Brands Expanding Internationally Should Embrace Competition-Conscious Luxury Goods Licences
When Will Your Electronic Marketing Efforts Be Caught as "Spam"?
Retailers Seek Perfect Balance Between In-Store, Online and Mobile Customers
When is Social Media Content an "Ad" and When is it "Sponsored", and Why Does it Matter?
Be in the Know - the Rules on Advertising Food Products to Children Are Changing
Brands Expanding Internationally Should Embrace Competition-Conscious Luxury Goods Licences
[co-author: Nicola Conway]
The licensing of luxury goods in Europe, where a supplier sells goods to a certain approved distributor to sell on its behalf, is known throughout Europe as selective distribution. Selective distribution is an indispensable tool for luxury goods suppliers. In short, it facilitates a brand's efforts to protect its integrity by preventing unauthorised and unsuitable retailers from selling its products. It also ensures that its distributors meet certain objective standards (for example, technical training in the goods).
The law on selective distribution is complex and includes tightly drafted laws concerning restrictions imposed on the selling or re-selling of goods. Luxury goods suppliers and retailers selling in Europe will seek to rely on the protections of certain safe harbour legislation (known as block exemptions) which give special allowances when parties do not have high market shares. Some of this safe harbour legislation relates specifically to vertical agreements, these being the distribution chains required for luxury goods suppliers to resell their products through multiple retailers.
These block exemptions do not give suppliers and distributors free reign to create rules on pricing and territory but, instead, they give general allowances whilst prohibiting specific behaviours. Examples of prohibited restrictions include:
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territorial licensing restrictions within a selective distribution system, the general rule being that you cannot combine selective distribution and territorial restrictions within the EU;
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territorial licensing restrictions which prohibit distributors from responding to passive sales requests which have come outside their allocated customer group or territory;
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restrictions on a distributor's ability to determine its own prices, for example through minimum or fixed resale prices;
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non-compete obligations which exceed five years in duration; and
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an obligation not to sell competing brands in a selective distribution system.
Despite these restrictions, luxury licences and goods distribution should not be feared or dodged. With competition law conscious drafting, luxury goods licencing and distribution agreements can be utilised as valuable tools in any international expansion or globalization strategy, through which brands can gain access to and expand into EU markets.
When Will Your Electronic Marketing Efforts Be Caught as "Spam"?
[co-author: Nicola Conway]
On 7 November 2016, the UK Information Commissioner's Office ("ICO") fined a loan matching service firm £70,000 for hiring a company to send spam SMS messages to over 2 million individuals on its behalf.
The messages were sent over a period of 6 months and, crucially, were sent without checking whether the recipients had consented to receiving them. They were thereby considered to be "unsolicited communications for the purposes of direct marketing by means of electronic mail" in contravention of The Privacy and Electronic Communications (EC Directive) Regulations 2003 ("The PECR") which regulates marketing by electronic means (including via SMS messaging, telephone, email, and fax).
The fine was imposed despite a finding by the ICO Commissioner that the company did not deliberately breach The PECR, but did so negligently on the basis that it ought reasonably to have known that such behaviour would amount to a contravention (given that, in particular, "the company is involved in a business heavily reliant on direct marketing, and the fact that the issue of unsolicited text messages has been widely publicised by the media as being a problem").
The Regulations provide clarification that electronic mail for the purposes of direct marketing should only be sent where either the recipient provides his express permission or where:
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"that person has obtained the contact details of the recipient of that electronic mail in the course of the sale or negotiations for the sale of a product or service to that recipient;
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the direct marketing is in respect of that person's similar products and services only; and
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the recipient has been given a simple means of refusing (free of charge except for the costs of the transmission of the refusal) the use of his contact details for the purposes of such direct marketing, at the time that the details were initially collected, and, where he did not initially refuse the use of the details, at the time of each subsequent communication."
This penalty comes as a warning shot to businesses across the UK. Any company which is found to have engaged in illegal marketing under the PECR may face civil and/or criminal sanctions, including fines of up to £500,000.
The Commissioner has advised that "organisations buying marketing lists from third parties, or contracting with third parties to carry out marketing for them, must make rigorous checks to satisfy themselves that the third party has obtained the personal data it is using fairly and lawfully, and that they have the necessary consent."
Retailers Seek Perfect Balance Between In-Store, Online and Mobile Customers
Retailers are increasingly under pressure to evaluate their business models and, in particular, the mix of their in-store, online and mobile offerings. Just as there are few pure-play e-tailers, there are very few retailers solely operating a bricks & mortar strategy because today’s customer wants to access their favorite brands in an omnichannel way: browsing online to get a sense of trends, dropping into a store to check the fit and shopping via mobile for impulse or last minute buys. But how do retailers find balance within the omnichannel world?
