Lidl v Tesco: Battle of the logos

UEA law grad Khushbu Hiranandani looks at the Lidl v Tesco judgment and the principle of ‘unfair advantage’

Under intellectual property law, if a company’s logo resembles another company’s logo and profits from creating a false association between the two brands, this is called ‘unfair advantage’. In March 2024, the Court of Appeal found that Tesco gained unfair advantage by associating themselves with Lidl by designing a Clubcard logo similar to Lidl’s logo. It was found that Tesco’s Clubcard design created the impression that Tesco’s products were as cheap as Lidl’s products. The profits that Tesco earnt by unfairly associating with Lidl’s logo, were products of an unfair advantage.

In the Lidl v Tesco case, Lidl claimed that Tesco infringed Lidl’s trademarks – both the ‘Mark with Text’ and ‘Wordless Mark’. Tesco counterclaimed for the invalidation of Lidl’s mark by arguing that Lidl had no genuine intention to use its ‘Wordless Mark’. In addition, Tesco stated that this claim was a legal weapon by Lidl against Tesco. In the High Court Tesco lost its claim and was found to be taking unfair advantage of Lidl’s business by associating with its lower prices. Tesco appealed this decision and the Court of Appeal broadly confirmed the High Court decision, ordering Tesco to cease its use of its Clubcard logo.

Under Art.10(2)(c) of the Trademark Directive 2015, “A registered trade mark is infringed when an unauthorised party uses an identical or similar mark in the course of their trade with similar or identical goods, for the mark with reputation”.

Tesco used its Clubcard sign for its supermarket business, selling similar goods to Lidl. It is crucial that the mark has a reputation in the United Kingdom and that the use of the sign, without due cause, takes unfair advantage of or is detrimental to the character of the registered mark. Tesco was found to gain an unfair market advantage through using a similar mark to Lidl’s since the average consumer would be confused and associate Tesco and Lidl, buying Tesco’s products thinking that they are cheap.

To prove similarity, we need to conduct the global assessment test which establishes that there is a similarity between two marks. This is based on the strength of the mark’s reputation, the degree of distinctive character of the mark, the similarity between the mark, and the nature and degree of proximity of goods concerned. Given that there was a link between the two marks with them being in the same market, Tesco was found to have infringed Lidl’s trade mark. Additionally, judges held that for the global appreciation test, the “likelihood of dilution or tarnishment of the mark” should be considered where necessary. Lidl’s logo was found to have been diluted in the market as brands like Tesco unfairly associated with them to earn profits.

In trade mark infringement cases, it is important to consider whether the defendant’s conduct is unfair, i.e. “he intends to take advantage of the reputation and goodwill of the trade mark”. The courts found that Tesco’s Clubcard logo was intentionally created to be similar to Lidl’s logo, in order to be seen as brand that sells products as cheap as Lidl.

To establish the claim of ‘unfair advantage,’ a substantial change or a likelihood of change in the consumer’s economic behaviour in favour of the defendant’s goods or services needs to be demonstrated. In this case, witness statements proved that consumers’ economic behaviour did change as customers assumed, based on the similarity of Tesco’s Clubcard logo to Lidl’s logo, that Tesco sold cheaper goods. This substantial change proves that a Lidl’s claim based on unfair advantage was valid.

The judge adopted the reasoning adopted by Arnold LJ in Jack Wills which emphasised that unfair advantage is gained when the sign is used to influence the consumer’s economic behaviour. Tesco designed the Clubcard logo with the intent to significantly influence its customers. This is evidenced by a rise in sales after the 2019/2020 financial year due to the attractive introduction of the Clubcard which changed the image of Tesco’s brand.

The link between the signs of Lidl’s logo and Tesco’s Clubcard was proved by the witness statements below. Consumers genuinely believed that they did not need to compare Tesco’s prices to Lidl’s as they believed Tesco had already done so because of its Clubcard sign. Lidl argued that the long-term consequence of this would be that Tesco’s market position would be improved through a false association with Lidl’s brand, giving Tesco an unfair advantage.

Ms McEttrick, a witness, confirmed that the Clubcard sign was effective due to its connection with the Lidl logo whose reputation was low prices and value. This proves that the general consumer associated Tesco’s Clubcard sign with Lidl’s logo in a manner which created an unfair commercial advantage for Tesco.

Law firm Fieldfisher has commented that “Lidl’s success under s 10(3) TMA is owed in large part to the comprehensive evidence used to prove its claim.” This case has demonstrated the extent to which an IP claim can be brought if there is enough evidence of a competitor taking unfair advantage of the claimant’s business. The High Court judge (Joanna Smith J) found that as a substantial number of Tesco’s consumers believed that Tesco’s pricing was same or lower than Lidl’s, Tesco was ‘price-matching’. This unfair advantage taken of Lidl’s affordable pricing, establishes that Tesco took unfair advantage of Lidl’s profits through its CCP cards that resembled Lidl’s affordable pricing image.

Stobbs and others commented that this judgment is an “excellent example of the power of social media evidence within s.10(3) of the TMA claims”. This has been good news for fast-moving consumer goods (FMCG) brands, who now have clear guidelines for claiming unfair advantage by a competitor. Smith J’s judgment has become valuable to those who want to pursue claims based on signs being alike for their colour and/or shape. This judgment has contributed to bringing change in the landscape of intellectual property cases as companies regardless of the scale of their business may feel they can claim for unfair advantage.

To sum up, under Intellectual Property Law, a claim can be made by a company under ‘unfair advantage’ if another company unfairly associates with its brand and earns profit from it. Tesco took unfair advantage of Lidl’s business by introducing a Clubcard sign which is like Lidl’s logo. Tesco failed the global appreciation test as Lidl’s logo was known in the market and it was found that consumers created a false association between the two brands based on the mark, Consumers thought that they did not need to consider the prices at any other store as Tesco provided the cheapest price with its Clubcard. Law firm Fieldfisher and Stobbs commented that this judgment has been a significant win for brands claiming unfair advantage.

Khushbu Hiranandani is a law graduate from the University of East Anglia. Originally from the UAE, she is pursuing a career as a solicitor in the UK and currently works as a researcher and manager for a UAE-based legal tech start-up.

The Legal Cheek Journal is sponsored by LPC Law.