Welcome to the second issue of our quarterly Food & Drink update, covering recent legal developments in the sector.

Contents

• Copycat Branding
• Slangevar to New Regulations
• 'Competition Test' to be Recommended to Government
• Grocers Make the Most of the Downturn
• An Update - OFT Gives All Clear to 'Beer-Ties'
• Health and Safety Investigation at 'The Fat Duck'
• Counterfeit Vodka Factory Rumbled
• Red Bull Rapped by Environmental Agency
• Blow to Minimum Alcohol Pricing
• An Update - Plain Sailing for First Stage of Marine Bill
• Kitchen Accident Leaves Jamie Oliver Hot Under the Collar
• Are Supermarkets too Big for their Boots?
• And Finally: Do You Know Your Golden Bunnies From Your Chocolate Reindeers?
• Contact Us

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Copycat Branding

A dispute between Sainsbury's and drinks company Diageo has, as with many of these disputes, ended in compromise.  Diageo, maker of alcoholic fruit-based drink Pimms, alleged intellectual property infringement and threatened legal proceedings, after claiming that Sainsbury's own-brand alcoholic fruit based drink, Pitchers, was merely a copycat version.  On first sight, the label and shape of bottle are very similar.  Further, the Pitchers serving instructions, which suggest diluting the drink with lemonade and adding various fruit to the mixture, were practically identical to the renowned method of preparation of Pimms.

Diageo has now accepted that Sainsbury's will continue to sell its Pitchers product but an out of court agreement will require Sainsbury's to change its colour scheme from gold to orange and add Sainsbury's name to the label.

This outcome has been welcomed by the British Brands Group which advocates consumer choice without confusion over the products on sale.  This group discovered in a recent survey that one in three shoppers have mistakenly purchased a product because of its similarity to a well-known brand and are pleased that the Pitchers product is to be made more distinctive in order to avoid such misunderstanding.

More actions of this type are likely.  In the past brand owners have been wary of embarking on disputes with large supermarket chains.  However, coupled with the Consumer Protection Regulations (introduced last May, banning products which are packaged and marketed in a certain way to mislead the customer into thinking they are buying a different brand) it is thought that brand owners will now have extra confidence to take more serious action in a bid to protect their intellectual property. 

Slangevar to New Regulations
November saw the introduction of the new UK Scotch Whisky Regulations which will provide better protection both for consumers and the Scotch whisky industry itself by combating counterfeit products and inadequate labelling.  The regulations have set down more stringent rules in relation to the famous tipple such as the use of distillers' and distilleries' names on labels and of local and regional geographical indications (for example making sure bottles labelled with "Islay" have an adequate connection with the island) as well as defining five separate categories of Scotch whisky.

It is thought that these regulations will bolster the reputation and status of Scotch whisky and give consumers confidence that they are buying the genuine article in Scotland and further afield.   

Additionally, the Scotch Whisky Association ("SWA") has also been successful in having Geographical Indication of Origin status granted over Scotch whisky in China this year.  In other words, all products labelled as 'Scotch' now must come from Scotland. 

In 2007 the SWA submitted a request to the country's General Administration of Quality Supervision, Inspection and Quarantine which asked for Scotch whisky to be afforded a special status.  Since this time there have been approximately 200 investigations into bogus Chinese whisky products and the Chinese Government has now accepted the request.  There is a large market for whisky in China and it is hoped that this milestone will sustain real Scotch whisky as a premium product.

Click here to view regulations.

'Competition Test' to be Recommended to Government
Despite being considered by many as controversial, the Competition Commission has formally recommended to the Department of Communities and Local Government its 'competition test' in relation to planning decisions on larger grocery stores.

If implemented, the test would put a stop to powerful retailers, who already have a strong presence in local areas, from dominating further to the disadvantage of consumers. It would apply to grocery developments as well as extensions to existing stores but would allow all retailers to make minor extensions to one store of up to 300 square meters of grocery sales area as long as the store had not been extended in the previous 5 years.

The Competition Commission says that such action is necessary to improve competition in local areas and has recommended the test to the Government with a revised set of measures following an appeal earlier in the year.

The recommendation was made at the beginning of October and the Government has indicated that it intends to respond in due course- so watch this space.

