4 Minutes

Is a product's label the last castle of protectionism? Should it be?

For decades, the issue of implementing protective policies regarding a country's production has been a thorn in the agenda of those who wish for free markets. Means of protectionism in the past have been tariffs on imported goods, restrictive quotas, administrative barriers and export subsidies, all of which have been applied in order to enhance or retain the national or regional competitive advantage.

In the case of EU, common market has abolished all of the classic protectionism measures in the aspect of a European free market. Whether this has been equally effective or fair for all the member states of EU, it is a topic for another post. In this post, I emphasize the lesser known trademark policy, based on the recent example of Greek Yoghurt.

Quick rewind: Greek yoghurt manufacturer FAGE has been making Greek yoghurt in Greece and selling it via its UK distributor for 30 years. In September 2012, a US company, named Chobani, entered the UK market with its yoghurt product, using the term ‘Greek Yoghurt’, which was actually made in the US (as explained in small writing on the back of the product). (http://www.thelawyer.com/greek-yogurt-trademark-decision/). FAGE instantly sued Chobani and the High Court accepted claims of "extended" passing off in connection to use of the phrase "Greek yoghurt". In its appeal, Chobani argued that the court should not provide passing off protection for what is in effect a geographical indication or a denomination of origin where there is already a regime giving protection to such indications. But the Court of Appeal also ruled against Chobani's arguments that its US-produced yoghurt could be sold as "Greek yoghurt", stating that (https://www.ashurst.com/publication-item.aspx?id_Content=10220):

the majority of consumers believed that "Greek yoghurt" came from Greece, something that suggested the product was special, "Greek yoghurt" could not be a geographical indication or designation of origin under the Regulations because the yoghurt was not known as "Greek Yoghurt" in Greece and the Regulations do not prohibit member states from operating national systems designed to protect consumers from misleading advertising. Recently, the issue was extended to whether labeling as "Greek-style" yoghurt qualifies as the same problem with producing "Greek" yoghurt outside of Greece. Referring to the Regulation on the provision of food information to consumers, the Commissioner Vytenis Andriukaitis stressed that food information should not be misleading, as to the characteristics of the food and, in particular, as to its identity and country of origin or place of provenance. "In particular, using the term ‘Greek yoghurt’ for products produced outside Greece would deceive consumers and would create unfair competition in the EU market," the EU official noted. (https://www.euractiv.com/section/agriculture-food/news/commission-tells-czechs-greek-yoghurt-is-greek/).

Where does all this lead us today? A market is not free if this principle is not applied: anyone can produce anything anywhere with any way and sell it in any way at any price. So, there are some arrows left in the quiver of protectionism and I strongly believe that there should be a minimum level of protection when it comes to health, food safety and quality of products. While I do not think that anyone could disagree with the first two, in quality of products I anticipate some quarrel. Why is Greek yoghurt's quality higher than any other country's? No one can prove that it is higher, hence no one should be ranking products based on quality since it is highly subjective. It is not only about the nutrients and pesticide-free food, but also about the consumers' habits and preferences, the marketing choices and the local economies' achievements. Something is of good quality as long as someone perceives that this is of good quality and vice versa. Sad but true. Chinese products have been labeled in the collective memory as of "cheap but low quality" and German or Japanese products have been labeled as exactly the opposite.

So, could there be long-term benefits from, for example, China producing Scotch-style whiskey, Russia manufacturing standardized Spanish-style paellas, Brazilians producing French-style Creme Brulee, Norwegians producing Greek-style ouzo or feta, Lebanese manufacturing American-style cars? In the long term, the product in each case will be irreparably "damaged". Because the label has to do not only with trademark rights, but also with ensuring that very characteristics that distinguished the product are not diminished in the context of quick market profit.

To sum up: geographic indication and origin of products is something that needs protection.