How are discounters getting away with copying brands – and will a looming legal case put an end to the imitation?
‘Like brands, only cheaper.’ There’s no denying Aldi’s chutzpah when it comes to pitching its own products as direct rivals to the biggest names in fmcg. It’s an issue that has long riled brands, which have spent years developing and refining their products and packaging – only to see cheaper mimics adorning the discounters’ shelves.
In some cases, it’s resulted in a high-profile legal battle. Take the dispute with Hendrick’s Gin, which resulted in Lidl being ordered to temporarily withdraw its Hampstead gin brand across Scotland in 2021.
Or Aldi, which was taken to task by M&S over its similar-looking gin-based liqueurs and could face an injunction if it attempts to sell them again.
So far, though, the discounters have largely managed to avoid such outcomes by using their commercial power to get brands on side, and relying on legal claims being tricky to prove.
Now this tried-and-tested strategy could all be blown apart by an upcoming legal dispute with Thatchers, which threatens to set a precedent on taking ‘unfair advantage’ of a brand’s reputation. If the alcohol brand wins, the discounters may have to rethink the mimicry that sits at the heart of their UK strategy – or at the very least, take a more subtle approach.
Until now, court defeats have done little to dampen the discounters’ confidence in their strategy. “We’ll continue to benchmark market-leading quality,” Aldi UK CEO Giles Hurley told The Grocer in April, less than three months after the gin defeat. “I don’t think there’s anything we need to avoid.”
His confidence stemmed from experience. While M&S has taken a stand against copycat tactics, not many brands have done so. Not publicly, anyway.
Many of the big brands used for inspiration are, in fact, stocked right next to their lookalikes. Lidl shoppers will find Wholegrain Wheat Bixies next to Weetabix and Choco Nussa next to Nutella, while Aldi’s will find Mighty Yeast Extract next to Marmite and Crumbly Oaties next to Hobnobs.
“With designs, the only test you have to get over to win is that it’s not a different overall impression”
John Coldham, IP partner at international law firm Gowling WLG
And this is the crux of why brands are reluctant to mount a challenge: they want a place on the shelves of the fast-growing discounters.
So says Geoff Steward, head of litigation at trademark and intellectual property specialist Stobbs. Behind the scenes, he says the issue may create internal wrangling between commercial and legal teams.
“The commercial people at the big brands want to be in Aldi and Lidl. The legal teams, who are the custodians for the intellectual property, don’t want it infringed,” he says.
The commercial teams typically win that argument. “Lawyers tend to spend money and commercial people make money, so within the business commercial normally trumps legal.”
This system works for the discounters. They like to sell their own-label lines alongside a single category- leading brand, says Steward – and in the process, they gain leverage over the brands they gain most value from copying.
Problems tend to arise when the discounters take inspiration from brands that aren’t on their shelves. Those that have no commercial dealings with Aldi and Lidl are more willing to mount a challenge.
In the worst cases, such as Hendrick’s in its dispute with Lidl, it leads to a court case. More often, though, the discounters will take pre-emptive action. They frequently agree to settle, thereby avoiding the risk of setting a potentially damaging legal precedent, says John Coldham, IP partner at international law firm Gowling WLG.
“Most of my cases against Aldi have settled on the promise that we won’t talk about them again,” he says. “But they often do what we ask. They will take the product off the market or they’ll make changes. Virtually every case I’ve had against Aldi and similar companies, we have come to a resolution, sometimes with a payment to our client.”
For brands that want to pursue legal action, the most common claim is trademark infringement. The problem is, this can be tricky to prove – it usually relies on ‘confusion’ or ‘unfair advantage’. The former hinges on proving consumers are likely to be confused about whose product they are buying because of similarities with trademarked characteristics.
The difficulty in establishing this confusion often prevents brands making claims. The discounters can get around this by simply giving the lookalike a different name, explains Coldham.
“In the case of something called Yeast Extract, that is literally what it is. It depends how it is presented. If you buy a lookalike water brand called ‘Water’ in a discounter, do you really think you’re buying the brand?”
Brands have struggled to make claims stick for this reason. In 2014, hair oil brand Moroccanoil lost a ‘passing off’ trademark infringement claim after arguing consumers would mistake Aldi’s hair oil, Miracle Oil, for its own. The court found insufficient evidence the public would think they came from the same manufacturer.
Another case in point is M&S’s ‘passing off’ claim against Aldi caterpillar cakes, which was settled out of court in a confidential agreement. Whatever the deal was, it didn’t stop Aldi selling Cuthbert again, or ridiculing M&S in a social media campaign and TV ad in which Cuthbert and Colin come to blows.
To realistically win on this basis, brands need clear-cut evidence of confusion. “I act for a company that makes toilet rolls and a copycat product came out using a similar brand name,” says Coldham.
“People had bought it on Amazon and then taken to the reviews to complain it was not what they thought they were buying. It was an absolute gift,” he recalls. “We wrote to the people who made the copycat and said look, we’ve got a ready-made case here. And they rebranded overnight.”
A claim of unfair advantage, on the other hand, relies on a more objective test. Claimants need to prove the defendant’s mark ‘free-rides’ on the coattails of theirs, says Cripps managing associate Elliot Fry.
In effect, claims must prove one product creates a link in consumers’ minds with another – and the similarities between trademarked characteristics have imparted some of the protected product’s reputation onto the copycat one.
