Prototype for a Subscription Model - Birchbox

Product Customization May Increase Brand Competition, But Beware the Legal Pitfalls

Using Instagram to Bolster Your Online Sales

The View of the Italian Supreme Court on Secondary Meaning

CMA Continues Crackdown Against Price Fixing Online

Guest Interview with Michaela Jedinak

Prototype for A Subscription Model – Birchbox

[co-author: Nicola Conway]

 In 2010, two business school graduates launched Birchbox; a monthly subscription service to a box filled with sample-sized beauty products from over 309 brands.

Birchbox has solved one of the most significant barriers to in-store and online sales in the beauty and cosmetics industries – the fact that many consumers prefer not to purchase beauty products without having sampled them first and yet some products (think shaving, dental, bathing and haircare products) simply cannot be tested in store. Birchbox acts as a channel between brands and consumers by delivering samples to the privacy of the consumer's home, and charging for the luxury.

This subscription model is also enlightened from a business perspective. The Birchbox e-commerce portal reports that 50% of subscribers buy full-sized products after receiving their samples. By inviting customers to purchase those full-sized products directly from the Birchbox website in return for member "'points"' to spend in the online store, Birchbox is able to pull in affiliate fees in addition to subscription fees.

Seems simple enough, but be under no illusions – subscription models require a keen eye from a legal perspective. Amongst other requirements, and specifically in relation to subscription contracts concluded by electronic means (including over the internet), The Consumer Contracts Regulations 2013 require that the trader provide information detailing the total costs per billing period or (where such contracts are charged at a fixed rate) the total monthly costs in a clear and prominent manner directly before the customer places the order. The consequence of failing to provide this pre-contract information is that the customer may not be obligated to pay such charges or costs.

It is essential to additionally detail the terms of the subscription agreement within your online terms and conditions or terms of use. A prudent trader would at the very least consider including (where applicable):

•  the fact that the subscription has an initial and recurring payment feature which will be automatically renewed;
• how, when, and through which payment method the trader will charge the customer for the subscription service;
• if and when the subscription service will expire; and
• how to opt-out, cancel or modify the subscription service, and eligibility conditions for a pro-rated refund in those circumstances.

In addition to the Consumer Contracts Regulations, online distance contracts are governed by a myriad of UK and EU law. If you would like any further information, please contact a member of the Bryan Cave Retail Team. 

Product Customization May Increase Brand Competition, But Beware the Legal Pitfalls

[co-author: Nicola Conway]

High-end brands such as Prada, Gucci, Bally, Jimmy Choo, and Goyard have long recognised the attraction to customers of customized products. Not only does the opportunity to personalise goods ensure that customers are getting precisely what they want, but the chance to co-design bespoke pieces bestows on the customer a heightened sense of exclusivity and luxury.

Mainstream brands have more recently caught on to the trend and customer interaction in production has accordingly trickled down to the high street. One of the leaders of the movement has been NikeiD – an online service which allows customers to engage with the brand and design footwear to their exact specifications; choosing fabrics, colours and typography to create a one-of-a-kind item. Advances in technology, in particular, have made customization far more economically feasible than it was with historically hand-crafted methods.

The effect of mass customization in the retail world has been increased competition amongst brands. Customers are becoming conditioned to getting exactly what they want and, in an era where brand loyalty is low and demands are high, there is a risk that those who do not keep up will lose out.

However, offering customization does not come without its legal pitfalls. Allowing the use of language or images which are owned by a third party, which infringe any applicable law or any third party intellectual property rights, or which are offensive, pornographic, defamatory or blasphemous may expose the brand to legal challenges and/or reputational damage. Retailers need to ensure that they have checks and measures in place to avoid falling into these traps, and watertight terms and conditions to protect themselves.

Using Instagram to Bolster Your Online Sales

[co-author: Nicola Conway]

Retail app LiketoKnow.it is making waves in the online retail world through the social media sphere. Instagram users are now able to encode their uploaded photographs with a LiketoKnow.it link so that followers can simply 'like' an image in order to automatically receive a URL in their email inbox to an online store selling the product featured in the picture.

Instagram users are effectively utilised as affiliate marketers with a global reach for the brands which they choose to showcase on their profiles, and all in return for a small commission of the eventual sale price (payable by the brand to both the individual and the app).

Amongst other retailers, Vogue has been a prominent user of the service and has been actively advertising brands through its Instagram platform in this way (and being paid to do so).

UK brands wishing to capitalise on this facilitated international buying access should be aware of the legal rules and consumer protection laws regulating online endorsements and, in particular, the UK government guidance on being open and honest with your audience through online endorsements.

The View of the Italian Supreme Court on Secondary Meaning

The Italian Supreme Court reverted earlier this year on two decisions of the lower Courts (the "First Courts") regarding whether a registered generic sign could become a trademark.

The generic sign was the Italian word "Rotoloni" ("big roll") which was used by a leading Italian household product manufacturer (Soffass S.p.A.) to commercialize a type of toilet paper.

The First Courts held that the sign was too generic to become a trademark, even if a public opinion survey showed that 51% of the consumers interviewed by the manufacturer thought that the said toilet paper came only from that specific company.