In our experience working with national and international retailers, getting the online and mobile experience right requires critical focus and serious investment in the three Ds: Distribution, Delivery and Data.
Successful ecommerce platforms require well located (and well managed) distribution centers capable of handling the nearly 24-hour demand profile.
Careful consideration needs to be given to whether an existing distribution center supporting stores can also support online, or whether it would be better to invest in an expanded footprint of distribution centers while reducing the number of stores. Retailers prepared to serve an international online market also need to understand the logistics landscape and either partner with a logistics expert with a solid track record of supporting international online retailers or build in-house expertise to manage not only export and customs issues (so customers can enjoy a hassle free experience) but also local law compliance relating to product labeling and hazardous materials.
Retailers shouldn't underestimate that customers want an instant buzz with online shopping — which means they want delivery of their purchases virtually immediately.
Not surprisingly, this is one area that has seen the biggest experimentation by retailers in the last few years. From expedited shipping options like Amazon Prime, to same day delivery by Net-a-Porter, to "click and collect" by John Lewis, online retailers are trying to replicate the instant gratification of in-store shopping while managing the non-trivial expense of rapid delivery. However, retailers cannot neglect the flipside: an efficient return process. Customers want to be able to return a product and receive their refund quickly. Similarly, retailers want to return the product to stock with minimal delay or damage. Getting delivery and returns right can accelerate the growth of ecommerce for most retailers.
Finally, online and mobile shopping create a tremendous opportunity for a rich and personal relationship with customers.
Shopping online is not the anonymous in-store experience and retailers need to develop effective (and legal) strategies for capturing and using all of the rich data generated by online shopping. Privacy policies, cookie policies and website or mobile terms and conditions are just the basics (although they should be reviewed at least annually to keep up with ever changing consumer protection laws). Marketing initiatives and customer loyalty programs also require careful assessment to comply with data protection laws — especially for retailers exploring international strategies. In the end, careful collection and management of the data generated by ecommerce transactions will allow retailers to customize shopping experiences to such a degree that each customer will feel like they have the store all to themselves and it is stocked with all of their favorite things.
It is not surprising that IMRG, an online retail industry association, is predicting that online shopping will eclipse shopping on the high street within five years. As a result, many retailers are suddenly thinking they should trim their store portfolio while investing more in their online and mobile offerings. Focusing on the three Ds will help get them there successfully.
When is Social Media Content an "Ad" and When is it "Sponsored", and Why Does it Matter?
[co-author: Nicola Conway]
Within the UK, different rules apply to social media content featuring brands depending upon whether it is classified as an "ad" or as "sponsored".
In response to widespread confusion in this area, the independent authority regulating the UK's advertising industry, the Advertising Standards Authority ("ASA"), has recently clarified the difference. In summary an advertorial is any "content in editorial space which is paid for by a brand and over which they exercise some degree of editorial control", whereas sponsorship has the payment element but "leaves editorial control entirely with the creator".
The importance of the distinction lies in the applicability (or non-applicability) of the UK Code of Advertising (the "CAP Code") – sponsored materials are not ads for the purposes of the CAP Code and therefore do not fall under its regulation. They will not however escape governance under competition and consumer protection laws.
Ads, on the other hand, must follow the CAP Code's requirements, and must therefore (amongst other things):
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be clearly marked as marketing communications with a label such as "advertisement feature", "advertisement" , or "ad", so that viewers/readers/listeners are informed as to whether the material is editorial or advertorial;
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not materially mislead (or be likely to do so); and
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not imply that expressions of opinion are objective claims.
The ASA has confirmed that where advertorial content is concerned both the publishers and the brands behind the publishers share the responsibility for ensuring that accurate terms are used to label and describe content.
Be in the Know - the Rules on Advertising Food Products to Children Are Changing
[co-author: Nicola Conway]
At the end of 2016, the UK Committee of Advertising Practice ("CAP") (which is responsible for writing, maintaining and providing authoritative advice on the UK Advertising Codes) changed the rules on how retailers and brand owners can advertise food and drink products to children.
Effective 1 July 2017, the advertisement of high fat, salt or sugar ("HSFF") food or drink products to target customers which include a significant proportion of under-16s will be banned in all non-broadcast media (this includes print, cinema, online and social media). Following a full public consultation, CAP has stated that in order for a retailer or brand owner to avoid sanctions imposed by itself and/or by the Advertising Standards Authority (“ASA”), "advertisements published from that date [forward] must comply with the new and amended rules [and] existing advertisements should be changed or withdrawn as soon as possible."
In an attempt to promote the health and wellbeing of children, these new rules will bring the non-broadcast rules under the UK Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing ("CAP Code") in line with those already in place for television advertising under the UK Code of Broadcast Advertising.
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