Brands: old and new thinking and implications for competition law and policy

Professor Ioannis Lianos

UCL Laws

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The elusive concept of brand• Brands and brand management have become a

central feature of the modern economy• Brands are used to indicate far more than source

and/or quality• What is a brand?

– From an economic point of view• Informing and signaling• Persuading

– From a business point of view– From a legal point of view

• Brands and product differentiation

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The evolving semantics of brands

• An historical perspective• Brands as an utilitarian provision of information

regarding origin and quality in order to reduce risk and uncertainty

• Brands and trademarks• Towards a more complex perspective on brands

– “A brand is a mental shortcut that discourages rational thought, an infusing with the spirit of the maker, a gathering, an inspiration. A brand is a semiotic enterprise of the firm, the companion spirit of

the firm, a hologram of the firm” (John F. Sherry, Jr., Brand Meaning, in KELLOGG ON BRANDING: THE MARKETING FACULTY OF THE KELLOGG

SCHOOL OF MANAGEMENT 41 (Alice M. Tybout & Tim Calkins eds., 2005)

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Normative choices

• Brands, product differentiation and the formation of consumer preferences

• Brands and the goals of competition law• Views on product differentiation

– The persuasive view– The informative view– The complementary view

• The contribution of behavioural economics or neuro-economics

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The illusion of choice

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Private labels and the emergence of a new rhetoric on brands

• What is a private label?– Private label is a term referring to all products sold under a retailer’s brand, which could be

the retailer’s own name (store brands) or a brand created by a manufacturer exclusively for the retailer, who defines the characteristics of the product (generic brands).

• Private label and consumer choice– “(t)he trade-off for the national brand producer facing a private label is between exploiting the

loyal consumers with a high price and competing for the switching consumers with a lower price. When the fraction of loyals is high, the national brand will concentrate on the loyal segment and a private label will be introduced at a lower price. On the other hand, when the fraction of loyals is relatively low, the national brand finds it optimal to offer an exclusivity contract to the retailer at a low price and no private label is introduced . . . If the national brand producer serves both loyal and switching consumers initially, the price of the national brand will be relatively low. In such a situation private label competition would lead to an increase in the price of the national brand. The reason is that the national brand producer decides not to serve the switching consumers to which the private label is offered and instead sets a high price to serve only loyal consumers . . . Loyal consumers are worse off due to a higher price on the national brand, while switching consumers are better off when offered a low-price private label. It turns out that in some cases consumers on aggregate benefit from private label introduction, in other cases they are worse off” (R L Steiner, The Nature

and Benefits of National Brand/Private Label Competition, Review of Industrial Organization, 24 [2004], 105, 107).

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• Thank you for your attention!

• For more, see Ioannis Lianos, Brands, Product Differentiation and EU Competition Law (September 1, 2014). D. Desai, I. Lianos & S. Weber Waller (eds.), Brands, Competition Law and IP (Cambridge University Press, 2015); CLES Research Paper No. 7/2014. Available at SSRN: http://ssrn.com/abstract=2542970

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