Nonetheless, the First Courts found that it was impossible for a sign to become a trademark with such a common meaning, even if it may have acquired distinctiveness by way of a secondary meaning.

The Italian Supreme Court held that a generic sign may be considered as a trademark by a secondary meaning, where it has acquired distinctiveness by proving, as in the case in question, that a significant number of consumers perceive the sign as being connected with a specific company.

Such a decision demonstrates the changing approach of the Italian lower Courts (Court of first instance and Court of Appeal) towards the secondary meaning of trademarks.

Going forward we can expect the First Courts to assess in more detail evidence of the distinctiveness acquired by a sign, regardless of whether the sign is related to a registered trademark.

For further details on this case please contact Mr. Luigi Zumbo at luigi.zumbo@bryancave.com or Mr. Arturo Battista at arturo.battista@bryancave.com.

CMA Continues Crackdown Against Price Fixing Online

On the 7th November 2016, the UK Competition and Markets Authority (CMA) launched a campaign to remind online sellers that agreeing and discussing price level with competitors is illegal and can result in serious penalties. In the context of Black Friday, Christmas and the January sales promotions, this was a salutary lesson. The CMA has warned online sellers against price fixing after finding evidence of collusion by sellers using internet marketplaces.

On 12th August 2016, the CMA held that two online sellers of posters and frames, Trod Ltd and GB eye Ltd, both broke competition law. Trod Ltd had admitted agreeing with GB eye Ltd (trading as 'GB Posters') that they would not undercut each other's prices for posters and frames sold on the Amazon's UK marketplace. The CMA's decision imposed a fine on Trod of £163,371 for its participation in the cartel. GB eye received immunity, having reported the cartel to the CMA and co-operated with the investigation.

Following this recent decision, the CMA has written to several online companies who it suspects may be denying customers the best available deals by discussing with competitors or agreeing not to undercut them. Even if online markets are considered to be a valuable tool for consumers leading to the most effective competition, it can become an obstacle if suppliers seek to restrict competition between shoppers. The CMA has also warned software providers that they too risk falling foul of competition law if they help their clients use software to facilitate illegal price-fixing agreements. To ensure that the message was understood, the CMA has produced information for online sellers including written guidance which explains what constitute price-fixing and what they can do in order to avoid it. The guidance can be found here.

 Therefore, if you are an online seller, bear in mind that you should not:

• agree with your competitors what prices you will charge, or that you won't undercut each other on price
• or discuss your pricing intentions or strategies with competitors.

GUEST INTERVIEW WITH MICHAELA JEDINAK

Sarah Atkinson, Paula Levitan and Carol Osborne talk to Michaela Jedinak about her fashion label, which was named one of the best workwear brands by Harper’s Bazaar in 2015 and cites Arianna Huffington as a client.

What inspired the creation of your fashion label?

I have always been interested in fashion and have spent most of my career working in the fashion industry, based in London, New York, Milan and Prague. I was managing director of Cosmopolitan in Prague, where I acquired invaluable experience in branding, marketing and advertising. From there, I moved to a design agency in Milan where I developed a love for Italian women's style and an appreciation of how to look good without the need to display prominent logos. But it was more recently, while working for an advertising agency that I recognised the potential for improving the online shopping experience for many women and I launched my label back in 2013.

What has been the inspiration for your dresses?

I am passionate about providing women with the right fitting dress and believe there is a perfect dress for every woman, whatever her age and body shape. My ambition is to empower women to dress for success and to make them feel comfortable and confident in what they wear.

What is the philosophy behind your dresses?

I have designed a range of dresses for women with different body shapes, offering a choice of styles and cuts that suit every body type, whether you are an apple, a pear, a Jessica Rabbit hourglass or a straight up and down column. I do not believe that one dress style fits all, unlike many designers who create dresses for one idealised body shape that only look good in small sample sizes and can only be worn by a very small percentage of women. In fact not all of my dresses are available in every size.

The dresses are hand made from Italian fabric to order in sizes 8 to 16 in our London studio, with the hem line and sleeve length capable of being customised. Every woman is different and should be able to find a dress to compliment her own unique body shape.

What has been the biggest challenge in starting your own label?

There have been many challenges, but the biggest challenge has been that my label is challenging traditional fashion rules and it always take longer than you hope to communicate that women need to know themselves and start to dress for the body shapes they have and not want.

 What tips would you give someone looking to start their own label?

Just do it! There is no perfect time or perfect stepping stone. Keep in mind you don't start with perfection and a big part of your DNA and growth is an elimination process of what doesn't work. Plus not everyone will like what you do, so you need to remove yourself from the noise. You can't have a positive outlook by surrounding yourself with negativity. After all you have to follow your heart- but take your brain with you.

What is the next step for your brand?

I will continue to design more dresses and ultimately we would like to grow the brand into an internationally recognised label. We are currently weighing up the idea of bringing in some third party investment, but any investor would need to share my passion for the brand and of course, I would need and want to be heavily involved in its continuing development.

Michaela's collection is available on her website www.michaelajedinak.com. Also, she will be holding a private shopping event at the HAM YARD Hotel from the 21st-23rd of February. Please sign up to her newsletter to be kept posted or email her for more information on michaela@michaelajedinak.com.

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