It's Not Too Late to Get Ready for the GDPR

Caution When Exporting Luxury Goods

French Supreme Court Upholds Exclusive Supply Obligation where Necessary to Franchise Network

Guest interview with Beth Butterwick, CEO of Karen Millen

Antitrust Division to Criminally Prosecute No Poaching Agreements

Guest interview with Founder of innovative loyalty app, Akquire

It's Not Too Late to Get Ready for the GDPR

Many of our clients are understandably concerned about the European Union’s General Data Protection Regulation (“GDPR”) which is set to go into force on May 25, 2018. While some companies have been working toward GDPR compliance for the last two years, we realize that other companies are just beginning the process of understanding the GDPR and its implications.

While coming into compliance with the GDPR in three months can feel overwhelming, it is not too late to begin moving in that direction. To that end, we have put together two accelerated programs to help our clients navigate the GDPR.

First, we will be providing a six-part weekly webinar program (i.e., 6 CLE hours) on GDPR compliance strategies. The first part will kick-off on April 3rd and continue with one hour trainings provided each week. We will be sending information on the program and how to register for each of the components through this listserv in the coming weeks.

Second, based upon the counseling that we have provided over the past two years to dozens of our clients, we have put together a list of the “top 50” most asked questions concerning the GDPR. Every week from now until the GDPR goes into force we will be publishing an article that provides practical and straightforward answers to each of these questions.

As the compliance deadline comes closer please do not hesitate to reach out to any of the members of the Data Privacy and Security Team if we can provide additional help or support concerning the GDPR.

Finally, to borrow from the Hitchhikers Guide to the Galaxy, the best advice always is simple: “don’t panic!”

Caution When Exporting Luxury Goods

[co-auuthor: Yeon-Ho Son (trainee)]

Luxury goods retailers must be cautious when exporting luxury goods, especially when they are leaving the EU. There are special rules applicable to exporting various types of goods, including in relation to 'luxury goods'. Such rules place restrictions on exports to certain countries and place a higher regulatory standard than for other types of goods.

Take diamonds for example. In order to export rough diamonds outside the EU, the exporter must obtain a Kimberley Certificate and attach it to the consignment. The potential consequence of non-compliance is the seizure of the goods.

In another example, in order to export art, antiques and cultural goods, the exporter may require a licence depending on the age and value of the goods. Such goods may be covered by an open licence, or an individual licence may need to be obtained, depending on whether it meets certain criteria. Any licence may also be subject to strict conditions that the exporter must be in compliance with.

There is also an outright ban on supplying 'luxury goods' to North Korea or Syria deriving from the Export Control (North Korea Sanctions and Iran, Ivory Coast and Syria Amendment) Order 2017, and the Export Control (Syria Sanctions) Order 2013. In these Orders, there is an exhaustive list of what constitutes luxury goods. The banned goods include (but are not limited to): pure bred horses; truffles; pearls; precious and semi-precious stones. The penalties are a criminal offence leading to a prison sentence and/or a fine.

The rationales behind such regulations are various, depending on the nature and destination of the proposed exports. It may be economic-based, for example to prevent a drop in supply of goods in the domestic market because it is more profitable to export. It may also be as part of foreign policy, for example as a component of trade sanctions — the EU implements UN sanctions through its Council Decisions and Regulations, which then have effect in English Law. In the case of North Korea, the UN Security Council has deemed that the proceeds of its imported luxury goods sales are contributing to its nuclear missile and weapons of mass destruction programmes.

In summary, retailers should tread carefully when exporting luxury goods and be wary of applicable restrictions and prohibitions. However, even in cases of an 'absolute' prohibition, there may be licences granted after careful review on a case-by-case basis.

French Supreme Court Upholds Exclusive Supply Obligation where Necessary to Franchise Network

[co-author: Emmanuelle Mercier]

Exclusive supply clauses are a frequent feature of franchise contracts. In accordance with EU Law, the French Supreme Court, by decision of 20 December 2017¹, ruled that the validity of such clauses depends on whether they are necessary to the preservation of the identity and reputation of the franchise network.

In the case under consideration, a bakery had entered into a nine-year franchise contract which contained an exclusive supply clause providing that the franchisee must purchase exclusively from a particular supplier which had developed a new concept for the manufacture of traditional bread made with natural yeast.

As a result of the franchisee having terminated the contract before its agreed term, the franchisor and the supplier claimed for damages for the losses incurred as a result of the breach of the franchise contract. In defense, the franchisee claimed that the exclusive supply agreement was an anticompetitive restraint of trade.

