Cross-border transactions are transactions in international trade involving two or more entities outside a country’s geographical limits or transactions in domestic work involving at least one party outside the transaction’s country. Transactions between individuals, businesses, or financial institutions wishing to transfer funds across borders can occur. Consumers and retailers are typically involved in this process, as are two brands as corporations between two nations, which might entail mergers and amalgamations of two companies, a simple international transaction, or a foreign company’s independent contractor.

Modern fashion houses transcend national boundaries. For example, an outfit with an Italian fashion label could have been designed in Milan by a team of British, French, and American designers and manufactured by contractors from China, Korea, and Mexico. This undoubtedly includes cross-border payments if the payee and transaction recipient are located in different countries. International merchants must be able to accept payments in all of the countries that they are targeting.

Working of Cross Border Payments 

The e-commerce industry of today has a global reach. Payments, remittances, and purchases frequently necessitate exchanging money across borders. When a business accepts foreign payments, several scenarios must be considered because each country has its restrictions. When a customer makes a transaction, a system transfers funds from the buyer’s account to the merchant’s account. International transactions entail currency conversion, international transaction fees, and dealing with an exchange rate. A banking system directs the flow of money through these channels. Each bank has a counterpart in another city in the world’s major cities. To prepare for remittance, cash will leave the buyer’s bank and go to that bank’s partner in the merchant’s nation. The remitted funds will then be received by the merchant’s bank and deposited into the merchant’s account. These banks frequently collaborate with others to move funds, requiring more than four banking locations to interact while negotiating currencies, differing taxes, and transaction fees. Each cross-border payment is subject to a fee because there are several fees associated with cross-border transactions. Most of them are absorbed by bank fees. This fee is a percentage of the purchase price made by a consumer using a foreign credit card; this is because this rate varies amongst credit cards, so it’s difficult to predict what percentage will be charged in a purchase.

Furthermore, taxes apply to everything, which includes more than just sales tax. Shipments are subject to Value Added Tax (VAT) and customs duty rates. All of these differ from country to country because each has its currency value, so exchange rates are computed.

Customers want to pay conveniently; thus, numerous options for engaging in cross-border e-commerce are available, including the following.

Bank transfers – International transfers have long been used to make cross-border payments. Most larger banks will keep a limited selection of currencies on hand, but only a few can be accommodated at any time. When a customer in the UK wants to send money to a country where they don’t have the currency on hand, they must rely on their foreign banking partners to facilitate the transaction.

Credit Card payments – Credit cards play a prominent role in cross-border payments and are a go-to option for many consumers. Cross-border payments require more work from the involved credit card networks and acquiring banks as they need to convert between two different currencies. This additional workload results in increased fees that are passed down the payment chain

eWallet – An eWallet, often known as a digital wallet, is a payment method that allows users to make online or in-store purchases. eWallets, which are commonly available through apps for smart devices, allow users to securely store their preferred payment cards to pay for goods and services. Some eWallets enable users to transact in different currencies and place orders across borders. Wallet-to-wallet transactions do not technically classify as cross-border payments, although they aid in transaction facilitation. The process is not considered a cross-border payment until the monies are removed from the eWallet and transferred to the merchant’s bank account.

Business to Business Cross Border Payments

The fashion industry is a significant player in worldwide internet retail. According to projections, the fashion industry would generate €772 billion in online retail sales in 2023. Internationally, the market has a strong sales potential. However, not all fashion brands have embraced cross-border e-commerce. Despite its enormous potential, local fashion enterprises are wary of cross-border e-commerce, especially since expanding can improve sales and attract new customers to the brand. Local businesses can not only win customers from all over the world with the proper strategy, but they can also provide them with the proper shipping. Travel disruptions and restrictions imposed by pandemics have prompted many businesses to look for ways to recreate business-critical events in a digital context. The fashion industry, like many others, is unlikely to abandon in-person transactions entirely once the pandemic has passed, but this does not mean that digital payments will fall into obscurity. Therefore, fashion and high-end luxury brands must use it in physical and digital forms. The pandemic has made providing smooth cross-border experiences even more critical for cross-border B2B enterprises, emphasising the need for digital technologies. Failure to employ such tools at any level, for example, in the fashion business, will almost certainly result in significant financial ramifications for brands or shops. This is especially true for cross-border luxury fashion, which has traditionally been a face-to-face company reliant on foreign travel.

