Asos must pay 20m to rival retailers
Online fashion retailer reaches a settlement with Switzerlands Assos and Ansons, a German menswear retailer
Online fashion retailer Asos has been forced to pay out more than 20m to two European retailers due to an alleged infringement of the trademarks on their names.
Asos has reached a global settlement with Assos of Switzerland, which makes clothing for cyclists, and Ansons Herrenhaus, a German menswear retailer. The UK retailer will pay a total of 20.2m in cash to the two companies.
The deal will allow Asos to start selling athletic leisurewear, a growing segment of the youth fashion market. However, Asos will be restricted from selling cyclewear and opening shops in Germany.
Assos and Ansons were already both in operation when Asos changed its name from As Seen on Screen in 2002. Ansons launched its legal case in 2010 and Assos launched its in 2011 as Asos began to expand rapidly outside the UK. Assos will open it first flagship store outside Switzerland in Londons West End later this year.
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Asos had successfully defended its case in the UK right up to the supreme court. However, there are outstanding cases in the US, France and Germany.
Despite the payment, which is equal to almost six months profit for Asos, shares in the company rose 132p, or 3%, to 46.94.
Nick Beighton, chief executive of Asos, said: We are pleased to have put this litigation behind us. Entering into this settlement at this juncture is the right commercial decision for our business.
Asos has been involved in disputes with rival retailers before over trademark infringements, but they have tended to involve accusations that the online retailer stole the design of an individual piece of clothing. The company said there were no other intellectual property cases that could have a material impact on its finances.
Analysts at Berenberg said: Intellectual property law is very complex and varies significantly by country. Asos couldnt therefore guarantee that it would win all cases in all markets and as such decided to settle the disputes.
The City welcomed the settlement because of the potential disruption the legal cases could have caused and the new opportunities that could open up for Asos.
Simon Bowler, analyst at Exane, added: Whilst Asos has successfully defended itself until now, there was no certainty they would be successful in these markets. Losing a case in either of these markets would force Asos to rebrand, which was a significant risk that Asos has eliminated.
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Whilst the 20.2m cash payment is optically large, this looks to be the right commercial decision for the business in the long term. The settlement brings certainty over the end of the dispute and eliminates any further litigation risk in Asoss biggest markets. The settlement also opens up the opportunity of moving the Asos own-brand into the attractive athleisure market.
Analysts at RBC Capital Markets said: In addition to removing a potentially large distraction, Asos will now be permitted to start selling sportswear on a global basis which they were previously unable to whilst the litigation was under way.
Sportswear, particularly yoga wear, gym wear, golf wear, could present a sizeable market share opportunity for Asos given its younger customer demographic and the growth we have been seeing in the premium sportswear market.