(1) Judgments of the Landgericht Duesseldorf, 3 January 2002 & 4 January 2002. NB: The author was unable to obtain a copy of the Judgments themselves from the Court or the Complainant prior to writing this report.Google Scholar

(2) EC, Case C-414/99, joined with Levi Strauss & Co., Levi Strauss (UK) Ltd and Tesco Stores Ltd, Tesco plc (C-415/99) as well as with Levi Strauss & Co., Levi Strauss (UK) Ltd and Costco Wholesale UK Ltd (C-416/99): Judgment of the Court of Justice of the European Communities, 20 November 2000. Available on line at: http://europa.eu.int/cj/index.htm; hereinafter “ECJ” and “Zino”.Google Scholar

(3) FRANKFURTER ALLGEMEINE ZEITUNG, 4 January 2002, p. 17.Google Scholar

(4) Gabriel Gloecker et al., GUIDE TO EU POLICIES, Blackstone: London, 1998, p. 159-161, 241-42. The multi-fold objectives of competition policy may just as clearly be seen in other jurisdictions’ legislation. For example, section 1.1 of the Canadian Competition Act identifies the purpose of the Act as being “to maintain and encourage competition in Canada in order to promote the efficiency and adaptability of the Canadian economy, in order to expand opportunities for Canadian participation in world markets while at the same time recognizing the role of foreign competition in Canada, in order to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the Canadian economy and in order to provide consumers with competitive prices and product choices.” In this series of objectives, it is also noteworthy that the objective of benefiting small and medium-sized enterprises precedes that of benefiting consumers, which is the last listed. Competition Act and Commentary (2000 Consolidation), Butterworths: Toronto/Vancouver, 1999, p. 1.Google Scholar

(5) Rittner, Fritz, WETTBEWERBS- UND KARTELLRECHT (2nd. ed.), C.F. Mueller: Heidelberg, 1999, p. 21–22.Google Scholar

(6) FRANKFURTER ALLGEMEINE ZEITUNG, 4 January 2002, p. 1. According to a company spokesman, 30 percent on average of C&A customers pay with credit or debit cards. It was expected that this share would rise to 50 percent during the promotion. FRANKFURTER ALLGEMEINE ZEITUNG, 4 January 2002, p. 16.Google Scholar

(7) FRANKFURTER ALLGEMEINE ZEITUNG, 4 January 2002, p. 16.Google Scholar

(8) DIE ZEIT, 10 January 2002, p. 26.Google Scholar

(9) BECK, C.H., 7 January 2002, archived at publisher's website without page citation.Google Scholar

(10) ‘Special offers’ - “Sonderangebote“ - do not qualify as special events per 7(2) UWG. These are defined as offers of single products or product groups in the context of regular commercial business.Google Scholar

(11) Winter- and summer sales may take place during prescribed two-week periods that begin on the last Mondays of January and July, respectively per 7(3)(1) UWG.Google Scholar

(12) per 8(1) to 8(3) UWG.Google Scholar

(13) Anniversary sales may take place every 25 years per 7(3)(2) UWG.Google Scholar

(14) As quoted in FRANKFURTER ALLGEMEINE ZEITUNG, 4 January 2002, p. 16.Google Scholar

(15) See Paragraph 7 Section 1 UWG: “der Beschleunigung des Warenabsatzes dienen und den Eindruck der Gewaehrung besonderer Kaufvorteile hervorrufen.“Google Scholar

(16) As quoted in FRANKFURTER ALLGEMEINE ZEITUNG, 4 January 2002, p. 16.Google Scholar

(17) INTERNATIONAL HERALD TRIBUNE, 8 January 2002, p. 1.Google Scholar

(18) FRANKFURTER ALLGEMEINE ZEITUNG, 5 January 2002, p. 17.Google Scholar

(19) INTERNATIONAL HERALD TRIBUNE, 8 January 2002, p. 1.Google Scholar

(20) FRANKFURTER ALLGEMEINE ZEITUNG, 5 January 2002, p. 16.Google Scholar

(21) Ibid.Google Scholar

(22) INTERNATIONAL HERALD TRIBUNE, 8 January 2002, p. 1.Google Scholar

(23) The European Economic Area or “EEA” comprises the 15 European Union Member States as well as Norway, Iceland, and Liechtenstein.Google Scholar