Somewhat ironically, Lidl made a successful claim on this basis against Tesco this year. The High Court ruled Tesco was taking unfair advantage of Lidl’s reputation as a discounter with its Clubcard Prices logo, which uses a yellow circle design that is similar to Lidl’s branding. In the event Tesco loses a planned appeal, it will be given nine weeks to remove more than eight million signs from stores.
The case highlights that unfair advantage is the way to go when making a claim for trademark infringement, reckons Steward. “It was held that the colours were more important than the Lidl logo and the use of yellow and blue was held to signify discount, and was therefore taking unfair advantage of what Lidl is doing.”
The same principles can be applied to packaging. “If the packaging is registered, and somebody is trying to benchmark it, that is unfair advantage and trademark infringement,” says Steward. “The fact they say they are benchmarking is basically acknowledging they’re deliberately creating a link, which is all you need for unfair advantage trademark infringement.”
All of which brings us to the court case that could strike a blow into the heart of the discounters’ strategy. In a dispute due to be heard in November, Thatchers is using the unfair advantage argument to sue Aldi over its Taurus Cloudy Cider Lemon. It claims Aldi is taking unfair advantage of its brand reputation by mimicking its appearance.
“Commercial teams want to be in Aldi and Lidl. Legal teams don’t want the IP infringed”
Geoff Steward, head of litigation at Stobbs
A victory for Thatchers would mean “a High Court’s authority purely on packaging, that says it is unfair advantage”, says Steward. He says the Lidl-Tesco judgment alone is “a very strong weapon against packaging lookalikes”. “Combined with Thatchers, which is a packaging case, to me it marks the start of the end.”
It means the discounters may soon have to think twice about social media posts basking in their own copycat reputation, he adds.
“You’ll often see them saying ‘our cheaper version’ or joking ‘we don’t know what you’re talking about, it bears no resemblance’,” points out Steward. “I use social media all the time in the claims I bring because it establishes they’re deliberately creating a link.”
Fry similarly believes a victory for Thatchers would prompt the discounters to reassess their tactics. “Discount supermarkets would likely rebrand products to minimise their exposure. In particular, own-label branding may end up being adjusted to relate more to any available un-trademarked aspects of other products’ branding.”
A Thatchers victory would provide brands with additional armoury alongside M&S’s claim against Aldi’s gin liqueurs. Rather than trademark infringement, it succeeded based on infringement of registered designs – another powerful tool. “With designs, the only test you have to get over to win is that it’s not a different overall impression, so effectively it’s the same overall impression,” says Coldham. “Designs are underused in this area and are very effective if registered well.”
Of course, victory for Thatchers is far from guaranteed. “Is it distinctive enough?” asks Coldham. “Aldi may say its packaging is just showing it has lemons in it, and there are only a certain number of ways of showing lemon orchard imagery.” Also, the Tesco vs Lidl judgment might be overturned on appeal, potentially weakening the prospects of a victory for Thatchers.
For now, Aldi remains resolute. In its response to The Grocer, the discounter said it went to great lengths to ensure all its own-label products adhered to strict legal guidelines. While the quality of its own label products matches that of leading brands, the designs and prices do not, it added. Lidl didn’t signal any change in its strategy, either – and did not provide a comment when approached.
So while the net may be closing around copycats, it’s a net that could have some large holes in it. And ‘like brands, only cheaper’ could be around for some time to come.
How brand mimicry can push up own-label prices
Lookalike products may cost less than the brands they imitate, but they also cost more than non-lookalike own-label, the British Brands Group claimed last year.
The trade body sent evidence of nearly 30 examples of retailers charging more for copycat products to Trading Standards and the CMA.
Among them was Lidl’s Hampstead Gin, which was subject to trademark infringement claim from Hendrick’s in 2021. The retailer was ordered by the Court of Session to temporarily remove the item from sale.
BBG used data from the judgment to show that, having moved from a distinctive pack design to one closer to that of Hendrick’s, the price of Lidl’s gin rose by 14%, despite alcohol content only increasing by 1.4%.
It was evidence of brand mimicry pushing up the price of own-label choices, BBG said at the time of its research in November. BBG’s John Noble argued the strategy should come under further scrutiny.
“We all know why copycats are done, it’s either to sell more or to charge more,” he said. “This is particularly topical at a time when shoppers are facing a cost of living crisis.
“The shopper has been left high and dry, which is why it’s so important to shine a light on this issue,” he added.
Geoff Steward, head of litigation at trademark and intellectual property specialist Stobbs, says the cited gin example is part of a wider strategy. He points to the price difference between lookalikes and the discounters’ value own-label lines.
He highlights Aldi’s Bramwells Baked Beans, which, like Heinz, come in a predominantly blue tin, albeit a different shade – and a price point of 45p for 410g. Aldi’s Everyday Essentials Baked Beans, meanwhile, come in an orange tin and sell at a lower price point of 28p for 420g.
Steward sees this as a concerted strategy by the discounters to impart added value through mimicry. When Aldi arrived in the UK in 1990, “their original model was to sell cheap German products at a discount, but the English market didn’t like German products”, he says. “Their solution was to sell stuff that looks like English products, and the whole lookalike model developed from that. Their entire model depends upon selling lookalikes.”
Aldi said Bramwells was benchmarked against a leading brand for quality, while its Everyday Essentials Baked Beans were of a different specification as part of its value range, and priced as such.
It said the strategy was consistent with all other supermarkets stocking value, mid-tier and premium own label.