My Lords, I return to an amendment on lookalikes which was first proposed by my noble friend Lord Jenkin in Grand Committee on 18 June. He and the noble Lord, Lord Borrie, from the opposition Benches, made an eloquent case that this kind of parasitic copying was designed to—and did—
confuse and mislead the consumer, and should have a remedy available to those whose products are copied in this way.
The Minister responded with a number of points on, first, the IPO study, the amendment itself, the Consumer Protection from Unfair Trading Regulations, the Which? report and TRIPS compliance. I will take each of his statements in turn and comment on them. First, the Minister said that the findings of the IPO study,
“were, perhaps surprisingly, fairly equivocal”.—[Official Report, 18/6/13; GC63.]
Having now studied the IPO study findings, I believe that they are unequivocal in key areas. The review of existing surveys concluded the following:
“It is clear across all these studies that consumers report making mistakes in what they have bought and in high numbers”.
In addition,
“where the packaging is similar then it appears that more people think the own brand has a common origin with the manufacturer”.
The study also states that,
“as the similarity of packaging increases it becomes more likely that consumers will perceive the quality of products to be the same”.
The study’s own consumer surveys found:
“Increased perceived similarity of packaging to manufacturer brand product packaging of one own brand product relative to another is significantly correlated with higher perceptions (ratings/expectations) of price, quality, suitability for intended use and (marginally) value for money … Substantial proportions (50-60%) of the UK, German and US populations report having purchased a lookalike accidentally or mistakenly at least once or twice … In summary, across the three national samples 5-15% of accidental purchasers of lookalikes rated the purchases as having been of the highest level of disadvantage … to them, and 30-40% rated the purchases as having been of the next highest level of disadvantage”.
The study also concluded that,
“some lookalikes are already unlawful in the United Kingdom as they are contrary to the Consumer Protection from Unfair Trading Regulations 2008”.
Tellingly, it went on to say:
“However, certain lookalikes already being unlawful under the 2008 regulations is of little significance if trading standards (or others) do not have the resources to take action against those breaching the regulations”.
The Minister went on to say that,
“there is a fine line between confusing packaging and the use of ‘generic cues’ to signal to customers”.
Competitors may adopt a category cue—typically this is one design element. The Minister quoted green for mint toothpaste. Nevertheless, each product can be distinct from others carrying the same cue. There is a big difference, however, where competitors set out to mimic a range of features associated with a familiar brand in order to create a similar overall appearance. Where there are borderline cases, the courts should have no difficulty in drawing an appropriate line. They must do so, for example, when determining whether or not a product is a counterfeit.
Category cue arguments are often used to justify copying familiar brands. However it is one thing to say that green equals mint or yellow equals lemon, it is quite another to say that red equals cola or squat, dark bottles equal Marmite. The Minister went on to say that,
“a substantial majority of consumers had deliberately purchased a lookalike and, of those consumers, most of them found the experience to be advantageous. The research did not analyse why some consumers perceived the purchase to be advantageous”.—[Official Report, 18/6/13; GC63-64.]
It should not be inferred from these findings that similar packaging is benign. A copy may be purchased deliberately, in the belief that it is comparable to the brand. This is what the copy intends to convey and the consumer may feel advantaged. However, the consumer would be misled were the copy not to share all the functional and emotional attributes normally associated with the brand. The IPO study demonstrates that similar packaging increases perceptions of quality and price. A consumer may feel advantaged, but actually may be paying more than would be the case were the product not free-riding and boosting its appeal artificially on the back of a brand.
The IPO study also demonstrates that similar packaging increases the belief that the product comes from the same manufacturer as the brand. The consumer may feel advantaged, but is actually misled when the product is not made by the brand owner. As the study states, crucially the research did not analyse why consumers perceived an advantage. It also makes a far-reaching and rather far-fetched assumption that shoppers have perfect information about the products on offer in supermarkets. This is clearly absurd. The finding therefore has little value in policy analysis.
