Brands, Competition and the Law
76 Pages Posted: 1 Feb 2010 Last revised: 28 Oct 2015
Date Written: February 1, 2011
Brands matter. In modern times, brands and brand management have become a central feature of the modern economy and a staple of business theory and business practice. Coca-Cola, Nike, Google, Disney, Apple, Microsoft, BMW, Marlboro, IBM, Kellogg’s, Louis-Vuitton, and Virgin are all large companies, but they are also brands that present powerful, valuable tools for business. Business is fully aware of that power and value. Contrary to the law’s conception of trademarks, brands are used to indicate far more than source and/or quality. Indeed those functions are far down on the list of what most businesses want for their brands. Brands allow businesses to reach consumers directly with messages regarding emotion, identity, and self-worth such that consumers are no longer buying a product but buying a brand. Businesses pursue that strategy to move beyond price, product, place, and position and create the idea that a consumer should buy a branded good or service at a higher price than the consumer might otherwise pay. Branding explicitly contemplates reducing or eliminating price competition as the brand personality cannot be duplicated. In addition, this practice can be understood as a product differentiation tactic which allows a branded good to turn a commodity into a special category that sees higher margins compared to the others in that market space. In other words, brands have important effects on competition and the marketplace.
Given that both trademark law and antitrust law address business competition, one might expect them to address brands as they fit into each doctrine’s areas of concern and that together trademark and antitrust law would offer a coherent legal regime to manage the way in which brands affect competition. That, however, is not the case. This article begins the process of broadening the legal understanding of brands by explaining what brands are and how they function, how trademark and antitrust law have misunderstood brands, and the implications of continuing to ignore the role brands play in business competition. We conclude that branding is so central to the business world, the modern economy, and the law that legal discourse must understand the brand or it will continue to reach incoherent results as it tries to navigate the realities of business competition in the 21st century.
Keywords: Brands, Goodwill, Trademarks, Dilution, Confusion, Aftermarkets, Entry, Product Differentiation, Price Discrimination, Entry Barriers, Antitrust, Mergers, Market Definition, Market Power, Edward Chamberlin, Frank Schechter, Monopolistic Competition, Vertical Restraints, Resale Price Maintenance
JEL Classification: D43, D41, D42, D83, K21, L11, L12, L40, L41, L42, M31, B21
Suggested Citation: Suggested Citation