EU Court Backs Levi in Jeans Case

Levi Strauss & Co. won a court order to prevent Tesco, the largest British supermarket chain, from buying cheap jeans from suppliers outside the European Union to sell at a discount in the United Kingdom.

The ruling means Tesco can’t obtain denims in the U.S. to undercut the prices charged by Levi and its distributors in Britain.

A pair of 501s costs as much as $78 in London, compared with $36.99 at some J.C. Penney Co. stores in the U.S.

The decision is a setback for shoppers, analysts said. Tesco, Wal-Mart Stores Inc.’s Asda chain and other rivals are using brands such as Levi’s and Calvin Klein Inc. underwear to tempt customers.

“It’s the consumer that loses because the consumer ceases to get the cheap goods,” said Richard Perks, an analyst at consulting firm Retail Intelligence.

“As far as Tesco is concerned, selling designer goods is about being the consumer’s champion,” Perks said. “Sourcing from the U.S. would have meant better prices and more volume,” said John Church, a spokesman for Tesco.

He said the company expects to sell $156 million of designer goods from within the EU this year, rising to $210 million next year.

The retailer hasn’t obtained its supplies from outside the EU since a previous ruling in 1998 and Tuesday’s order won’t affect revenue, Church said.

Tesco will continue to sell 501s for $40 as they were purchased in Europe, he said.

The European Court of Justice ruled that trademark owners must consent unequivocally before imports from outside the European Economic Area can be sold within the EU.

The area consists of the EU nations plus Iceland, Liechtenstein, Norway and Switzerland.

San Francisco-based Levi must now argue its case before a court in the U.K, which is bound by EU law to apply the ruling. That could take a year, analysts said.

Levi may seek an immediate injunction to halt any illegal discounting, spokeswoman Paola Brandi said.

“The ruling is a strong win for brand owners, who invest heavily in research and development and their retail networks, which provide consumers with the quality, value and reliability they have come to expect,” Levi said in a statement.

“It’s unfair,” said Rosalyn Annenberg, 36, a shopper at the Tesco Metro store on Bishopsgate, in central London. “Tesco should be able to buy jeans where they like.”

The “Consumers’ Assn. is disappointed by today’s decision to allow Levi to continue to effectively overcharge U.K. consumers,” the U.K. group said in a statement.

Tuesday’s decision was the second in a month to uphold trademark protections in Europe.

On Oct. 29, the court said the European Commission had no right to suspend a trademark that gives IMS Health Inc., a U.S. drug data collector, a near-monopoly on the German market. The commission now has to prove its case in court.

In another victory for patent holders, the European Parliament in February passed a new media copyright law that the music industry welcomed as a blow against Internet piracy and consumer groups denounced as too restrictive.

In other cases, manufacturers have been unable to turn to patent protections.

The commission has fined auto makers, including Volkswagen and DaimlerChrysler, for refusing to sell cars to shoppers who hunted around Europe for the lowest prices.

With car prices varying by 20% between some countries, the commission has threatened to strip auto makers of the right to operate exclusive dealership networks. The monopoly entitlement runs out in 2002.