Tesco vows to fight on

EU ruling on Levi’s leaves UK supermarkets in defiant mood

Retail:

UK supermarkets were left reeling after Tuesday’s European court ruling which prevents them from sourcing cut-price designer goods.

But, while the European Court of Justice said US jeans company Levi-Strauss can prevent Tesco from importing its products from outside the European Union, the supermarkets have vowed to continue to press for a change in the law. And they are adamant that they will continue to sell cheap designer clothes, perfumes and cosmetics sourced from within Europe.

Despite their bullish attitude, Tesco and several of its rivals were clearly rattled by the verdict, having expected the long-running court case to go their way.

Instead of opening the gates for branded luxury goods to flood on to British supermarket shelves, the court ruled that anyone wishing to sell branded products from outside Europe must obtain the “expressed consent” of the manufacturer.

Tesco admits the judgment is a “disappointment” but says its stores will still offer customers more than £150m worth of grey market goods over the next year.

“But we’re working with our hands tied behind our back,” says Tesco director John Gildersleeve. “Customers will be dismayed that once again the European Court has failed to loosen the shackles and let us bring in the products they want.”

Asda, which announced (on Monday) ahead of the ruling that it would launch its “biggest ever” range of grey market designer goods, says it will also continue to source goods from within the EU.

The supermarket sells brands such as Adidas, Calvin Klein, French Connection and DKNY at up to 57 per cent less than the recommended retail price.

Safeway is to go ahead with the sale of 120,000 pairs of Levi’s sourced from the European grey market. Chief executive Carlos Criado-Perez branded the court ruling a “setback for free trade”.

Levi’s has hailed the judgment as a “strong win for brand owners” and says it will step up efforts to crack down on distributors within the EU which supply supermarkets, or other non-approved retailers, with cheap jeans. While this is not illegal, it is a contractual breach on the part of the distributors.

Levi’s sentiments were backed by the British Brands Group, which applauded the “vote of confidence in the integrity of brand manufacturers”.

Group director John Noble says: “Nobody would seriously expect Sainsbury’s to be coerced into allowing its goods to be sold in Tesco. It should be no different for brand owners.”

While the grocers have suffered a major setback, big brand owners should steel themselves for future battles. Both Tesco and the Consumers’ Association have vowed to continue the campaign and apply pressure on the UK Government and European Commission to review “this ridiculous, outdated and fundamentally unfair piece of legislation”.

To prove its defiance, Tesco announced immediately after the verdict that it is to sell bottles of Veuve Cliquot champagne, bought on the grey market for about £15 each – £10 less than the usual price – in order to cheer up its customers.

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