EU Retail News - April 2016

by Bryan Cave Leighton Paisner
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Welcome to the first issue of EU Retail News written by members of the Retail Team at Bryan Cave:

  • EU and US: Marketing fitspiration from SoulCycle
  • UK: What is the UK's Modern Slavery Act and does it apply to you?
  • EU and US: Brand battle of the Kylies
  • France: Will a prohibition in a distribution agreement against sales on a marketplace website soon be prohibited in France?
  • Italy: New Italian law governing commercial leases is a welcome reform
  • EU and UK: ll retailers must adopt new EU online dispute platform — does your UK website comply?
  • US and EU: What's so special about hashtags?

EU and US: Marketing fitspiration from SoulCycle

SoulCycle has taken the US by storm, with fitness studios spreading throughout California, Illinois, Connecticut, Florida, Maryland, Massachusetts, and New York — and it's pacey takeover of the fitness world doesn't show any signs of cooling down and will undoubtedly spread "across the pond" to our shores.

Popular features of the SoulCycle brand include a convenient membership model, exclusive exercise classes, celebrated instructors, contemporary facilities, and a zen atmosphere — but none of this is new. What sets this fitness creature apart from its numerous competitors is its word-of-mouth marketing strategy: SoulCycle does not market its brand, its customers do.

Consumer interest in SoulCycle is created through social media — 'selfies' are actively encouraged before, during, and after classes and the global social media sphere is swimming with photos of celebrities, CEOs., and even First Lady Michelle Obama reaping the benefits of the SoulCycle lifestyle. And, what's more, these human billboards are frequently sporting the brand logo on their clothing and accessories which the company releases in monthly fashion lines and capsules. With product sales making up an increasing percentage of SoulCycle's revenue, not only is the company benefiting from free advertisement both inside and outside the studio, it's increasing its merchandise sales by using this marketing strategy.

In this digital world, social media marketing is fast becoming the most effective way to advertise your brand as consumer trust in celebrity endorsements, whether paid or otherwise, seems to be on the rise.

But, beware, this new approach to marketing doesn't mean you can ignore legal obligations regarding unsolicited email opt-in requirements.

UK: What is the UK's Modern Slavery Act and does it apply to you?

The UK's Modern Slavery Act is amongst the toughest in the world. Companies must comply with the Act if they:

  • supply goods and/or services;
  • have annual sales of £36m or more; and
  • carry on any business in the UK.

Thus, the Act reaches far beyond the borders of the UK although merely having a UK subsidiary will not necessary require the foreign parent company to comply with the Act. The test is common sense based—if a company has a demonstrable business presence in the UK (either itself or via a subsidiary) it will be caught by the Act.

The transparency in supply chain provisions of the Act require a statement be prepared and published each year including such things as details of the business and structure of the company, policies relating to human trafficking and slavery, parts of the business which may be susceptible to slavery/human trafficking, how the company measures its compliance and what training it provides to its employees.

The concept of slavery the Act seeks to prevent is broader than the image of a person in bondage being forced to work by violence. But, recent guidance issued by the UK government says that where a worker chooses to work in undesirable or unsafe conditions without being forced or deceived and is able to leave freely and easily without threat to themselves or their family, this may not amount to modern slavery. So, the government expects companies to investigate in detail and in depth the conditions in their supply chains.

The first group of companies required to file a statement are those with fiscal year ends of 31 March 2016. Retailers and brand owners inside the UK and those who are based outside the UK but do business here may very well be caught by the Act's provisions. If this applies to you, an important first step will be to review your supplier contracts and consider including provisions requiring suppliers to comply with the Act. And, of course, make sure your UK employees are paid the minimum wage and that you have appropriate immigration checks in place!

EU and US: Battle brand of the Kylies

On 22 February 2016, Australian pop princess Kylie Minogue opposed 'King Kylie' Jenner's application to the United States Patent and Trademark Office to trademark the name "Kylie".