However, each of these will have its own set of obstacles, and they are as follows :

Customers suffer hidden costs – While taxes may only affect consumers in specific corridors, practically all cross-border e-commerce purchases run the possibility of various forms of hidden expenses. Depending on how the customer pays – whether by choice or as a result of the merchant’s alternatives – they may confront variable FX margins, ultimately raising their final purchase price. Intermediaries between the issuing and acquiring banks also take a cut.

Transaction costs between home currency and foreign currency – Customers are more likely to abandon their cart if they cannot make a transaction in their local currency. Still, by handling the currency conversion themselves, merchants can potentially capture more of the fees rather than passing them on to a card issuer.

Consumer expectations and cultural concerns – make garment fulfilment difficult. Some regions, for example, are more affluent and style- and image-conscious. Buyers in these markets will likely anticipate white-glove treatment for luxury items, including quality packaging and communication. Consumers value clothing quite differently in emerging economies where there is less prosperity. To be successful, you must first thoroughly understand your market.

International Regulations 

Legislation and rules governing foreign transactions vary from country to country due to differences in geopolitics. However, several factors are universal and are considered by practically every country. Consider the following crucial elements in the Fashion Industry:

Entering the market – entails determining which country’s law will apply throughout the transaction and complying with the local legations where the goods or service is ultimately destined.

Safety Regulations – ensuring that it meets all of the safety standards established by the appropriate authority. These include screening raw materials utilised in the finished product before use.

No infringement of intellectual property – knowing that no violation will occur after such cross-border trade and transaction is completed concerning a product or service that could jeopardise anything already registered as a design, patent, trademark, or copyright.

Data Privacy – International data flows have revolutionised modern goods and services trade. Data flows provide new avenues for commerce and investment while allowing businesses to run more efficiently.

Conflicts between legislation can occur due to varying goals in consumer protection, law enforcement access, and national security exemptions. To guarantee that trade and transactions are not hampered needlessly, countries must design interoperable systems that allow commodities to move quickly while offering adequate protection.

In India, two Acts are principally concerned with when a person engages in cross-border transactions: the Foreign Exchange Management Act of 1999 and the Reserve Bank of India (RBI) Guidelines; and the Income Tax Act of 1961. With its consistent growth performance and abundance of highly skilled labour, India offers excellent domestic and foreign investment prospects. As more investments arrive in India on regulatory and taxation fronts, clarity improves. Foreign firms that conduct business in India are subject to Indian Income Tax.

Like many others, the fashion business heavily relies on cross-border transactions. Contractual agreements provide for dispute resolution through international arbitration in these situations. While not many fashion labels appear before arbitral tribunals, such unusual appearances can be found by attentively scrutinising the accessible instances.

Creating a Successful Network Chain

Retailers who wish to sell their fashion products in international trade should think about how they can regulate their supply chain so that things are available swiftly and everywhere. Depending on the number of countries served, having more than one central warehouse may make sense. Cross-border e-commerce traders can rely on fulfilment suppliers, who often keep warehouses in multiple places and provide the same choice as their hubs. Depending on the setup, the expenses may be lower than renting many warehouses. Furthermore, fulfilment providers help merchants optimise cross-border shipping by providing additional services such as order acceptance and picking. Other relevant hints are as follows:

Conduct extensive market research.

This will entail thoroughly examining the target audience, their purchasing habits, and an awareness of market rules.

Choose a location for your inventory.

Whether you use a “ship-to” or “ship-from” approach, be sure you can move the product rapidly.

Concentrate on customer satisfaction.

Update your eCommerce site to include explicit language throughout the checkout process, so customers know what to expect regarding shipping and product services.

Use collaboration to address tax, compliance, and import constraints.

Consider lowering your risk by enlisting the assistance of partners with proven knowledge in tax and compliance in global marketplaces.

Expanding into new geographies is a crucial development driver for many established and rising garment firms. However, getting products into those markets is far easier said than done. As you develop and optimise your fulfilment strategy, use careful data analysis, market research, and trusted partners to help you deliver your products and exceptional experiences that your customers will appreciate and remember. Partnering with multiple carriers provides redundancy and flexibility, allowing you to tailor fulfilment to regional preferences.