Grocers Make the Most of the Downturn
According to recent research carried out by commercial real estate advisors CB Richard Ellis, British grocers have been making the most of development opportunities generated by the recession - evidenced by a 5 million square foot increase in grocery floor space since mid-2007.

While shopping centres and retail warehouses in the non-food market have continued to experience difficult setbacks throughout the recent downturn, UK grocers have benefited by snapping up floor space left vacant and developing their non-food market share in response to an emerging gap in this area. 

Mark Teal, who is head of UK Retail research at CB Richard Ellis said that "Although planning obstructions will continue to inhibit the development of major hypermarket formulas, grocers are still in an unusually strong position to develop and acquire new space."

An Update - OFT Gives All Clear to 'Beer-Ties'
We noted in our previous issue of Food & Drink that the hot topic of Beer Ties had been hitting the headlines with a Government Select Committee suggesting the practice should be 'severely limited' and the Campaign for Real Ale submitting a 'super-complaint' to the Office of Fair Trading (OFT) in July.

An examination of Beer Ties by the OFT found that there is no evidence to suggest that the system is causing competition issues or having a negative impact on consumers by pushing up prices and limiting choice.  The OFT has allowed the practice, in which pub tenants are tied into purchasing their stock requirements from their landlord, to continue and stated that it will not be taking any further action.

It is thought that this decision will provide a lift to pub companies who are already struggling with supermarket competition but the Campaign for Real Ale is now demanding immediate action from the Government as it considers the OFT's decision to be inadequate to protect the sector.     

Health and Safety Investigation at 'The Fat Duck'
A report from Windsor and Maidenhead Council has concluded that Heston Blumenthal's restaurant, The Fat Duck, was the source of a food poisoning outbreak which led to 500 reported cases.  It stated that the source was shellfish supplied by a fishery in Colchester which is thought to have become contaminated by sewage. 

Blumenthal has not been absolved from all responsibility as the investigation discovered several food management failures at the restaurant such as cross-contamination, a delay in reporting early signs to the Health Protection Agency and person to person transmission.  However, it appears that no formal action is to be taken against the celebrity chef.

Counterfeit Vodka Factory Rumbled

Counterfeit problems continue to plague the drinks industry in particular. Recently, 10,000 bottles of counterfeit vodka were seized during a massive HM Revenue and Customs bust at an illegal factory in Leicestershire.  In addition to the bottles of vodka, which were falsely branded as 'Glens', the Customs officers also found 35,000 litres of pure alcohol which is enough to make 100,000 litres of vodka. 

It is estimated that had the seizure not been made, the sale of the bogus alcohol on the black market could have defrauded the Treasury out of £1 million in duty and VAT.

Even more shocking, however, are the methanol levels in the seized spirits which are higher than average and could be lethal if consumed in large quantities.

Red Bull Rapped by Environmental Agency
The increased obligations on food & drink producers to deal with recycling and packaging waste were highlighted recently in the case made against Red Bull.  Red Bull was accused of failure to recover and recycle its packaging waste.

Red Bull was accused of 16 charges in total, including failing to register with the Environmental Agency as a producer of packaging waste and failing to meet the requirements to recover and recycle that waste over the years between 1999 and 2006.  A hefty fine of £261,278 was imposed together with £3,775 in costs and £6,854 in compensation and missed Environmental Agency registration fees.  This is the most substantial fine imposed for similar breaches. 

The Producer Responsibility Obligations (Packaging Waste) Regulations 2007 requires businesses to take responsibility for the packaging waste to which their products contribute and has an overall aim of reducing the packaging waste destined for landfill and increasing the amount which is recycled. In short, the Regulations oblige businesses with an annual turnover of a sufficiently high level (currently £2 million) and which produce more that 50 tonnes of packaging each year to either register with the Environmental Agency or another suitable compliance scheme and provide evidence that they are paying for the recovery and recycling of their packaging waste. 

The Environmental Agency regularly checks up on companies to ensure that these requirements are being met.

Blow to Minimum Alcohol Pricing
The Scottish Government recently published its Alcohol Bill with the intention of tackling alcoholism in Scotland and cutting down on alcohol-related deaths and crime.  Amongst other provisions the Bill provides for the creation of a minimum price per unit of alcohol sold but despite the backing of several medical experts the Bill has been shot down by the Conservative, Labour and Liberal Democrat parties. 