The French Supreme Court, implicitly following the position of the European Commission in Article 190-b) of its Guidelines on Vertical Restraints, which provides that "a non-compete obligation on the goods or services purchased by the franchisee falls outside the scope of Article 101(1) where the obligation is necessary to maintain the common identity and reputation of the franchised network" and that "in such cases, the duration of the non-compete obligation is (...) irrelevant under Article 101(1), as long as it does not exceed the duration of the franchise agreement itself", held that the exclusive supply clause at issue constituted a crucial element for the image and identity of the franchise network and was therefore valid.

Hence, the French Supreme Court acknowledged that exclusive supply clauses contained in franchise contracts are valid, regardless of their duration, if they are necessary to the preservation of the identity and reputation of the franchise network.

Guest interview with Beth Butterwick, CEO of Karen Millen

1. What do you consider to be the top two challenges facing fashion retailers in the UK in 2018?
   The top two challenges facing fashion and other sectors across UK retail are a headwind result of our weakening currency. This of course has been a trend since 2016. However, the longer term impact of this will hit hard in 2018, with the top two challenges being a) overseas goods becoming more expensive to import into our country and b) static wage growth and rising living costs affecting the discretionary income of our customers. Consumers are already buying less and beginning to prioritise discretionary spend across retail and leisure.
2. Are there any challenges specific to larger, global brands?
   The key challenges, whether a large or small business, remain the same. Of more relevance is whether a brand is UK only or international. Companies operating across different global territories should be able to mitigate against some of the UK headwinds through currency or local economic tailwinds. China and India are forecast to be the strongest global economies through 2018.
3. How much emphasis should a 21^st century brand place on their corporate social responsibility?
   In this digital era, there is no place to hide. Digital platforms have enabled consumers to demand total transparency across all number of topics, whether that be politics, charities or brands. Great bands are built on a strong customer following; with this they want transparency and truth around ‘purpose and values’. Strong corporate social responsibility is a brand’s obligation to not only ensure they are authentic and consistent with their customers, but as importantly with their employees and shareholders too.
4. How much value should retailers place on celebrity/influencer affiliates?
   Marketing trends come and go. In the fashion industry 15 years ago it was all about 'super models', over the last 7 years it has been about 'celebrity endorsements'. In this digital era and with platforms such as Instagram emerging, most companies should have an influencer plan built into their marketing strategies. The key is knowing your customer and which influencers resonate with them in endorsing your products. A mismatch could impact your brand's relevance to its audience.
5. How crucial is it for a brand to stay true to its DNA, versus exploring new avenues/roles in the market?
   I cannot stress how staying true to ones DNA is key. Time and time again, I see businesses that either move their product offer away from its core DNA or they fail to care about understanding their customers and how they are changing over time. In my business, we obsess about our customers and the subtle nuances across our 3 core profiles. However, if you are clear about your DNA, it is absolutely possible to explore new avenues whether that be a new product launch or a strategic merger or acquisition; the key part is, it has to add value to the current offer, not distract or compete.
6. What are the next steps for the Karen Millen brand?
   Our customers tell us that they love the quality and dynamic design of our clothing offer and would love to see us develop other lifestyle categories, whether that be travel luggage or resort wear. We have developed a detailed 4 Year Plan and are excited about enabling the scale of our ambition.

Antitrust Division to Criminally Prosecute No Poaching Agreements

The Antitrust Division of the Department of Justice (“DOJ”) has indicated that, in the coming months, it intends to criminally prosecute companies that have entered into naked no-poaching agreements for violation of the antitrust laws.² DOJ Assistant Attorney General Makan Delrahim announced the possible upcoming criminal charges at a January 19, 2018 conference hosted by the Antitrust Research Foundation. During his speech Delrahim referenced the DOJ’s 2016 guidance, which previously warned companies that an express or implicit agreement not to recruit or hire each other’s employees could be susceptible to criminal prosecution. Delrahim specifically called out activity that began prior to the issuance of the guidance and has continued from that time.³

Background

In 2016, the DOJ and the Federal Trade Commission (“FTC”) issued joint guidance for human resources professionals and others who participate in hiring and compensation decisions (the “HR Antitrust Guidance”).⁴ The HR Antitrust Guidance covered three areas, including the risk of no-poaching agreements, and indicated that agreeing companies do not have to compete for the same customers for the agreement to violate the antitrust laws; they merely have to compete for the same employees.⁵

A naked no-poaching agreement is “separate from or not reasonably necessary to a larger legitimate collaboration between employers,” and is per se illegal without regard to its competitive effect.⁶ The DOJ has previously obtained civil consent judgments for no-poach agreements with the companies agreeing to stop the prohibited conduct. Delrahim’s comments promise what would be the DOJ’s first criminal actions for these violations.