Conclusion

International payment processes can be sophisticated; staying up to date on the latest technologies will provide your clients with the most significant payment experience possible and encourage repeat business. This is true for most fashion industry players, whether big brand fashion retail businesses or entrepreneurs selling their items through a homegrown fashion brand. Ensuring a good checkout experience with no unpleasant surprises is critical to customer attraction and retention. As more and more customers make online purchases, it can be difficult to distinguish between a market leader and a company playing catch-up, given the vast potential of efficiently utilising cross-border transactions.

Resources 

• https://taxguru.in/finance/international-transaction-cross-border-transactions.html
• https://business.ebanx.com/en/resources/payments-explained/cross-border-payments
• https://www.emerchantpay.com/insights/cross-border-payments/
• https://www.finance-monthly.com/2022/01/what-you-need-to-know-about-cross-border-payments/
• https://esw.com/global-voices/global-voices-2021-cross-border-shopper-insights/

Labourers put clothes together on sewing machine production lines. The fashion and textiles sector employs around one out of every eight people worldwide, with jobs ranging from farming and processing cotton and other fibres to the cut-make-trim stage. Workers’ experiences showed significant differences depending on whether they worked as core or contract workers at major factories, small units, or subcontract homeworkers. There are also garment producers who work for themselves and produce for local consumers or markets.

Who are these labourers?

• Homeworkers:

Females typically take paid work for brands or designers from their homes, usually on a piece-rate basis.  Males perform some of the higher-skilled duties such as cutting and those who have more opportunities to learn new skills, have pushed women out of the clothing industry when products require higher technical abilities.

• Contract Labourers:

They are hired to work at a firm through a contractor for a set amount of time for a specific job; they are not company employees.

• Migrant Workers:

Immigrants and migrants make up a large portion of the workforce in clothing factories. Workers migrated from rural areas to metropolitan areas, but now they cross borders to pursue a job.

• Forced Labourers:

In a recent Amnesty International investigation, based on first-hand testimony, we understand that detailed mass incarnation and systematic torture of Uighur Muslims in China prevails. Some instances describe Uighurs being “forced to live and work in a factory.”

In general, there are three methods through which workers are recruited:

(1) direct hiring by the employer,

(2) labour contractors or staffing agencies,

(3) informal hiring through personal relationships.

(4) Providers of vocational skills training.

The fashion industry has expanded dramatically in recent decades as consumer demand for lower-cost clothes and greater variety has developed. Firms in developed countries outsource garment production to developing countries to keep prices down and output levels high, while developing countries transfer production within and between nations to locate the lowest labour.

Garment factories in India are concentrated in a few destination cities such as Delhi/NCR, Bengaluru, Tirupur, Chennai, and Mumbai; most of the workers employed there are migrants from other locations, primarily rural areas, and they come from low-income backgrounds and have little education. Many of them are from India’s disenfranchised and socially excluded Scheduled Castes, Scheduled Tribes, and Other Backward Classes. They have been stigmatised and discriminated against for a long time. Inevitably, they are overrepresented in low-wage positions with terrible working conditions, few career possibilities, and, in some cases, gender-based violence. Let’s have a closer look at what kind of other problems do these workers face.

Wages are low, and there are no benefits

Most garment and textile sector homeworkers are paid by the piece (based on how many they make), earn very little, and are not paid for working overtime. Sick leave and paid vacations are not available to the majority of employees. Workers in the fashion industry get wages that keep them in poverty worldwide. They make minimum wage or little more, which is insufficient to meet their fundamental necessities for themselves and their family (food, housing, transportation, utilities, education, and so on).

Issues with Infrastructure

Electricity shortages and load-shedding have severely impacted the lives of textile workers. Due to the high cost and unreliability of energy, garment workers were forced to use manual sewing machines, which resulted in lower-quality items. For home-based workers too tiny or insufficient housing is a severe issue. A small residence reduces productivity since a worker cannot accept large work orders because she does not have enough space to store raw materials. Competing demands of other home tasks also hamper work. When roofs leak or dwellings flood, equipment, raw materials, and completed goods are destroyed.