Further, it is thought that a recent European decision, which said that three countries were in breach of EU competition rules by attempting to impose national minimum pricing on tobacco, has added weight to opposition to the Bill by suggesting minimum alcohol pricing is questionable in terms of its legality.  The Scottish Government has rejected this but alcohol producers will view it positively as a further blow to the Alcohol Bill's future. 

An Update - Plain Sailing for First Stage of Marine Bill
The Marine (Scotland) Bill has now passed its first parliamentary stage and will return to the Rural Affairs and Environment Committee for a more comprehensive analysis.

An amendment is to be introduced to the Bill which will insert climate change objectives into the new national marine plan in order to assist Scotland with achieving its emission targets.  Due to the implementation of new European regulations, Scotland will now be responsible for the health of Scottish waters to 200 nautical miles (this is in addition to earlier decisions permitting Scotland to take responsibility of marine planning in the same 200 nautical miles).

On the other hand, environmentalists have raised concerns over provisions concerning seals and the Scottish Green Party has called for proposals which would ban seal shooting in breeding seasons.

Kitchen Accident Leaves Jamie Oliver Hot Under the Collar
Health and safety issues were once again in the headlines when skin grafts and a ten day hospital stay were the unfortunate consequences of a serious kitchen accident at one of Jamie Oliver's restaurants in Bath, Jamie's Italian. 

It has since been discovered that although the injured chef had 13 years experience she had not received proper health and safety training or seen a risk assessment during her employment.  Subsequently, Jamie's Italian pleaded guilty to 3 breaches of health and safety at Bath Magistrates Court and a fine of £8,500, together with costs of £3,910, was imposed.

Bath and North East Somerset Council's health and safety team welcomed this outcome and hope that the publicity of this case will serve as a reminder to other restaurant operators of their health and safety responsibilities.  

Are Supermarkets too Big for their Boots?
Tesco was recently accused by its suppliers of breaching the Supermarket Code of Practice.  Apparently the supermarket giant asked some suppliers for large cash payments (as profits for the first half of the year were lower than expected) or risk their products being delisted.

The Supermarket Code of Practice states that a supermarket is not able to demand payment from a supplier in order to compensate for a drop in profits unless agreed in writing but Tesco's suppliers said that Tesco refused to do this.  Additionally, the new Groceries Supply Code of Practice, which will come into play next month, states that retailers must treat its suppliers 'fairly and lawfully'.  However, Tesco has denied these allegations, suggesting that there is no evidence to support them.

Nevertheless, supermarkets dominance in the food & drink retail sector is a hot topic and in August the Competition Commission recommended the implementation of a Groceries Ombudsman to the Department for Business Innovation and Skills.

Since then, on 13 January, the Government announced its decision to accept this recommendation, and has indicated its intention to consult on what powers the body might have and who it may be.

We will keep you updated as and when the Government's final proposal is released.

And Finally: Do You Know Your Golden
Bunnies From Your Chocolate Reindeers?
Famous chocolatier Lindt, which was successful in trade marking the 3-dimentional shape of its gold foil wrapped chocolate bunny back in 2001, has recently accused an Austrian company of trade mark infringement of the big-eared treat.

3-d trade marks can be controversial and time has shown European Judges to be reluctant to grant protection to trade marked products unless the competing product is exactly the same in appearance.  Since 2001 Lindt has taken several chocolate bunny competitors to court with varying success.  It won against a German company in 2006 but a Polish court decided that stamping a company's name on the golden wrapper was enough to distinguish the Polish chocolate maker's bunny from Lindt's.

But Lindt now faces a sting in the tail (excuse the pun!) as the Austrian bunny maker has countered Lindt's accusations by suggesting that it applied for its trade mark in bad faith in 2001, knowing that similar golden bunny products were on the market at the time, and this question was sent to the European Court of Justice in June.  Had the ECJ agreed with this counter-attack then Lindt's 3-d trade mark could have been overturned.  However, the opinion returned by the ECJ on this matter merely set out specific criteria which need to be met to show bad faith.

The Austrian court is still to decide the fate of the golden bunnies.

Contact Us
For further information, please contact:

Kenneth Shand
Partner
Corporate
0141 303 2331
kenneth.shand@mms.co.uk

Alison Bryce
Partner
IP & Technology
0131 228 7102
alison.bryce@mms.co.uk

Gillian Downie
Partner
Property
0141 303 2396
gillian.downie@mms.co.uk