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"Battles" in the alcohol market, or How the AMC fines for inaccurate product labeling

AMCU fine for whiskeyThe editors of the magazine "Quality Management" received a request to comment on several decisions of the Antimonopoly Committee of Ukraine:

The AMCU fined three producers of alcohol for violating the provisions of Art. 15-1 of the Law "On protection against unfair competition". The violation consisted of placing the word "WHISKEY" on the labels of alcoholic products, which was regarded as the dissemination of misleading information.

Earlier, the Antimonopoly Committee fined Kotnar-M LLC for violating the Law on Protection against Unfair Competition. The company used a name and label similar to the name and design of BAILEYS liqueurs for the production of liqueurs under the name O'DAILYS without the consent of R&A BAILEY & CO (Ireland).

It is positive that readers are increasingly paying attention to the cases of imposition of fines by the Antimonopoly Committee of Ukraine for inaccurate product labeling. Such fines are quite significant. Therefore, entrepreneurs need to be careful.

We have already talked in detail about the grounds and cases when the Antimonopoly Committee fined entrepreneurs for labeling that misleads consumers (see the article in the Journal "Quality Management" №7 for July 2018), so in this article the answer will be on the merits of specific cases, about which the reader asks.

Whiskey producers

On December 11, 2018, the Antimonopoly decided in two similar cases related to the production and sale of Whiskey.

One decision №717-r concerned the manufacturer of Gorobina LLC and the distributor of TD Resurs LLC. Another decision №716-r was made regarding the manufacturer - Boisson Elite Belvedere Group LLC and the distributor of Drink Distribution Systems LLC.

Gorobina LLC produced whiskey-flavored tincture. That's just the fact that this tincture was indicated on the back label in small letters. Instead, the front label in large font contained the following designations: "The finest", "WHISKEY", "ORIGINAL".

A consumer who bought such a tincture complained to the Antimonopoly Committee that he had been misled. He thought he was buying whiskey, but it turned out that he had bought a tincture.

Boisson Elite Belvedere Group Ltd. sold a drink with a clear inscription on the label "WHISKYE" and the inscription "ALCOHOLIC STRONG DRINK" WITH GLEN MORRIS "WHISKEY" light background.

At that time, the legislation did not contain a definition of "whiskey". This definition was enshrined only in DSTU 3297-95, which sets the terms and definitions of basic concepts in the alcoholic beverage industry. According to the provisions of this DSTU whiskey is a tincture with a strength of 40 % to 45 %, with a characteristic aroma, made from raw alcohol aged in charred inside oak barrels from rye grain, corn, barley.

The products of Gorobina LLC and Boisson Elite Belvedere Group LLC had nothing to do with this definition, in particular, they were not made from raw alcohol aged in charred oak barrels inside.

The Antimonopoly Committee conducted a survey of consumers and concluded that the presence of the label "WHISKEY" consumers perceive as information that they are buying the original drink "whiskey" and this gives preference to the producers of such products. In particular, the AMCU noted that stimulating consumer interest by disseminating false information about consumer properties, product characteristics may provide undue advantages in the market and put the company in a more favorable position compared to other businesses operating in the market.

LLC "Gorobina" and "TD Resource" sold only one batch of these products, so the fine was imposed on them insignificant - UAH 28,900 for LLC "Gorobina" and UAH 41,600 for LLC "TD Resource".

Instead, the Antimonopoly Committee imposed a much higher fine on Boisson Elite Belvedere Group LLC - UAH 260,140. Drink Distribution Systems LLC has already been liquidated on the date of the decision, so no fine was imposed on it.

I would like to draw your attention to the fact that in December 2018 the Verkhovna Rada adopted amendments to the Law of Ukraine "On State Regulation of Production and Circulation of Ethyl, Cognac and Fruit Alcohol, Alcoholic Beverages and Tobacco Products" and defined the Ukrainian definition of "whiskey". Now it is an alcoholic beverage with a strength of 35 to 45 percent by volume with a characteristic aroma, made by cognac technology from aged in charred inside oak barrels (containers with charred oak rivets) grain distillate.

Therefore, if your product corresponds to such technology, you can safely write on it "Whiskey".

Kotnar-M LLC

In the case of Kotnar-M LLC, the situation was slightly different from the previous one. The company has started producing a line of "O'DAILYS" liqueurs, which is similar to a similar line of world-famous Irish liqueurs "BAILEYS". There were similarities in many elements: the name, color and shape of the bottle, the shape and design of the label.

