In the United States, a pair of Levi's 501 jeans will cost you about $30 down at the mall. That same pair will cost $80 at the flagship Levi store in London. True, the cost of living in London is astronomical, but in this case the differential goes far beyond the norm. After all, New York is a pricey city too.
When it comes to blue jeans, the difference between Europe and the States is marketing strategy. In the U.S., Levi Strauss sells its jeans like steak, combining images of sultry youthful stylishness with durable ruggedness. In the U.K., it sells the sizzle, turning that style dial up past 11. The result, in economic terms, is price discrimination: Europeans are willing to pay more for their pants, and so they do.
This, you may say, is stupid. If you are an economist, you will observe that price discrimination is socially sub-optimal, and that society would benefit if the market in blue jeans weren't geographically segmented. If you are an activist, you will complain that the differential branding of blue jeans is a shell game played at the expense of advertising-addled consumers. And if you are a large retailer, you will note the opportunity to make a substantial profit by buying Levi's jeans around the world and selling them in England.
Tesco (England's largest supermarket) decided to give this idea a try. It started purchasing jeans here in the States and selling them back home. Levi Strauss, upset at being undercut, sued -- and won. It's illegal to import blue jeans into Europe without their manufacturer's consent.
No, I am not making this up.
The ruling itself turns on a fairly narrow issue of express versus implied consent, but the narrowness of the legal question being disputed is merely a diversion from the outrageousness of the result.
In brief, Levi won by arguing that its trademark on the jeans gave it the right to control their sale. By importing the jeans without Levi's permission, Tesco was undermining the value of the intellectual property contained in that little brown fabric patch that says "Levi Strauss" on the back of every pair of jeans.
Though it may sound absurd, the governing law of the European Economic Community is firmly on their side. The applicable rule states that a trademark owner is allowed to "prevent all third parties not having his consent from using [the trademark]." Selling goods bearing the trademark counts, as does "importing or exporting the goods bearing the sign."
In an effort to avoid complete unconscionability, the law then carves out the usual exception that, by selling trademarked goods in the EEC, their maker legally consents to their future use and resale. [That is, once Levi sells a pair of jeans in London, they can't turn around and stop me from selling them to a football hoodlum in Manchester, however much they might like to.] The European Court of Justice ruled, however, that this consent does not attach to products sold outside the EEC.
So consider: even though the jeans are genuine and Levi has consented to the use of their trademark in connection with the jeans and has sold them in the U.S. without restrictions on their resale and does sell them itself in the U.K., it can still block Tesco from undercutting its prices.
Those who have been following the technology world in the last few years are probably feeling a sinking sense of deja vu. Such practices are common in the world of software. You don't buy software, you license it, and that license prohibits you from doing all sorts of stuff. You can't read an e-book in two places at once, you probably can't resell it, and you can't quote from it without permission, even though no one would ever think to stop you from trying any of these things with a real book.
Put another way, as intellectual property has become increasingly liberated from physical vessels, the balances embodied in intellectual property law have increasingly tilted towards the property-owners. The Tesco ruling marks a new and disturbing twist, though, because now the draconian protections afforded to intellectual property are being back-propagated onto physical property.
The old idea was that the physical nature of real, concrete, objects -- the sort you could hold in your hand or cram in a breadbox -- dictated how the intellectual property expressed in them ought to be understood and controlled. But now that the IP lawyers have been burnt by the Promethean fire of cyberspace, where no physical restrictions apply, they're figuring out how they're figuring out how to capture its awesome power -- and bring the real world's laws in line with the police-state vision of perfect control they've glimpsed in the virtual world.
To me, this vision feels like sharecropping to the Nth degree: if it's got someone else's IP on it somewhere, you don't really own it. And you can be sure that the capital-T They are hard at work figuring out how to put Their IP on anything and everything. The food you eat contains patented genetic material. The music you listen to (licensed, not bought) is copywritten two different ways. And the jeans you wear have a (TM) on them, waiting quietly for the right time to strike.
Even more outrageously, when you buy the jeans, the IP that came with them is worthless to you. The trademark on them isn't an expression of some creative idea; it's just a sign, a pointer back to the folks who made them. When Tesco buys and resells a pair of jeans, the jeans don't change at all. And yet the brand on those jeans -- that abstract combination of advertising and manufacturing practices -- is considered so valuable that its rules run with the jeans.
It may seem odd that the law considers the brand more important than the jeans it adorns, but then again, in today's world, it is more important. It's not the jeans that command the big bucks; it's the brand. Where companies used to build factories, now they build brands. When those companies seek the same legal protections for their brands that they enjoy for their factories, who are lawmakers and judges to object? So what if some traditional individual rights get discarded in the shuffle and our notions about property take a journey through the looking-glass?
When economic power passed from land-holders to stock-holders, the law recognized this shift in by reifying corporations, recognizing them as "people" and granting them various and sundry rights. Today, the modern industrial corporation is giving way to the postmodern marketerial one; the law is playing along by reifying brands, figuring out how to recognize them as distinct entities and showering new rights upon them.
I, for one, am terrified.