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Tuesday, 20 November, 2001, 13:45 GMT
Q&A: The Tesco-Levi battle

After a three year legal battle, the supermarket chain Tesco has lost its case against the US jeans maker Levi Strauss. But does the landmark ruling mean that all supermarkets must stop selling cut-price branded goods?

What was the row between Levi and Tesco all about?

Tesco sells an average pair of Levi jeans for 27.99.

This is almost half the price of the recommended selling price of Levi jeans at approved outlets in the UK.

The grocery chain was fighting for the right to import designer goods from around the world and sell them at an even greater discount to UK customers.

Levi said that it has the right to decide how its own brand is distributed and marketed in the UK.

It said that selling Levi 501 jeans alongside household groceries undermines the exclusivity of its brand.

The European Court of Justice has now ruled that Levi - the privately owned US manufacturer - does indeed have the rights to stop Tesco importing its merchandise from the US.

How was Tesco selling the jeans so cheaply?

Tesco is not selling the jeans at a massive loss.

It was importing them from other European countries, where the wholesale prices are cheaper, and passing those price cuts on to the consumer.

It has not imported jeans from the US since 1998 when the argument first erupted.

Under the EU's trademark rules, any company can import branded goods from another EU country for sale in the UK, even without the manufacturer's agreement.

But the permission of the manufacturer is usually required when importing from a non-EU country.

Tesco will be allowed to continue buying Levi jeans from within the European Economic Area (the EU plus Norway, Iceland and Liechtenstein) - the so-called "grey market" - but it will not be able to go further afield, such as the US, for the goods.

So what does that mean for consumers?

The news is not as bad as it might sound.

Tesco has already said that it will continue selling the Levi jeans that it is currently sourcing from the grey market at 27.99.

But prices are unlikely to get any cheaper.

The company was fighting to source a wider range of luxury brands from the US and then sell them at even cheaper prices.

Tesco says that if it had won the case, it would have been able to offer a discount of up to 40% rather than the 20% discount available from EU sourced plants.

The EU has ruled that Tesco will not be allowed to do that.

So while existing offers will not be jacked up, there will not be the future bargains some consumers had been hoping for.

And grey market goods are not always as widely available as hoped for, so Tesco may not be able to carry the full range of sizes and colours.

Does this ruling affect other supermarkets and other branded goods?

Not directly, no.

Tesco and its rival Asda have already stressed they will carry on selling cut-price designer goods.

All the ruling means is that retailers may be sued for selling branded goods cheaply if they import them from outside the European Economic Area without the permission of the manufacturer.

It is now up to each store to decide whether that is a risk they are willing to take.

Asda, for example, says that it has not had a complaint from a manufacturer during the past four years that it has been selling discounted designer products.

But other designer brands may have been waiting for the outcome of the Levi case, and may now be preparing to launch similar legal action.

Is this the end of it all?

No. "Our campaign goes on," said a spokesman for Tesco, adding that it will now push for a change in the law.

Tesco has already said that it will write to the UK Trade Secretary Patricia Hewitt offering their support for a change in the law.

Tesco is also writing to the European Commission urging them to review the law.

The UK government gave its backing to Tesco during the case, and may now chose to pick up the argument with the European Union.

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