(24) OJ 1989 L 40, p. 1; hereinafter the “Directive”.Google Scholar

(25) OJ 1994 L 1, p. 3.Google Scholar

(26) Article 5(1) of the Directive states that “the registered trade mark shall confer on the proprietor exclusive rights therein”, including the entitlement “to prevent all third parties not having his consent from using in the course of trade: (a) any sign which is identical with the trade mark in relation to goods or services which are identical with those for which the trade mark is registered.” Business dealings that include “importing or exporting the goods under the sign” may be prohibited, per Article 5(3)(c).Google Scholar

(27) Zino Judgment at paragraph 33.Google Scholar

(28) Ibid. at paragraph 47.Google Scholar

(29) It should be noted that traders may continue to exploit price differentials within the EEA. These differentials - and parallel imports with them - are likely to increase significantly with European enlargement. Traders will be able to import cheap products from eastern Europe into western Europe with few legal restrictions. FINANCIAL TIMES, 21 November 2001, p. 17.Google Scholar

(30) FRANKFURTER ALLGEMEINE ZEITUNG (English Edition), 4 January 2002, p. 5.Google Scholar

(31) DIE ZEIT, 10 January 2002, p. 26.Google Scholar

(32) The law can through judicial development change its meaning. For example, a rule that was originally intended by the legislator for the protection of competitors can come to be applied also for the protection of consumers. Rittner, p. 21.Google Scholar

(33) FRANKFURTER ALLGEMEINE ZEITUNG, 4 January 2002, p. 17.Google Scholar

(34) Ibid.Google Scholar

(35) Ibid.Google Scholar

(36) The DIHK put the matter most colourfully perhaps. Applicable law, it argued, must be enforced in order to ensure weapon parity - “Waffengleicheit“ - among suppliers. As quoted in C.H. BECK, 7 January 2002, archived at publisher's website without page citation.Google Scholar

(37) FRANKFURTER ALLGEMEINE ZEITUNG, 3 January 2002, p. 1, 13.Google Scholar

(38) FRANKFURTER ALLGEMEINE ZEITUNG, 5 January 2002, p. 17. One German newspaper, Die Welt, speculated that C&A had made so much money with the promotion that its gains more than covered the threatened fine. As cited in INTERNATIONAL HERALD TRIBUNE, 8 January 2002, p. 1.Google Scholar

(39) Pace the view of one newspaper: “[i]t did not take long for the new euro notes and coins to collide with the European old-world ways of shopkeeping.” Ibid.Google Scholar

(40) I realize that the distinction between sales practices and products for sale, drawn from ECJ jurisprudence concerning the former Article 30 EC Treaty (the new Art. 28), is not always clear, but here the distinction is loosely used to make an analogy. As will be discussed below, the distinction may soon be further blurred by the proposed EC legislation over sales promotions.Google Scholar

(41) Zino Judgment at paragraph 32. The Italian Government had argued that the Directive did not embody a complete harmonisation. It submitted that such exhaustion is not provided for by the Directive but is a matter for the national law in question. Ibid. at paragraph 38f.Google Scholar

(42) Ibid. at paragraph 45.Google Scholar

(43) Ibid. at paragraph 53ff. It is true that several paragraphs precede this conclusion. These paragraphs merely repeat, however, the defendants’ counter-arguments.Google Scholar

(44) As noted, only some of the proprietors’ contracts with distributors contained reservations to the effect that the distributors were to market the products outside and not within the EEA, even though the law of the contract included an unlimited right of resale in the absence of such reservations.Google Scholar

(45) See, for example, Zino Judgment at paragraph 44.Google Scholar

(46) Ibid. at paragraph 50.Google Scholar

(47) Ibid. at paragraph 62.Google Scholar

(48) The Economist put the matter more bluntly: “the question […] is not whether brands need to control how they are sold to protect their image, but whether it is the job of the courts to help them do this.” (ECONOMIST, 24 November 2001, p. 62.) The newspaper cited the precedent of the Italian clothes label Gucci, whose image was being destroyed by loose licencing and over-exposure in discount stores. Gucci did not save its image by resorting to the courts but by ending contracts with third-party suppliers, controlling its distribution better, and opening its own stores.Google Scholar

