Tesco designer deals banned

SUPERMARKETS group Tesco has been banned by the European Court from offering millions of pounds worth of savings on designer goods. The court's ruling in favour of jeans maker Levi Strauss is a major blow to all supermarkets.

The European Court of Justice had been expected to pave the way for stores to sell top-name clothes, watches, perfume and cosmetics at vastly reduced prices. But it ruled that goods sourced from outside the EU, on the 'grey market', cannot be imported without the consent of the trademark owner.

Tesco has been in dispute with Levi Strauss for three years over whether the firm can stop the supermarket selling its jeans alongside groceries. While Tesco will continue to sell designer products sourced within the EU at knockdown prices, the ruling will prevent the supermarkets chain from reducing prices a further 10% by purchasing products from outside Europe.

Levi jeans from European distributors will remain on sale at Tesco for £27.99 compared with the High Street price of about £50. If the hearing had been won by the supermarkets chain, they would have been able to sell for £25.

Further savings would have included Paul Smith aftershave, which would have been reduced from the High Street price of £23 to £18 if Tesco's plea had been successful. The product, sourced from Europe, is currently on sale for £20.

Tesco described the ruling as a 'blow' for both the company and its customers. 'We are disappointed. If we had won we would have saved customers around £70m,' it said. 'We would have been able to reduce all the products which can be sourced in America by a further 10%. Now we can only save them about £35 million with cheaper goods from Europe. We will be writing to Patricia Hewitt and the European Commission urging them to review the law.'

However, Levi Strauss welcomed the decision . Spokesman Joe Middleton said: 'We are extremely pleased that the court has established without a shadow of a doubt that Tesco had been acting illegally by importing our jeans for sale in Europe without our consent.'

The judgment has thrown into disarray the supermarkets' planning for a pre-Christmas blitz of cut-price products. Asda had already fired the opening shots in the discount war by flooding its stores with £25m of cut-price goods. In a calculated risk, the company pre-empted the ruling and introduced £25m worth of products last weekend, including Nike, Adidas and French Connection.

An Asda spokesman said: 'We're disappointed that the court has ruled that goods cannot be bought from across the world. There's no secret of the fact that big brand owners are bad value. We will continue to get the best products on the grey market within the EU. But we need to change the EU legislation and we believe the British Government is behind us.'

Safeway said: 'It's a terribly sad decision for the customers. It will now be extremely difficult for us to source goods outside Europe. We will continue to look for goods on the grey market within Europe. We have 120,000 pairs of Levis sourced in Europe that are going into our stores this week and they are not affected by the ruling.'

Sainsbury's said the company had considered stocking cut-price designer goods but had now been deterred by the ruling. Opponents of the system say it allow s companies to keep prices artificially high in Britain.

Middleton, president of Levi Strauss Europe, said: 'This definitive legal decision enables us to continue doing what we do best - making and marketing the world's best recognised jeans. We have always maintained that we have the right to decide the way in which we distribute our products to best serve our customers, and the court has confirmed that right.'