Levi wins cheap jeans battle against Tesco

Jeans manufacturer Levi Strauss said the European Court of Justice had ruled that goods sourced from outside the EU cannot be imported without the consent of the trademark owner.

If the decision had gone Tesco’s way it could have heralded a flood of cut-price designer products bought on the so-called "grey market".

Store chiefs today said they were "disappointed" by the ruling.

But they said they would still sell cut-price clothes - imported from other EU countries instead of the US and the far east.

Tesco spokesman Jonathan Church said: "It’s disappointing for our customers because we could have sold these designer goods between ten and 20 per cent cheaper if we’d been allowed to buy them in from outside the EU.

"As it is we will still sell cut-price designer names - but not as cheaply as we could have."

A Levi spokeswoman welcomed the EU ruling, saying: "The court ruled that goods from outside the European economic area cannot be imported without the unequivocal consent of the trademark owner, and we think that is the right decision."

The long-running and costly dispute between Tesco and Levi was sparked over whether the jeans manufacturer had given the supermarket chain consent to stock its products. Tesco believed it was right to sell jeans, such as the popular 501 brand, at discounted priced, while Levi said it had turned the company down as a stockist.

Levi has a policy of only selling its products through selected outlets - 17,000 across Europe - arguing that these are chosen for customer service. However, opponents of the system claimed it allowed the company to keep prices artificially high within the UK especially in comparison with countries outside the EU such as the United States. Joe Middleton, president of Levi Strauss Europe, Middle East and Africa, said: "This definitive legal decision enables us to continue doing what we do best - making and marketing the world’s best recognised jeans."

Joanna Boag-Thomson, an expert in intellectual property rights with Edinburgh legal firm Shepherd and Wedderburn, said she was surprised at the ruling.

She said: "We did not expect the ruling to come down so strongly in favour of the trademark owner.

"The courts could have made it their responsibility to control the companies who manufacture their goods. Instead they have made supermarkets responsible, ruling that they can’t import the clothes."

A pair of Levi’s in much of Europe costs roughly twice what it sells for in the United States. San Francisco-based Levi Strauss sued in 1999, charging that selling jeans next to groceries damaged its image and undercut sales by authorised dealers. Tesco claims it has saved British shoppers more than 40 million.

Levi’s was joined in the case by Swiss luxury goods firm Zino Davidoff SA, which was seeking to stop a British import company from buying its Cool Water cologne in Singapore and reselling it at home at a discount.

Tesco chiefs are now planning to take up the issue with Government ministers. A spokesman for the store said: "We are writing to Patricia Hewitt [Trade and Industry Secretary] offering our continued support for a change in the law and to the European Commission urging them to review the law.

"We will be talking to our lawyers to see what happens now after the court’s decision today."

But he hinted that the saga might not end there after the company discovered a court ruling in Spain which may identify a loophole, saying: "There was a decision in Madrid a couple of weeks ago involving Nike and an importer and the judgement went against Nike."

A spokeswoman for the Consumers’ Association, which has been supporting Tesco’s stance, said of the European Court of Justice’s ruling: "It not a huge surprise but it is a great disappointment for consumers."