(49) A senior Tesco executive was quoted as saying that the ruling risks “creating a Fortress Europe with a vengeance.” (As quoted in Ibid.) This view of the magnitude of the setback that the ruling represents for so-called grey market imports may be somewhat exaggerated. As one British lawyer noted, while Tesco and other high-profile retailers can now “expect to be pursued if they ever step out of line”, there remains a “huge industry - the iceberg underneath” of parallel import sales through independent shops and other outlets. (As quoted in FINANCIAL TIMES, 21 November 2001, p. 17.)Google Scholar

(50) I say ‘presumably’ because the trade mark proprietors often claim that removing the restriction on parallel imports would not lead to significant falls in prices, as retailers would pocket the majority of the benefits. This prediction, most recently put forward by the British Brands Group, seems to me implausible. (As quoted in FINANCIAL TIMES, 21 November 2001, p. 17.) First, to win business, the discount retailers have to cut prices significantly. Consumers would otherwise continue to give their custom to authorised dealers out of habit and/or superior customer care. Second, the prediction is contradicted by an alternative argument of the trade mark proprietors that the cut-rate prices are damaging the brand image.Google Scholar

(51) Spokesman for the Consumer's Association as quoted in INTERNATIONAL HERALD TRIBUNE, 21 November 2001, p. 15.Google Scholar

(52) ECONOMIST, 24 November 2001, p. 62.Google Scholar

(53) As cited in FINANCIAL TIMES, 21 November 2001, p. 17.Google Scholar

(54) FRANKFURTER ALLGEMEINE ZEITUNG (English Edition), 4 January 2002, p. 5.Google Scholar

(55) Ibid. For example, one German wrote in a letter to the editor, “[w]hile I thank the German Retail Association for attempting to protect us feebleminded consumers from confusion over low prices and disruption of scheudules, I would rather be confused than pay high prices. And I prefer to go looking for bargains at my leisure rather than during prescribed two-week periods when the other 80 million residents of Germany are doing the same.” (As printed in INTERNATIONAL HERALD TRIBUNE, 10 January 2002, p. 9.) An editorialist argued that the citizen, who may vote upon turning 18, should be shown greater trust as a consumer. For many years already, consumers have used shops’ pricing policies of shops to their advantage. (FRANKFURTER ALLGEMEINE ZEITUNG, 5 January 2002, p. 1.)Google Scholar

(56) As quoted in INTERNATIONAL HERALD TRIBUNE, 8 January 2002, p. 1.Google Scholar

(57) As quoted in Ibid.Google Scholar

(58) FRANKFURTER ALLGEMEINE ZEITUNG, 17 January 2002, p.18. It should be no surprise that the head of Metro, one of Germany's largest supermarket chains, came out strongly in favour of a liberalisation of the discount rules and a reform of the UWG. The tight restrictions, which he said were unique in Europe, must be abolished outright. (As quoted in DIE WELT, 14 January 2002, p. 11.)Google Scholar

(59) As quoted in C.H. BECK, 7 January 2002, archived at publisher's website without page citation.Google Scholar

(60) FRANKFURTER ALLGEMEINE ZEITUNG (English Edition), 9 January 2002, p. 1.Google Scholar

(61) As quoted in Ibid.Google Scholar

(62) Commission of the European Communities, COM(2001) 546 final, 2.10.2001, p. 2.Google Scholar

(63) The EU Commissioner for Consumer Protection has said that making discount offers like C&A would become problem-free in Germany with the passage of the Regulation. (As quoted in DIE WELT, 14 January 2002, p. 1.) There is a recent precedent for European developments prompting such changes in retail regulations: the repeal of the Rebates Act and Gifts Regulation came about partly as a response to the requirement that Germany put the EU directive on e-business into effect immediately. (FRANKFURTER ALLGEMEINE ZEITUNG (English Edition), 13 December 2000, p. 5.) More generally, the ECJ has long controlled the unfair competition laws of member states from the perspective of the former Article 30 (now Article 28) EC Treaty if they hinder the free movement of goods within the community. Rittner, p. 19.Google Scholar

