Tesco is to drop the blue and yellow logo used to promote its Clubcard loyalty scheme – a rebrand that could cost it almost £8m – after losing an appeal against a ruling that it had copied a design by Lidl.
Legal experts said Lidl would have the right to seek compensation for infringement of its trademark, which could mean a further multimillion-pound bill for the UK’s biggest supermarket.
Tesco had appealed against a decision by the high court last year that it had infringed Lidl’s trademark and was guilty of “passing off” in misleading shoppers into thinking that products under the Clubcard Prices scheme were offered at the same or lower prices as those in Lidl.
The dispute started after Tesco began using a yellow circular design with a blue background to promote offers available for members of its Clubcard loyalty scheme. Lidl’s main logo follows that design, with the addition of a red outline to the circle and its brand name.
In a ruling published on Tuesday, the judges said Tesco’s appeal against trademark infringement and passing off should be dismissed but agreed with the high court that there had not been copyright infringement.
Tesco does have the right to escalate the case to the supreme court but it is understood it has accepted the court of appeal ruling and will update its logo in the coming weeks. Tesco suggested during the legal proceedings that the cost of rebranding could be £7.8m – a figure that does not include any potential compensation sought by Lidl.
A Tesco spokesperson said on Tuesday: “We are disappointed with the judgment relating to the colour and shape of the Clubcard Prices logo but would like to reassure customers that it will in no way impact our Clubcard Prices programme.”
A spokesperson for Lidl said: “Last year, the high court ruled that Tesco’s Clubcard logo was copied from ours and infringed our trademark rights, allowing them to unfairly benefit from our longstanding reputation for value while misleading its customers. Despite this, Tesco prolonged the dispute by appealing, deceiving customers for another year.
“Therefore, we are delighted to see that the court of appeal has now agreed with the high court that Tesco’s use of its Clubcard logo is unlawful. We expect Tesco now to respect the court’s decision and change its Clubcard logo to one that is not designed to look like ours.”
The appeal court judge, Lord Justice Lewison, said that he had supported the high court’s findings with “undisguised reluctance”, making clear he found elements of the original finding “surprising”.
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He added: “It is plain that the primary message that Tesco wanted to convey is that by joining Clubcard the consumer would achieve better prices at Tesco than a consumer who had not joined.
“Despite Tesco’s wish to differentiate itself from Lidl and to promote the value of its own very distinctive brand, it has found itself liable for trademark infringement and passing off.”
John Coldham, an intellectual property partner at the law firm Gowling WLG, said: “Lidl will be delighted by this result – there is a court finding that it has a reputation as a discounter that offers goods at low prices, and that Tesco adopted its Clubcard Prices logo in order to effect a price comparison.
“The court of appeal was openly uncomfortable with the factual finding made by the earlier judge that this was a price comparison with Lidl, as opposed to a price comparison with its own ‘non-Clubcard deal’ prices, but this was not something that they could change on appeal.”