Problem with Transport

Labourers concerns about transportation have also surfaced. Increased public transportation expenses and travel distances influence the profitability of their businesses since they must travel to get raw materials and deliver manufactured items.

Safety and Health Hazards

Unfortunately, workers are unlikely to have adequate protective gear and may be uninformed of safety precautions. Repetitive strain, dust from cloth pieces, and, in the case of particular colours, exposure to hazardous chemicals are all health dangers in the garment industry. Due to shared living and working space, family members may equally be exposed. Backaches and eye strain are common among garment workers.

Working Overtime

The clothing industry employs people who work exceptionally long hours. Excessive overtime is a problem that plagues the industry. Workers often have little choice but to work overtime regularly to augment poor regular income to make ends meet. Factory managers also require overtime to deal with surges in production demand. Extended hours are harmful to workers’ health and well-being and increase accidents and injuries.

Short-term contracts

They are prevalent in this sector. These contracts are a source of dangerous, insecure work that limits workers’ ability to exercise their rights, in order to associate and bargain collectively. Retaliation against leaders of autonomous, democratic trade unions is expected in this sector, as are violations of the right to freedom of association and collective bargaining.

Gender Discrimination & Sexual Harassment

Women who work as textile workers are vulnerable and suffer various issues, including those listed above. In truth, for some women working in the garment business, bonded labour is a reality. Young females who work so early and drop out of school to support their families are paid less than the legal minimum wage and are subjected to a variety of sexual and physical abuse.

Creche Rules remain unenforced and unimplemented

Creche is a nursery for children whose mothers work at a specific location. In India, guidelines have been introduced as an amendment to the Maternity Benefit Act 2017. This amendment ignores the physical and monetary costs of sending the children from one place to another workplace, reducing the adoption of the measures. Working hours and the capacity of onsite creches are other concerns that the amendment appears to have missed when women commute great distances to their professions. Employers have yet to begin considering implementation.

All of these issues show us how unfair the lives of labourers in the fashion industry are; they do not deserve the conditions imposed on them by their work. Everyone works for a living, and while there are struggles, if your source of income becomes a place where your life is no longer suitable, it can be unfortunate to live with. This is why labourers choose to unionise: they want to make a difference in the conditions that affect their employment and livelihood. They want to see improvements in the current hazardous conditions and demand betterment.

The COVID-19 pandemic was not helpful to them either, and it negatively impacted these workers. Many labourers returned to their villages to help in wheat harvesting. It was an excellent alternative for them, but not everyone was fortunate enough to find a job; many remained unemployed for months and are still unemployed somewhere. The COVID-19 pandemic is being utilised as an excuse to fire unionised workers, undermining rights protections and exposing garment workers to more severe exploitation. As part of their due diligence, brands must engage directly and effectively with unions and worker groups when labour conflicts and reports of union-busting arise in their supply chains and work with them to support suitable remedies.

What appears on the onset is that there is no ‘loyalty’ left either. Indian garment factories have been doing a lot for the upliftment of workers for a long time. Global companies and merchants have backed the initiative as well. All of this has resulted in a ‘loyalty’ factor on the part of workers. Still given the current dire situation; it appears that this loyalty factor will no longer be influential, as workers will prioritise any work that pays them a little more money and keeps them in their comfort zones.

It is pertinent to note here that fashion and retail brands make it more difficult for factory owners to adhere to labour standards and norms by continually demanding faster turnaround times, lower prices from their suppliers , and fuelling rivalry among supplier factories. As the need for more diversity and lower-cost clothes has grown. Firms in developed countries outsource garment production to developing countries to keep prices down and output levels high, while developing countries transfer production within and between nations to locate the lowest labour. Finding the most insufficient labour means nothing but making them work overtime without any regard to their needs.

The fatal and well-known collapse of the Rana Plaza building, which housed five garment companies and killed at least 1,134 people and injured more than 2,500 others, occurred on April 24, 2013, in Dhaka, Bangladesh. The ultimate calamity was caused by a variety of engineering and managerial shortcomings. Parts of the structure were built without the necessary city permissions. The building’s fifth through eighth levels was added without supporting walls. The structure could not support the heavy machinery from the clothing factory. Because it was built on swamp ground, the foundation was shaky. The building was on the verge of collapsing as the cracks widened. And, according to sources, it could have been avoided totally.