5.30 pm
It should also not be forgotten that some consumers believe that purchasing counterfeits is advantageous to them. Indeed, some buy them deliberately. The Minister went on:
“Although a high number of consumers felt disadvantaged by the accidental purchase of a lookalike, a substantial number saw it as an advantage”.—[Official Report, 18/6/13; col. GC63.]
Suggesting that because some consumers feel advantaged in some way balances those who feel disadvantaged is an unusual approach to policy. It is akin to suggesting that were rogue traders to satisfy at least 51% of their customers, their exploitation of the remainder should not be open to challenge.
The last comment made by the Minister on the study was that,
“only in a limited number of categories was there an association between, ‘a reduction in the sales of the brand leader and an increase in the sales of the lookalike’”. —[Official Report, 18/6/13; col. GC64.]
I do not believe that that fairly and accurately represents the IPO study, which actually states in the data analysis that this effect was not proven. The brand owners believe this to be the case because the study used a limited number of products, inappropriate data and poor control products, and were unable to match the sales data to the packaging designs, and the effect of similar packaging could not be isolated from other influences such as advertising promotion, shelf display formulation and the many other factors that affect rates of sale. With similar packaging prompting mistaken purchase and creating false assumptions about the origin and quality of product, there must be a sales effect. Generally on the IPO study, to reiterate, there are significant findings in crucial areas that are conclusive
such as shoppers buying the wrong product and making mistaken assumptions about the origin and quality of goods. These are underplayed when the study as a whole is presented as equivocal.
The Minister commented on the nature of the amendment put forward. He said that it would prohibit the use of packaging which tells consumers that a product has similar qualities to those of a competitor’s product even where it is true. The amendment, which is in exactly the same form as the amendment moved in Grand Committee, would prohibit only the use of similar packaging to indicate such similar qualities, including reputation.
Quality can be conveyed to consumers in many distinctive ways that would be unaffected by the amendment, such as unique label design, materials, imagery and printing techniques such as embossing and metal foils. If a competitor mimics the brand’s packaging to convey similar or identical qualities, it is not competing on its own merits, but free-riding on the brand’s hard-won reputation. The copy is essentially inferring that the product is similar in every respect. Under comparative advertising rules, such a claim would not be permitted as it is neither objective nor verifiable. Were such a message to be conveyed through words in an advertisement, the advertisement would be banned. Why should the principle differ when the product packaging is the medium, especially as such imagery conveys the false message far more powerfully? The comparative advertising rules, while applying to a wide range of marketing communications, regrettably do not apply to similar packaging. Furthermore, the comparative advertising rules were not considered in the IPO study.
On the second major point under this heading on the amendment, the Minister said:
“The law already provides for the protection of distinctive packaging … First, where packaging is distinctive, it may be registered as a trade mark”. —[Official Report, 18/6/13; col. GC63.]
While packaging may be registered as a trade mark, it would have to be well known to have protection against unfair competition. It is uncertain whether most packaging would be deemed well known, and certainly it would discriminate against small suppliers who were copied. Furthermore, protection by Cadbury, for example, for its purple colour, has been a hugely long and drawn-out process taking many years. In reality, copiers are able to design around registered trade marks while still conveying a similar overall impression. The Minister went on to say that there are,
“remedies under the common-law tort of ‘passing off’”.—[Official Report, 18/6/13; col. GC64.]
As the interviews in the IPO study convey, a passing-off action is very difficult and expensive to bring in cases involving similar packaging. Often the pack clearly displays the producer’s name, reducing the likelihood of misrepresentation, and consumer confusion is extremely difficult to prove to a court’s satisfaction. Consumers tend not to complain about low-priced items. Evidence cannot be gathered in stores, and courts often dismiss survey evidence as unreliable. These factors explain why in 2006 the Gowers review commented:
“The review believes that passing off does not go far enough to protect many brands and designs from misappropriation”.