Minogue took issue with Jenner gaining exclusive rights to the name "Kylie" in relation to advertising and endorsement services. Describing Jenner as a "secondary reality television personality" in the Opposition, Minogue argued that allowing this registration would cause customer confusion and dilute her brand, particularly since Jenner's "photographic exhibitionism and controversial posts have drawn criticism from e.g., the Disability Rights and African-American communities".

Celebrities trademark their names for the same reason companies do; to protect the financial integrity of their brand and to prevent others from diluting it or gaining undue advantage through its use. Whilst Minogue can be seen to be doing just that, she could be criticized for doing Jenner, whose goal is the very same, a great injustice. The so-called "secondary reality television personality" has over 50 million Instagram followers (as compared with Minogue's 1.2 million) and, at only 18 years old, has worked to have her name associated with television shows, leading sportswear brands, hair extension lines, a website and mobile app, a video game, jewellery and fashion lines (including her own), makeup and beauty lines (again, including her own), beauty blogs, modelling, novels, and much, much more. Jenner's application to the US Patent and Trademark Office is in itself an example of the business of her brand and her strategy to propel her name into the public spotlight whilst protecting her ever-growing financial stake in it.

Retailers beware when working with celebrities: this US scenario may wash up on our shores in Europe!

It remains to be seen who will triumph in the US battle of the Kylies.

France: Will a prohibition in a distribution agreement against sales on a marketplace website soon be prohibited in France?

Since the landmark Pierre Fabre decision, there is no longer any doubt that imposing a blanket prohibition on selling via internet in a selective distribution network will constitute an impermissible restriction of competition. A recent French decision has likely broadened the scope of this restriction in selective distribution.

In November 2014, the Caudalie cosmetics company applied for an injunction against the "1001pharmacies.com" marketplace platform to prohibit them from selling Caudalie personal care and beauty products via their on-line website on the grounds that 1001pharmacies.com was not an approved distributor of Caudalie, that those pharmacies which were approved Caudalie distributors were authorized to sell on-line only via their own internet sites, as opposed to via an on-line marketplace, and therefore that the activity of 1001pharmacies.com was manifestly illicit. The injunction sought was granted by the Paris Commercial Court in December 2014.

1001pharmacies.com appealed, citing, among other things, recent decisions of the French and German Competition Authorities in favor of on-line marketplaces. In February, the Paris Court of Appeal overturned the lower court's injunction, ruling that a blanket prohibition to sell online via a marketplace platform may well constitute an impermissible restriction of competition.

The Court's reasoning clearly goes in the direction of prohibiting brands using selective distribution networks from outright banning marketplace retailers from carrying their products. In the luxury space, this could have far-reaching implications for brand owners, who will at the very least need to devise clear qualitative criteria for on-line distribution if they want to be able to maintain control over the websites on which their products can be sold.

Italy: New Italian law governing commercial leases is a welcome reform

On 12 November 2014 a new law governing commercial leases in Italy (the “New Law”), came into force which has radically amended the previous law (the “Old Law”), governing commercial leases in Italy.

The New Law has empowered the parties to “Major Lease Agreements” (agreements having annual rent in excess of €250,000) to depart from the very strict rules protecting tenants, including, but not limited to, the right for the parties to negotiate such important clauses as minimum duration, automatic renewal, preemption rights and the tenant’s right of early termination.

For retailers the reform is very welcome as more properties will become available for retail tenants to lease since the Old Law had a dampening effect on the willingness of landlords to offer their properties for rent. In order to “dodge” the prior protections tenants enjoyed, landlords engaged in a fiction whereby they would “transfer the business” (including the relevant lease) in which a trading activity took place to avoid application of property law altogether, where they could.

There is a carve-out in the New Law for properties designated to be of historical interest. So, it remains to be seen if the local authorities will attempt to expand the exception applicable to such properties by designating more properties to be of historical interest. The New Law also does not apply to existing tenancy agreements. But, on the whole, this development should eventually free up more properties for retailers to lease in Italy which is welcome news indeed.

EU and UK: All retailers must adopt new EU online dispute platform — does your UK website comply?