There were 44 central laws in India that are now within the ambit of the New Labour Codes 2021, which are now broadly divided into four parts The Code on Wages, 2019, The Industrial Relations Code, 2020. The Occupational Safety, Health and Working Conditions Code, 2020 and the Code on Social Security, 2020.  Even though each of them has an intent to provide for and protect the welfare of workers, we still see disputes arise between brands and their employees, where workers form unions, stage protests, the manufacturing process is halted. Product delivery deadlines are missed, all of which result in losses. Not to mention the additional legal expenditures that the owner must bear to battle these unions because they are lawful. Wouldn’t it be so much easier if so much hassle could have been avoided if one could provide the workers with the things they deserve? They also have a family and personal health to look at, so in no way them unionising is a bad thing because they are speaking for their fundamental rights, which they are entitled to simply by being a citizen of India or elsewhere but most importantly because they are a human too. But is it something which can be avoided to save money and time? Yes.

Garment workers’ unionisation is low due to the workforce’s highly unorganised and segmented nature. Wherever union activities do occur, they are immediately suppressed by management.

We need to understand that unionising is not easy. There are many occasions where battles are waged alone, making it exceedingly difficult to take forward the case, your requests, and they are never settled quickly. I took the liberty of conducting an in-depth investigation into the situation in Indian law when such issues arise in the fashion sector, and the following are some of my findings.

In one instance, the government took unions’ side and helped them before unionising. Look at Management Ambattur Fashion India Pvt Ltd v. Government of Tamil Nadu 2020; due to the COVID 19 Pandemic, there was a significant drop in customer orders, and workers were unable to report due to lockdown. Therefore, very rational layoff permission was granted to avoid additional costs under section 25-M of the Industrial Disputes Act 1947. However, the Tamil Nadu government refused such layoffs because the COVID pandemic is not an acceptable reason for granting permission for layoffs. If it were, the department would be inundated with similar unnecessary requests from all corners of the state, making it unmanageable and detrimental to workers’ interests.

In another case, Management of M/s. GG Fashion v. Jayanti Negi 2006, where the labour court held that the aggrieved party’s employment was illegally terminated, the fashion brand management filed a writ petition in Delhi High Court challenging the same and claiming that the worker was gainfully employed and did not need any interim wages at the time of pendency of such suits proceedings, however, no evidence was found in support of that and it was shown that the worker is not having any means to support herself, the court directed the management of GG fashion to grant interim wages during the pendency of the challenged under section 17B of the Industrial Disputes Act, 1947 which advocates the same.

Similar Facts are observed in the Fashion Exim India Pvt Ltd v. Chintamani Ambolker and another, 2005. The Bombay high court held that what the labour court concluded in its finding is correct and that no interference is required from the higher court’s side.

In Fashion Production Mazdoor Sabha, Bombay v. Smt. Smita Prabhakar Dalvi and others, 1985 held that individual employees or employees could not initiate proceedings for cancellation of recognition of a union while delivering the judgement. The court also observed the importance of the trade union act and how it gives recognition and protection from criminal liability to these unions. It also highlighted that no union should be recognised if the interest is not made bona fide for its employees but is formed to further the employers’ interest.

When we see all these cases mentioned above, we notice that every state has its own set of guidelines for labour laws and trade unions which is a step towards recognising the different cultures these workers come from, as each state has its own set of working conditions, as well as supporting with the jurisdictional issue.

The three key parties in the garment sector supply chain—governments, suppliers or factories, and brands—must take individual and collective actions to give migrant workers a life of dignity, security, and recognition at their workplaces. Labour reforms must replace unilateral decision-making with a threefold (government, labour, and employers) collaborative system for dealing with employer and labour concerns. To facilitate the adoption of safe and responsible migration, the government must actively collaborate with factories.

Big fashion giants should publicly join together and pledge to defend human rights across their entire supply chain. Brands should consider the human costs of pressuring manufacturers to produce more for less money and promote improved working conditions. They must also invest collectively in factory systems to improve working conditions and incentivise better practices. All of this does not apply solely to employers of garment workers; every employer must ensure that no infraction of any kind occurs while they are in charge.