The Minister’s final point on the amendment was:
“Any proposal which changes the status quo should be considered with caution”.—[Official Report, 18/6/13; col. GC63.]
This amendment was first tabled in 2000 when my noble friend Lord McNally’s Copyright and Trade Marks Bill was presented to the House. There have been something like 13 years for careful consideration of the amendment. As the IPO study states in relation to the Gowers review:
“This response was criticised by some commentators for largely reflecting the same wait-and-see approach that had been taken when the Trade Marks Act 1994 had been adopted. Such criticism argued that wait-and-see had been used as a strategy for too long”.
That criticism was made in 2006.
Coming on to consumer protection through unfair trading regulations, the Minister said that civil powers to enforce were rejected at that time,
“because of the danger that such powers in relation to regulations with a very broad, principles-based application could lead to a great deal of costly and burdensome litigation before the courts”.—[Official Report, 18/6/13; col. GC65.]
This statement appears to acknowledge that there is a significant problem in the UK with many potentially unlawful products on the market. The IPO study indicates that the Government’s fears are groundless. Other countries where civil powers to enforce have been granted to companies have not seen a wave of litigation. The Minister’s second point on the CPRs was that such actions,
“would also need to be based on consumer detriment”.—[Official Report, 18/6/13; col. GC63.]
I do not believe that that is the case and it would amount to government gold-plating. There is no consumer detriment test under the CPRs. The IPO study verifies that consumers make mistaken purchases and are misled in significant numbers, with many considering themselves disadvantaged. I appreciate that the OFT and trading standards may wish to adopt a consumer detriment test to determine their enforcement priorities, but this would be less of a constraint on brand owners were they to have civil enforcement rights. The outcome would be higher levels of consumer protection at no cost to the taxpayer.
Penultimately, the Minister dealt with the Which? report by saying:
“The Which? survey of 2,244 of its members, conducted in February of this year, also found that of those who had mistakenly purchased the lookalike product, 38% were annoyed by the fact and 30% felt misled. However”—
this was the Minister’s point—
“the survey also reported that 18% of participants had deliberately purchased an own-brand product because it resembled a branded product, some of them because it was cheaper than the branded product. Taken together, the Government consider that these measures grant a proportionate level of protection to the packaging of brand owners and that therefore the amendment is not necessary”.—[Official Report, 18/6/13; col. GC65.]
This Which? finding should not be taken at face value—it refers to only 18%. A consumer may deliberately purchase a copy, but may still be misled over its source and/or its quality.
Finally, the Minister responded to the point on the TRIPS agreement and the Paris convention. He assured me,
“that the UK is fully compliant in its obligations under TRIPS and other international agreements.—[Official Report, 18/6/13; col. GC65.]
In response to a Parliamentary Question in 2000 from my right honourable friend Norman Baker, the Government were unable to substantiate that the UK complies with its obligation to give nationals effective protection against unfair competition. This is a requirement under the Paris convention and TRIPS. In the same year, Christopher Morcom QC reviewed all the documents referred to in the answer, but could find nothing that was relevant to the UK’s compliance. In 2006, the Gowers review of the UK’s IP regime, undertaken at the behest of the Treasury, found that brands in the UK are not well protected from misappropriation. The review was accepted by the then Government.
Other than this reply, I am not aware of any substantiating evidence from the Government of the UK’s compliance, only assurances such as those that were given by the Minister on 18 June. The IPO study suggests that the protection required by Article 10bis of the Paris convention is now met by the UK’s implementation of the unfair commercial practices directive through the CPRs. This statement ignores the reality of the fact that the CPRs are not being enforced by the OFT or trading standards. Without enforcement, the CPRs cannot be deemed to meet the “effective” threshold required by the Paris convention.
I hope that, in the light of what I believe is a comprehensive rebuttal of the points made by the Minister in Grand Committee, the Government will reconsider their position on lookalikes and on this amendment. I beg to move.