Retailers win appeal over sale of decoded products

PHILIPSBURG--Diageo, the world's leading premium drinks business, has lost another battle in court against six Front Street retailers it had accused of illegally selling decoded products.

Following the ruling of a judge of the Court of First Instance of February 2010, Joint Court confirmed on September 30 that the six retailers had not been violating Diageo's rights, nor had been acting against the law by selling products obtained via so-called parallel import.

Diageo Brands B.V., Diageo North America Inc. and R&A Bailey & Co. had initially filed their case in November 2008 against Sriram N.V, Cardinal Gift Shop N.V., Nandwani N.V. Jaanvi N.V., Rekhasuresh Lalwani N.V. and Planet Duty Free N.V. because they had been selling alcoholic beverages without the required codes on the bottles.

Diageo, a global company, trading in more than 180 markets around the world, is manufacturer and distributor of a broad collection of alcoholic beverage brands, including Smirnoff, Johnnie Walker, Captain Morgan, Baileys, J&B, José Cuervo, Tanqueray, and Guinness. The company has manufacturing facilities in the Caribbean and across the globe.

According to Diageo, production batch or lot codes are placed on products to make it possible for the manufacturer to quickly and easily recall a product which is defective or non-compliant with manufacturing standards.

Decoded products cannot be identified by the manufacturer and therefore pose a threat to the consumer, the company had stated to the court. Products sold by the authorised distributor are never decoded, as this would be an infringement of his agreement with the brand owner.
This issue had already been the subject of several previous court cases, including at the High Court in The Hague, which were all thrown out.

Diageo is considering the tampering with their bottles, purchased by store owners through parallel import and not via Diageo's local agent, to be an infringement on its trademark and intellectual property.

Diageo stated that their brands are well-known and have a luxury image which was damaged by the Front Street stores by the sale of bottles with labels from which the codes were removed or made invisible.

Sriram had purchased these bottles outside St. Maarten, and did not contest it had the codes removed or made indecipherable to hide from Diageo via which, cheaper, import channel it had obtained the merchandise.

Diageo stated it couldn't nor wouldn't resist parallel import. But it retained its right to protect the exclusive image of the bottles and packages. It also stated that identification numbers were mandatory under the Federal Ordinance Labelling of Food Items of 1995 to combat counterfeit and to make recalls possible.

Diageo's representatives had presented several examples to the court of bottles and packages that had been tampered with, but following Judge Diederik Thierry of the Court in First Instance, the Joint Court Judges Jan de Boer, Jurjen de Haan and P.E. de Kort also stated these "physical changes were but minor" and did not "noticeably damage the good reputation of Diageo's brands" and their "luxury image."

Contrary to the judge of the Court of First Instance, the Joint Court found it proven that the identification marks were placed on the bottles to combat counterfeit, which it considered legitimate in connection with Diageo's objective to limit its liability.

The Joint Court, however, considered this in itself legitimate reason to be of lesser importance than the government-induced system of free parallel import, and its "(supposedly) positive effects on prices and economy."

This all meant, according to the Joint Court judges, that Diageo could not resist the removal of identification numbers, and ordered the company to pay the cost of the procedure, estimated at NAf. 5,339.50.

(Source: The Daily Herald Sint Maarten)

12 October 2011

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