(64) FINANCIAL TIMES, 17 January 2002, p. 2.Google Scholar

(65) As quoted in German in DIE WELT, 14 January 2002, p. 11. The consumer protection competence is based on Article 95 (the former Art. 100a) EC Treaty, according to which harmonising measures may be adopted by the Council by a qualified majority. Nonetheless, proponents are far from having collected the number of votes necessary for adoption.Google Scholar

(66) In the court of public opinion, the arguments of the traders in Zino have met with far more support than those of the trade mark proprietors. This reaction was marked in the UK, where price differentials tend to be higher than in the rest of the EU. The ancillary argument of Levi Strauss that customers need trained advisers when buying jeans has in particular met with “snorts of derision” in the British media. FINANCIAL TIMES, 21 November 2001, p. 17.Google Scholar

(67) As quoted in Ibid.Google Scholar

(68) As quoted in Ibid.Google Scholar

(69) Ibid.Google Scholar

(70) Ibid.Google Scholar

(71) Zino Judgment at paragraph 44.Google Scholar

(72) Ibid. at paragraph 38.Google Scholar

(73) FINANCIAL TIMES, 21 November 2001, p. 17.Google Scholar

(74) Zino Judgment at paragraph 44.Google Scholar

(75) ECONOMIST, 24 November 2002, p. 62.Google Scholar

(76) The arguments of the small retailers and trade mark proprietors may be challenged on other bases. Just how realistic - and therefore worthy of consideration - the fears of retailers about further liberalization of the UWG is open to doubt. The repeal of the Rebates Act and Gifts Regulation was met with similar reactions: complete dismantling of the legislation was said to imply “the danger of large trade chains deactivitating competition mechanisms with massive discounts.” (FRANKFURTER ALLGEMEINE ZEITUNG (English Edition), 13 December 2000, p. 5.) First, as noted, in the half year following the repeal of the Rebates Act and Gifts Regulation, the new sales possibilities had not been extensively exploited. The C&A promotion came therefore as even more of a surprise. Second, the clothing chain's discount offer was adjudged to violate the UWG. Liberalization of the UWG need not necessarily mean a law of the jungle in the marketplace: other competition laws and regulations would remain in force. (All marketplace participants are aware and in agreement that competition can only take place under fair conditions. (Rittner, p. 6–7.)) Anti-competitive practices would continue to be prosecuted for the benefit of the retailers as well as the shoppers. Third, as one journalist pointed out, it is not clear that small retailers across all business lines would necessarily be threatened by liberalisation. It is true that in the grocery business an unprecedented consolidation has recently occurred, the result of which is that many ‘Mom-and-Pop’ shops have shut. Competition in many other business lines does not, however, revolve around price, because the products are not so readily comparable as in the grocery business. (To be specific, the small retailers in the clothing business are boutiques, designer shops etc. that already serve another clientele on different terms than C&A, the ‘Aldi of the Textile Trade'.) (DIE ZIET, 10 January 2002, p. 26.)Google Scholar

(77) Michael, J. Trebilcock and Robert Howse, THE REGULATION OF INTERNATIONAL TRADE (2nd ed.), Routledge: London/New York, 1999, p. 15.Google Scholar

(78) As Trebilcock and Howse explain in the trade policymaking context, “[t]his is largely a function of the differential mobilization and hence lobbying costs faced by producer and consumer interests”. Ibid.Google Scholar

(79) It is worth emphasizing that interest groups have apparently reorganised successfully at the supranational level, recognizing the far-reaching impact EC legislation and effectively penetrating its policy process. It is true that in the C&A saga, the EU, as played by the Commission, has assumed the role of the liberalising influence. It seems that on the European level, the competition authorities have a fundamentally different image of the consumer than do the German: the ‘flighty average consumer’ has been replaced by the ‘enlightened market actor'. (Rittner, p. 20.) The Commission has, however, been unable so far to convince a qualified majority of member state governments to share its image: the proposed regulation on sales promotions has met with staunch resistance in Council. Moreover, the EU in the form of the ECJ played the role of the anti-competitive influence in the Zino decision. The ECJ found in favour of the trade mark proprietors over the traders, holding on the terms of the Directive that parallel imports were held to be legal within the EEA but not necessarily from without. This competition policy does not, given member states’ veto in the matter and the strong proprietors’ lobby in a couple, look like it is soon to change. Liberalisation seems only to extend to the borders of the EU.Google Scholar