Here are some tips for employers in the fashion sector based on what we’ve seen so far.

• Prohibit discrimination against unionised workers to promote freedom of association. Brands must review all layoffs proposals to ensure that workers are not discriminated against.
• Identify the challenges that your employees are encountering, conduct a survey, speak with them, and collaborate with them or with NGOs designed explicitly for this purpose if necessary to ensure that you know where your employees stand.
• Any law or contract clauses about labour rights should be translated and made available to factory workers, who are ideally qualified to comprehend and ensure they are followed. Inform your workers about policy changes, if any.
• Have an open forum and make sure that you take time out of their schedule to make them aware of their rights and tell them that it is entirely acceptable for them to approach any grievance.
• One can also donate independent third-party labour rights training to guarantee that workers in supply chains are aware of their rights and exercise them.
• Even if a dispute arises after all of this, it is crucial to take an active and transparent part in discussions between suppliers and workers in industrial disputes. Seek the reinstatement of wrongly fired union members and leaders, and do it ahead of time, even if there is no pressure from the worldwide labour movement or consumers.

Whether you are a designer with your label, a homegrown or multinational brand, or a factory owner under a brand, whether you have a few employees or a large number of employees, you must protect your workers from unfair practices and ensure that they have access to all primary working conditions; otherwise, no clothes are worth anything if they are produced after someone has been exploited. The choice is yours.

]]> https://fashionlawjournal.com/are-fashion-brands-treating-their-workforce-well/feed/ 0 https://fashionlawjournal.com/6-controversial-legal-disputes-in-the-fashion-industry/ https://fashionlawjournal.com/6-controversial-legal-disputes-in-the-fashion-industry/#respond Fri, 28 Jan 2022 08:47:39 +0000 https://fashionlawjournal.com/?p=2984 How conflicts arise is quite prevalent, especially in the fashion industry, where everyone strives to be the best, and as a result, lines are frequently crossed, mistakes are made along the road, and other such things. We see several potential or susceptible areas in the fashion business where enough safety is not offered, or awareness is lacking. As a result, they have escalated into some of the most contentious debates ever. This article highlights the top 6 legal disputes in which fashion and law are inextricably linked.

Paparazzi Copyright Suits

For uploading paparazzi images of oneself on social media without the photographers’ consent, numerous celebrities have been sued or threatened with being sued for copyright infringement. Like many other pop stars such as Ariana Grande, Justin Bieber, and Nicki Minaj, Gigi Hadid has been sued by several photographers and photo agencies for uploading images of herself on Instagram without properly licencing the photos from the copyright holder on multiple occasions. Even fashion designers like Virgil Abloh, the founder of Off White, and the well-known Marc Jacobs have been sued for copyright infringement. The right to regulate the commercial use of one’s identity, or prevent others from utilising their picture, name, or other aspects of their identity for commercial purposes without their agreement, is known as the right of publicity. Although the right to privacy is not codified in India, it has been recognised and enforced in many cases by Indian courts. In the lawsuits pertaining to the U.S. celebrities named above, the defendants’ attorneys have made fair usage (or fair dealing) and co-authorship arguments. Still, in India, The Copyright Act of India explicitly defines the creator of a photograph as the person who “takes” the photograph, so that argument cannot be used in the Indian Scenario as per this analogy.

Fashion Discrimination Cases

Fashion is typically associated with specific ideals of beauty and visual aesthetics, and it is referred to as “glitzy” for a reason. But all that glitter is not always gold; if not handled properly, it can slip into your eyes and cause blindness. Employees of well-known brands such as Barney’s, Sephora, Zara, and Forever 21 have been sued for racial discrimination in multiple cases. Sephora has been accused of racial discrimination after reportedly barring Asian and Chinese users. Forever 21 has been accused of insulting and biassing one of its employees because of her transgender identification, including calling her a “hot mess,” “useless,” and “disgusting,” and telling her she looked “offensive.” The fact that Barneys has been sued twice in less than a month over the identical racial discrimination claim says a lot. Even the big brands are not behind in this race, from Alexander McQueen’s getting sued twice wherein one instance an employee was hospitalised for his anxiety attacks and had horrid plans of suicide because he was in such a hostile work environment where he could not get enough of racist taunts to Louis Vuitton being accused of racial discrimination and harassment the list is unfortunately quite lengthy. What’s worse than the Dolce & Gabbana’s cosmetics sales associate being told that ‘pregnancy is not part of the uniform’ is that Versace reportedly has a ‘black code’ to alert staff and security when a black shopper is in the store. An employee was allegedly fired from Tiffany & Co. after having her breasts and ovaries removed to avoid getting cancer. Such instances bring out the fashion industry’s dark side, and all the brands and designers must take measures to counter such things.

