LEVI’S AND TESCO AWAIT EU RULING
Byline: Robert Murphy
BRUSSELS — The next chapter of Levi’s three-year spat with the U.K. retailer Tesco may be written in the coming months by the European Court of Justice.
While the Luxembourg-based European Union institution has not yet committed to setting a date to hear the case before it goes on a six-week summer recess later this month, it could issue a ruling on the discount store’s right to sell Levi’s jeans in the early fall.
Levi Strauss & Co. is seeking a ruling that would bar Tesco, which has been buying Levi’s jeans at cut-rate prices from suppliers outside the EU, from selling its jeans at a 20 to 30 percent discount in the U.K.
The San Francisco-based jeans maker argues that, by doing so, Tesco has violated European trademark rules. Although those regulations stipulate any company can import branded goods from another EU member, they usually do not allow the importation of goods from a non-EU member without a brand’s consent.
Tesco argues the law is unclear.
“We are seeking clarification of that law,” said a spokesman for the retailer. “Initially, the law was written to promote free trade and let consumers benefit from the lower prices generated by competition.”
Levi’s argues that having its jeans sold in Tesco, which also sells groceries, cheapens its brand image.
“Tesco is not a clothing store,” said Alan Christie, Levi’s vice president of public affairs. “We are trying to protect the reputation of the brand, of which a central component is the retail environment. They [Tesco] are playing with an essential component of the Levi’s identity.”
The Levi’s-Tesco spat dates back to 1998. An initial complaint was filed in a British court, which referred it to the European court. It was heard by that body for the first time last January. In April the EU Advocate General handed down a nonbinding opinion that sent both Levi’s and Tesco into spin mode.
That lengthy opinion read, in part, “When the trademark regulation is applied to apparel imports from non-EU-member countries, account must also be taken of the interest of the traders involved.”
Both painted the opinion auspiciously. Tesco said it provided “a clear message that [Levi’s] policies to keep prices high will no longer be tolerated in Europe.”
The Tesco spokesman said, “Levi’s are too expensive. They are a global commodity and not rare. We have not wounded the brand identity and a customer’s appreciation of Levi’s is not linked to the retail experience, which lasts only about five minutes.”
Tesco said it sells about 10,000 pairs of Levi’s jeans a month.
For its part, Levi’s read the opinion as a restatement of the status quo that brands have the right to control distribution of their goods.
“Like the trademark law, it was very vague,” said Christie. “But we are confident and serene that justice will fall on our side.”
In any case, the European court’s decision is not binding. The case will then be referred back to the British court for a final decision, for which a timetable remains unclear.
Traditionally, national courts have followed the advice of the EU body. The case is being followed by many brands in Europe. If Levi’s loses, other companies contend it will allow more designer goods to end up on supermarket shelves.