How to Respond

Although the HR Antitrust Guidance does not explicitly exempt any agreements from liability, it suggests certain legitimate joint efforts may not run afoul of the antitrust laws. The guidance is clear, however, that “informal or formal, written or unwritten, spoken or unspoken” agreements are all vulnerable to criminal penalties. It is important to note both employers and individuals can be liable.⁷

To reduce their antitrust risk, in-house legal departments should include HR professionals and more traditional personnel in their antitrust risk management and compliance strategy. In addition, companies should update their antitrust training, monitoring, and auditing strategies to ensure compliance.

Guest interview with Founder of innovative loyalty app, Akquire

Nicola Conway talks with David John, Founder and CEO of Akquire Points Ltd; a brand new loyalty and rewards app linked directly to your debit and credit cards.

1. How is Akquire different to other earn-as-you-spend rewards programs?
   The current rewards marketplace is struggling to keep pace with market growth, digitalisation and evolving consumer demands. Akquire has developed an innovative solution to provide an effortless journey from spend to reward — a customer downloads the app, links their payment-card(s), shops on those cards with participating retailers (online, in-store, or through Apple Pay / Android Pay), and points are rewarded instantly. Akquire is the only payment-card-linked coalition loyalty platform to be entirely app-based, from sign-up to redemption. There is no need to carry around an additional loyalty card or enter a code at the online checkout; we have removed all unnecessary hassle.
2. What traditional aspects of loyalty models does Akquire seek to avoid?
   There are three main flaws present across current programs: (1) lack of value in the points received and rewards available for redemption; (2) lack of flexibilty in reward choice, collection points and redemption channels; and (3) lack of interest as a result of limited variety and minimal program personalisation. Akquire points are worth up to 3x the value of other major programs and through the transaction data we collect, we can offer truly tailored rewards based on user spending patterns and behaviours.
3. What are the challenges of appealing to millennials and generation Z?
   Competition for attention is the central issue for retailers when appealing to this market segement. After spending time and money developing a product or service, an inordinate amount of effort needs to be spent on trying to reach them. Millennials and Gen Z are constantly searching for ‘the best’ in the market, changing where/when/how they shop without hesitation. Our research shows, however, that they value loyalty programs and will spend when the reward is real, relevant and flexible.
4. What is your golden rule for a successful points program?
   Understanding what your customer wants before they ask for it. To be successful in loyalty, you need to anticipate a customer's desires before they voice their demands. By studying the transaction data we collect, we understand how each individual customer spends, interacts with our brands, and behaves when personalised offers are promoted to them. If you don't understand your customer, you can't keep them happy.
5. What does the future of loyalty look like to Akquire?
   Consumers want zero agro in whatever they do and we have responded to that: no longer will customers have to frantically search for a loyalty card in a queue or enter membership details online — instead, they shop and receive instant notifications on their smartphone of their rewards. Retailers also benefit hugely: they can essentially outsource their loyalty programs to us and shed that burden. No retailer builds their own social platform, but uses Instagram to speak to their market. Why not do the same for loyalty programs?

1. Cass. Com. 20-12-2017 n°16-20.501 F-D, Sté Vaille Sébastien développement c/ Sté Boulangerie tradition biotechnologie. 
2. Matthew Perlman, Delrahim Says Criminal No-Poach Cases Are In The Works, LAW360.COM (January 19, 2018), available at https://www.law360.com/competition/articles/1003788/delrahim-says-criminal-no-poach-cases-are-in-the-works.
3.  Id.
4. Department of Justice Antitrust Division & Federal Trade Commission, Antitrust Guidance for Human Resource Professionals (Oct. 20, 2016), available at https://www.justice.gov/atr/file/903511/download (“HR Antitrust Guidance).
5.  For a broader discussion of the 2016 HR Antitrust Guidance, see Arindam Kar & Philip D. Bartz, Agencies Issue Antitrust Guidance to Human Resources Professionals, (Nov. 2, 2016) available at https://www.bryancave.com/en/thought-leadership/agencies-issue-antitrust-guidance-to-human-resources.html.
6. HR Antitrust Guidance at 3.
7. Id.

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