Grocers Battle Over Store-Brand Trademarks

By Heather Haddon Features Dow Jones Newswires

Kroger Co. is suing a new rival in the U.S. supermarket sector, accusing German discounter Lidl of using a private label too similar to its own.

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Kroger said Lidl's "Preferred Selection" brand name infringes on the "Private Selection" label the Cincinnati-based grocer uses on thousands of products that brought in nearly $2 billion in sales last year.

"This mark will confuse customers," Kroger wrote in a complaint filed last Friday in U.S. District Court in Virginia. The company said the strategy undermined Lidl's promise to offer U.S. shoppers a novel shopping experience. "With its Preferred Selection logo, the opposite is true," Kroger said.

Lidl said the injunction would affect millions of dollars worth of products the chain has advertised.

Lidl is opening 20 stores in the U.S. this summer, with 10 now operating and four more slated to begin running next week. The company plans to open up to 100 stores by next year. Meanwhile, German deep-discount chain Aldi has pledged to invest $5 billion to open nearly 900 stores in five years, putting it on track to be the third-largest food retailer in the U.S. by store count.

The German rivals are arriving at a time of turmoil for U.S. grocers, battered by a sluggish sales after a record stretch of falling food prices sparked a price war. Amazon.com Inc. and other online food-sellers are also eating into their market and working to remake it completely. Last month, Amazon said it plans to buy Whole Foods Market Inc. for $13.7 billion.

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Kroger, the largest U.S. supermarket chain, has struggled this year with declining sales and, in June, cut its earnings forecast for 2017. Its shares are down 32% this year. The company's request for a preliminary injunction against Lidl accuses the German chain of trademark infringement, unfair competition and violating state consumer protection law.

A Kroger spokeswoman said the company is "extremely proud" of its store brands. Lidl spokesman William Harwood wouldn't comment on the case, but said Lidl's U.S. offerings have been "positively accepted by our customers."

After a hearing on Wednesday, additional court papers are set to be filed later this month.

Write to Heather Haddon at heather.haddon@wsj.com

(END) Dow Jones Newswires

July 06, 2017 14:22 ET (18:22 GMT)