As
stated above trademarks possess in itself the power to appeal consumer’s
behaviour, influencing them to purchase the marked products. This marketing
power of the trademarks has been criticised for a really long time. The
question “whether the marketing power of the trademark which gives “benefit
that are illusory” or creates an economic benefit which serves some useful
purpose in marketing the product. The two major schools debating on this topic
are, the Harvard school criticising the marketing power of the trademark and
the Chicago school favouring it.
HARVARD SCHOOL
Trademark
as a means of providing information through advertising gains recognition in
the minds of the consumers. The marketing power of the trademark acquired by
this recognition gives some advantages to the brand owner including some which
are not in favour of the consumer. For example, as recognized trademark appeal
to the consumer at emotional and psychological level, which makes the consumer
to re-purchase the product and finally makes addicted to that product.
“Addicted” here mean “brand insistence” where the consumer refuse to switch to
any other brand. This process of inducing the consumer to buy a particular
product is highly criticised but “Harvard school”. According to Harvard school,
the firms induce consumers to buy product by “persuasive advertising”, as ‘most
advertising, however, is designed not to inform, but to persuade and
influence’.[1]
It
goes further than this; Firms could use trade marks to achieve a form of
monopoly power or at least to engage in price discrimination.[2]
The tendency of marked products to demand high prices on the market compared to
alternatives or to enjoy a relatively large market share appears to favour
Harvard school. Similarly, ECJ has ruled in many cases that, “the image or the
aura of the recognised trademark does add value to the price of the product as
well as plays an important in conferring intangible characteristics upon the
product, as it appeals to the mind of the consumers[3]”.
According to Harvard school, it is also arguable that this is merely a form of
price discrimination and does not add genuine value to the marked products[4].
In
conclusion, economists supporting Harvard school of thought insists on the
statement that “Firms may differentiate their product from competitor’s
products and achieve consumers brand insistence through persuasive advertising,
and insulate his market share from price competition and create high barriers
to entry”. Edward Chamberlain go further that this when stating that “the
public interest would be best served by permitting unlimited confusion through
imitation, so that it would be almost impossible to accomplish advertising
differentiation” [5]
,supporting no trademark at all which in my view he suggested “the world of
confusion” where there is no way to distinguish between the products.
CHICAGO SCHOOL
Chicago
school’s theory on trademark aimed to disprove the Harvard School’s theory on
trademarks and argued that, trademarks facilitate competitiveness, by reducing
the search and communication costs that may result from there being significant
differences in the quality of products and provides mechanism for combating the
problem that consumers may lack the information and expertise they need to
compare the products available to them on the market[6].
Further, Chicago School’s theory has been elaborated to take account of the cognitive impact of such trade marks
on
the basis that this capacity reduces consumers’ mental or “internal search costs”.
Even ECJ’s has stated that trademarks are consistent with the economic theory
of trademarks, which is associated in particular with the ‘Chicago School’ of
economics.[7]
Furthermore,
it can be said that the recognised brand do offer premium price, but that brand
premium cannot, over time, exceed the informational and economic value of the
brand itself. So for example, if a consumer is paying more prise for a product
it is because of the highly quality and low search cost which is inferred on
the product, so it not correct to say “just
because consumer have paid more for some products did not mean there had been
any actual increase in the quality of the product rather, they themselves have
talked into paying premium price for the same product”
Favouring
the Chicago school, in United Kingdom, the system of certification marks
signifies that a firm or its products have been certified as complying with
specific standards on such matters as safety, performance or geographical
origin.[8]
This practice gives consumers an assurance that the products they are buying
have a certain level of quality standard and other attributes, which it has
passed to claim that mark.
Under Chicago School of thought, trademarks promote
the product rather than distort competition, they facilitate communication and
reduce search, they increase the flow of information to consumers, and they
enable consumers to rely on prior experience.
[1] Kenner Parker
Toys, Inc. v. Rose Art Industries, Inc. - Confusing Play on Words Costs Dough
for Rose Art http://heinonline.org/HOL/Page?handle=hein.journals/utol25&div=14&g_sent=1&collection=journals accessed on
21/7/2011
[2] Price
discrimination occurs when a seller of products that are identical or closely
similar to each other is able to charge different purchasers a different price
according to their individual willingness to pay rather than having to sell at
a uniform market price.
[3] L’Oréal v.
Bellure [2009] ETMR 987] and Copad v Christian Dior [2009] ETMR 683.
[4] Van den Bergh
and Camasasca, 2006
[5] Ralph brown,
Advertising and the Public Interest, http://digitalcommons.law.yale.edu/cgi/viewcontent.cgi?article=3707&context=fss_papers&sei-redir=1#search="Ralph+brown,+Advertising+and+the+Public+Interest" accessed on
09/5/2011
[6] An Economic Perspective on
Trade Mark Law (Edward Elgar Publishing, 2011)
[7] McClure, 1996
[8] The 1994 Act,
s. 50. (as amended).
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