Of course the market for shower gel increases if somebody who used to shower with plain old soap bars starts using shower gel.

You know, there was once a time when shower gel didn't exist and people were clean nonetheless.

Thought at 11.39 said...

RE: You know, there was once a time when shower gel didn't exist and people were clean nonetheless.

As far as I know, people used to carry little animals with them and, in this way, attract fleas from their own hair to the animal ... Something like that: https://en.wikipedia.org/wiki/Lady_with_an_Ermine

Anonymous said...

To Another Confused Shopper. If you pick up the wrong thing in Tesco then you aren't looking hard enough. You shouldn't get angry about it though (good grief, isn't life hard enough without getting angry over cereal?). We're all "morons in a hurry" from time-to-time. It happens to the best of us (or at least 57.2% of us). Laugh it off and look properly next time.

Personally, I don't see an admission from 57.2% of us that we have at least once in our lives made such a mistake is proof of damage to brands. It is an eye-catching statistic, but the reality is that we each of us of buy huge quantities of branded products week after week, month after month, year after year without such error. These mistakes are a tiny drop in a vast ocean. When they occur, we look properly next time. Very occasionally such a mistake might lead to a change in future shopping behaviour, but surely that will have more to do with a comparative assessment by the consumer of quality & price (i.e. a realisation that the branded version was not worth the extra money after all). Does the brand suffer in that scenario? Potentially, to a tiny degree.(Although query how secure that shopper's loyalty was in the first place. Is there ever a guarantee that people won't drift or be tempted away to competitors one way or another?). Does the consumer suffer from exercising their choice? Not at all.

All of which is a side-show. The overwhelming majority of own-brand/copycat products are sold to consumers who are not confused in the slightest. People who have their eyes-wide open and their wallets more closely-guarded than brands would like. Meanwhile brands continue to do just fine. Anyone heard of a brand that went under because they couldn't compete with own-brand/copycat products?

gloomysunday said...

Surely if you see a shampoo that is OEM branded, and a shampoo that is the supermakret own brand, and they are simialrly packaged, you'll assume one is a cheaper, slightly worse alternative of the other? Thats what I do when I choose my nice cheap shampoo... go for the one that looks most like the OEM brand, not the cheap ones that don't. Thus, copying increases sales for the lookalike... It probably doesn't divert them from the OEM brand in my case, because "I'm not worth it", paraphrased to rub the salt in deeper. What remains of my greying barnet simply doesn't justify £4 plus a bottle.

Also, if it bothers them that much, P&G et al could always take their products out the supermarkets...

I want choice said...

On re-reading this article my favourite part is that it appears that the author genuinely believes that a red label is a "brand cue" for Coca-Cola and no other competing product should be able to use a red label. This means that the British Brands Group consider any other soft drink using a red label to be a "parasitic copy" and "illegal under existing law". This seems an excellent example of the absurd amount of protection that the British Brands Group would like their members to benefit from.

Anonymous said...

What "I want choice said".

The problem surely, is ithat Brands are not particularly imaginative or creative in their attempts (lemon juice in a lemon shaped bottle anyone?) and want a monopoly on their lack lustre efforts. The red label on Coca Cola is one example, another is the Moroccan-oil/Miracle Oil saga. No-one in a million years was confused by these products, Aldi would never have been selling the original version, it was clearly a cut price "dupe" and it was a blatant attempt at trying to restrict use of the orange and turquoise colour combo by Moroccan-oil (even though this combination is highly distinctive and reminiscent of Morocco, not Israel where the product is made/brand is from) even though it has been used by other cosmetics companies, including Lancaster, before them.

The whole issue seems to have come to the fore with the growth of the discount retailers like Aldi and Lidl who have shown consumers that the branded goods are really not worth the extra money in the vast majority of cases.

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