[Guest Post] Thatchers v Aldi – is the UK moving towards a tort of unfair competition?

Now that the IP community has had a week to reflect on the Court of Appeal judgment in Thatchers v Aldi, the IPKat is pleased to host the following guest contribution from Katfriend Oliver Fairhurst (Lewis Silkin) to comment on the potential ramifications of the decision. Here's what Oliver has to say:

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"Most UK readers will know all about the Thatchers Cider v Aldi case ([2025] EWCA Civ 5), which was summarised by the IPKat here. It is a pro-brand judgment. While it is heartening to see a small, family-run brand beat the pantomime villain of rip-offs, this decision may have a broader impact. 

For brevity (and the IPKat purr-d limit), much of what follows assumes an understanding of L’Oreal v Bellure, which involved smell and look-alike perfumes. The key points for present purposes are that the courts declined to recognise a tort of unfair competition that did not require deception (“Bellure 1”), the CJEU gave guidance on unfair advantage trade mark claims here, and the leading judgment when the case came back to the national courts (delivered by Jacob LJ) contained an excoriating criticism of that CJEU decision and the potential impact on competition and free speech (“Bellure 2”). 

Unfair advantage?

Jacob LJ in Bellure 2 took the view that the CJEU’s guidance rendered the word 'unfair' meaningless ([49]); any advantage will be unfair. Arnold LJ in Thatchers said that reading is incorrect ([150]), referring to Whirlpool v Kenwood ([2009] EWCA Civ 753) and Argos v Argos Systems ([2018] EWCA Civ 2211). 

Aldi’s intention to mimic Thatchers’ brand and avoidance of spending money on advertising its own product appeared decisive.  The key paragraph bears quoting:

"… Aldi was able to achieve substantial sales of the Aldi Product in a short period of time without spending a penny on promoting it. … That was an unfair advantage because it enabled Aldi to profit from Thatchers’ investment in developing and promoting the Thatchers Product rather than competing purely on quality and/or price and on its own promotional efforts." (emphasis added) [114]

Whirlpool and Argos show 'unfair' serves a purpose. Lessons can be taken from both of those cases. In Whirlpool, the defendant had invested significantly in developing and promoting its own product. In Argos, the defendant had legitimate grounds to use ARGOS and the benefit it received (internet traffic generating advertising revenue) had also caused various problems. 

A global assessment of factors is required but it seems clear that deliberately and successfully imitating a trade mark in launching a look-alike product, and then not spending substantial amounts of money (or any) in promoting that product, will take unfair advantage of the mark. But often the intentions of the defendant, and the lack of investment in the competing product, is less black and white. I add that unfair advantage has still been proven in cases where no intention to free-ride has been shown (see e.g. Jack Wills and Lidl).

The approach in Thatchers favours heavily the trade mark owner. It will be challenging for many defendants to show that, while aware of a trade mark, they did not intend to free-ride on its reputation, and that to the extent they did, they were entitled to do so. 

Looking forward, I suspect that courts will be asked to put a lot more emphasis on the ‘without due cause’ part of s.10(3) to find the right solution in each case, and to avoid overextension of trade mark rights (see Planetart at [38], [44]). The challenge is that the bounds of a trade mark’s protection may be difficult to assess at the product launch stage, or even the early stages of litigation, encouraging more litigation and, as argued by Jacob LJ, potentially discouraging competition. 

Impact of comparative advertising

The impact of such a finding on competition was not lost on Arnold LJ, who drew the distinction at [150] between “transfer of image cases” (such as the present one) and “fair and transparent comparative advertising”. 

What is fair and transparent comparative advertising? Comparative advertising is any representation (note: not limited to ‘advertising’) explicitly or impliedly identifying a competitor (see here). I would suggest that “fair and transparent" comparative advertising is advertising which complies with the requirements of the Comparative Advertising Directive (CAD) and the UK’s Business Protection from Misleading Marketing Regulations (BPRs). 

Aldi’s use of its Taurus branding could have been a form of lawful comparative advertising if it complied with the requirements of the BPRs. It did not raise such a defence, likely because it was misleading and therefore did not comply with the BPRs (see [122]). It is in principle possible, though, for packaging to constitute a comparative advertisement and, if it complies with the CAD/BPRs, be permitted. 

The BPRs (and CAD) contain many traps for the unwary, though. In particular, there are various cumulative obligations that, if not complied with, cause the advertiser to lose the protection that the BPRs/CAD would otherwise grant (of which one, the presentation of a product as an imitation, is particularly challenging in a look-alike case). Relying on comparative advertising will not, in most cases, offer an answer.

Unfair competition in the UK?

A tort of unfair competition that does not require deception as to origin has been a long-held ambition for brands and their lawyers in the UK. However, the Court of Appeal declined to recognise such a tort in Bellure 1. 

Arnold LJ referred in Thatchers to “unfair competition” three times in his judgment, noting the “irony” that Thatchers would probably have a remedy in Aldi’s home territory “in unfair competition law”. While he was using the phrase unfair competition in quite limited ways (two were very much in relation to trade mark law, the other was obiter in describing the law of another country), the practical reality may be that where a brand has a trade mark for its product’s appearance (certainly where that product has distinctive packaging), the outcome may indistinguishable from one where a tort of unfair competition was in place. 

But, that is only where the brand has a suitable trade mark with a reputation. That raises the bar to those brands that have the resources to secure proper trade mark protection for each product, and are successful enough to secure a reputation. If a small brand that has created an excellent product, or a range of products, perhaps even registers its logo and name, thinking it has protected its ‘brand’, why should it not get protection when an experienced copier such as Aldi decides to imitate it? Should, from a policy perspective, the existence of a trade mark be the difference between success (Thatchers) and failure (Morrocanoil)? I fail to see any such justification.

Conclusion

Many brands choose, where possible, to bring proceedings in continental European jurisdictions where protection is thought to be easier to obtain. However, this decision, and the decision not to depart from the CJEU’s guidance in Bellure, puts the UK back on the map for tackling look-alikes. UK procedural law enables disclosure of documents relating to the design process, which is helpful in showing intention, and the process can be quick and cost-effective. 

It is not lost on this author that part of this increased attractiveness is brought about by post-Brexit re-alignment with the EU rather than divergence. Let’s see if the Supreme Court has a view…"