Ukrainian representatives and official distributors of BAILEYS liqueur paid attention to such a competitor and began to actively fight it. In particular, a representative of the manufacturer R & A BAILEY & CO filed a lawsuit to recognize the trademarks "O'DAILYS" and "Dales" as similar to the well-known trademarks "BAILEYS", "Baileys" and the ban on LLC "Kotnar- M "to use such designations, as well as the obligation of LLC" Kotnar-M "to remove such designations from bottles, websites, documentation and other places.

They also appealed to the Antimonopoly Committee. The subject of such a statement were two violations:

1. Illegal use in business activities without permission (consent) of the international company "R&A BAILEY & CO" (Republic of Ireland) name and design of packaging (label and bottle) of liqueurs "O'DAILYS", which are similar to the name and design of packaging (label) and a bottle) of BAILEYS liqueurs, which the international company R&A BAILEY & CO started to use in economic activity earlier than Kotnar-M LLC, which may lead to confusion with the activity of the international company R&A BAILEY & CO and which is a violation , provided for in Article 4 of the Law of Ukraine "On Protection against Unfair Competition".

2. Disseminating false information by posting on the website that O'DAILYS Original is an Irish liqueur, while O'DAILYS Original is not relevant to Ireland.

The Antimonopoly Committee considered these two violations separately and on December 13, 2018 adopted two decisions №720-r and №721-r. I will not go into the details of these solutions, because there are many of them, but they relate to specific products.

In summary, in №721-r the Antimonopoly Committee concluded that Kotnar-M did indeed use the name and design of the label and bottle for its liqueurs, which were similar in degree of mixing to the well-known BAILEYS liqueurs. Instead, R&A BAILEY & CO began using this design much earlier, registering trademark rights, and investing heavily in building and promoting the BAILEYS brand. Such a violation on the part of Kotnar-M LLC gives them an illegal advantage in the market. I note that in considering this case, the Antimonopoly Committee analyzed in great detail the product design of both manufacturers, assessed several expert opinions, conducted a survey among consumers and in general approached the analysis of all circumstances quite thoroughly.

Such a violation cost Kotnar-M UAH 3,350,000 in fines.

As for the second violation - the dissemination of false information about the product, then everything is much more confusing and the decision of the Antimonopoly is not as logical and detailed as in the previous case.

Initially, the Antimonopoly checked the accuracy of information about the Irish origin of the liqueur "O'DAILYS Original". Of all the Irish that was in this liqueur, the manufacturer was able to indicate only in the drink flavor "Irish". This flavoring was made by an Austrian company according to its own recipe. Therefore, this liqueur had nothing to do with Ireland. But the fact is that the manufacturer did not indicate on the bottle that the liqueur is Irish. Such information was provided only on the website, which was in fact a duplicate site of the official website of the manufacturer. The Antimonopoly Committee concluded only on some indirect grounds (identical telephone numbers, links, trademarks, etc.) that the products on this site are sold in the interests of Kotnar-M LLC. In my opinion, such an argument of the Antimonopoly Committee is not very convincing. At the same time, Kotnar-M LLC did not provide any evidence that it had taken any action to terminate the operation of such a duplicate site.

In addition, in the course of consideration of the case, the AMCU additionally found that on the front side of the bottle on the labels of liqueurs there are markings "Chosolate", "Hazelnut", "Coffee" and the inscriptions "CHOCOLATE CREAM LIQUE", "HAZELNUT CREAM LIQUEUR". Although these liqueurs do not contain ingredients such as chocolate, coffee or hazelnuts, there are only appropriate flavors.

The AMCU confirmed its findings in previous cases that in this case the manufacturer should state that the product is not "chocolate" but "chocolate flavored". According to the AMCU, the presence of designations of basic products, instead of indicating their flavors, misleads consumers and gives such a manufacturer an undue advantage over others who provide accurate information about their products.

It should be noted that in this case, the AMCU did not conduct a consumer survey on the ingredients "chocolate", "hazelnut" and "coffee" in O'DAILYS liqueurs and their impact on consumer choice. The survey concerned only information about the Irish origin of such a liqueur.

Nevertheless, the Antimonopoly Committee found Kotnar-M guilty of violating Article 15-1 of the Law of Ukraine "On Protection against Unfair Competition" in the form of dissemination of false information about the product, which may affect the intention of consumers to purchase such a product. For this, the AMCU imposed another fine of UAH 3,350,000 on the enterprise. An enterprise may appeal such a decision of the Antimonopoly Committee to a court. It would be interesting to look at the position of the court in this case.


The original article was published in №2 Magazine “Quality management


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