Since 15 February 2016, all EU retailers who sell online should have complied with the rules of the EU's new online dispute resolution ("ODR") platform. Compliance is mandatory for all retailers — from small independent shops with online stores to multinational retailers.

What is the ODR platform? 

The ODR platform is a website, administered by the EU, to serve as a portal for handling complaints between consumers and retailers relating to provided goods or services. Once a consumer submits a dispute they are having with a retailer to the ODR platform, the ODR platform contacts the retailer to enquire as to their preferred ADR procedure and whether they are subject to any required statutory ADR procedure in their Member State or have contractually agreed to ADR. The consumer will be asked to agree to the ADR procedure, at which stage the ODR platform withdraws and allows the parties to commence an ADR process for up to 90 days, in an effort to come to an agreement. The ODR platform also allows retailers to make complaints against and ADR requests to consumers. 

What are the new requirements for retailers?

  • For retailers who are not subject to any existing ADR regime in their Member State (most consumer goods retailers generally are not) and who have not contractually agreed to ADR in their terms of sale, then the requirement is to simply have a link on the retailer’s website to the dispute platform.
  • All retailers must include an email address on their website. The contact form previously used by many retailers pursuant to which consumers could write to a retailer but are not supplied with an actual email address for that retailer will no longer suffice. Part of the reasoning for this is to allow the ODR platform to contact and correspond with the retailer directly when notified of a dispute. (This change in itself is likely to be mourned by retailers who favour the contact form to prevent their businesses being inundated with junk email!)
  • Where a retailer is already obligated to use an ADR procedure (by local law or pursuant to contract), there are additional requirements, such as including a link to the dispute resolution platform in any emails sent to consumers.

Will my company have to comply?
Yes, all companies who sell online will have to include at least a link to the online dispute resolution platform on their website, and must also provide a public email address. However, there is no statutory requirement to actually consent to ADR. This means that, while a retailer will have to have a link to the ODR platform, if the platform is contacted by a consumer and then the ODR platform contacts the retailer, the retailer can refuse to participate in ADR.

For UK retailers at least, there is no immediate penalty for non compliance (not having the link on the website and not providing an email address). But, eventually they will probably be contacted by trading standards services and asked to make the necessary changes. If retailers then fail to follow the order, there is the potential for unlimited fines and even the threat of prison sentences of up to two years.

This means that it is not too late for UK retailers to amend their websites to comply!

GUEST ARTICLE
US and EU: What’s so special about hashtags?     

As international retailers and brands increase their fluency, engagement and use of social media as a driver that builds brand equity, unsurprisingly many are now looking at protecting their names on Twitter, much like the domain name gold rush of 15 years ago.

You may remember then that “cybersquatters” bought the domain and offered it back to the brands at a significant mark-up which extreme fees were often paid to control the brand in etherspace.

Now, Pepsi is the first to trademark the hashtag #sayitwithpepsi so its presence on Facebook, Twitter, LinkedIn and the social media not even invented yet can fizz with conversation about their range of drinks.

In another sign of marketers’ interest in controlling their brands and conversations online, interestingly Pinterest has just introduced advertising on its UK site that lets retailers bid in an auction for topics, people and keywords via “promoted pins” that appear in a user’s feed. Recently L’Oreal Paris used mini-videos this way, reaching 5 million consumers which raised purchase intent by 31% as a result.

So what do these social media developments mean for retailers?

  • The future is increasingly a virtual one making the challenge of translating a bricks-and-mortar experience to an online one important and ambiguous
  • Building online conversations about retail brands by controlling the keywords brings consistency across markets and social media outlets, and consistency is at the heart of brand-building
  • Get moving. Like the cybersquatters, getting rights to your own brand name in the online world could be compromised unless you take control of it in all its facets.

Allyson Stewart-Allen, CEO of International Marketing Partners Ltd., is an advisor, broadcaster, educator, speaker and author of "Working with Americans: How to Build Profitable Business Relationships." A London-based Californian for over 25 years, she helps marketers and their companies internationalise and become corporate diplomats.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Bryan Cave Leighton Paisner | Attorney Advertising

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