When Garment Design Elements became copyrightable

The Supreme Court opened the door to expanded copyright protection for the fashion sector in Star Athletica, L.L.C. v. Varsity Brands, Inc. Copyright protection allows producers of a wide range of works, from paintings and sculptures to poems and books, certain unique rights. The copyright protection afforded to certain fashion designs, on the other hand, is significantly less guaranteed. If a design incorporated into clothes qualifies for copyright protection on its own, it may be protected under the Copyright Act of 1976. A leading American cheerleader uniform manufacturer, Varsity Brands, attempted to sue Star Athletica L.L.C., a smaller rival, for infringing on five of its cheerleader uniform designs. Star Athletica utilised certain chevron and line designs from Varsity’s uniforms, according to a lawsuit filed by Varsity in 2010. It claimed that the visual features of Varsity’s cheerleading uniforms were different from the uniforms’ function. As a result, the corporation claimed, they could be protected just like any other work of art. Star Athletica disagreed, claiming that the design and usefulness of the clothes were closely linked. These cheerleading costumes were stitched inside out to minimise chafing, as with most uniforms. Under new legal criteria, the Court determined that design characteristics can be separated from the apparel’s useful features and pronounced a judgment favouring Varsity Brands Inc., thus concluding that fashion and apparel have some level of copyright protection.

The Defamation Battle between Diet Prada and Dolce & Gabanna

In light of current anti-Asian comments in the United States, fashion watchdog Diet Prada is publicly challenging a defamation lawsuit filed by Italian design house Dolce & Gabbana. Following an ad campaign featuring an Asian woman trying to eat Italian food with chopsticks, Diet Prada labelled the brand racist and sexist in 2018. After receiving outrage, Dolce & Gabbana filed a lawsuit against the social media account, seeking 4 million euros ($4.8 million) in damages for lost income and brand harm. Dolce & Gabbana postponed a planned fashion show in Shanghai after the ad campaign garnered controversy, and a number of models and celebrities withdrew and issued a public video apology. “I believe Dolce & Gabbana’s actions of publicly apologising on the one hand, while using on the other, merits closer examination,” Ms Sedhom stated. Diet Prada cofounders Tony Liu and Lindsay Schuyler were sued by Dolce & Gabbana a few months later, in early 2019, for damages caused by the account’s public criticism of Dolce & Gabbana. Mr Liu and Ms Schuyler published a statement on March 1, 2021, asserting their right to free expression in response to the Italian brand’s claims in a Milan court. “Diet Prada will continue to be a platform to elevate these crucial issues.” They said. Because the lawsuit was filed in an Italian civil court rather than a U.S. court, Diet Prada’s legal team believes Dolce & Gabbana is looking for a favourable judgement and engaged in a degree of forum shopping.

Hugo Boss – Brand or the name of a comedian?

In response to the German fashion house’s trademark enforcement efforts, U.K. comedian Joe Lycett has officially changed his name to Hugo Boss. Now here’s a little backstory regarding the same. Hugo Boss reportedly sent a cease and desist letter to Welsh company Boss Brewing in August 2019, initiating a four-month trademark dispute. Boss Brewing eventually agreed to change the names of its products – ‘Boss Black’ (to ‘Boss Brewing Black’) and ‘Boss Boss’ (to ‘Boss Bossy’) – and stop selling clothes. It was a little surprising why such a huge brand is coming after a small brand just to protect its identity and make it an extremely stressful and long-drawn battle for the brewing company’s owner. Joe Lycett received a letter from the U.K. Deed Poll Office on February 1, 2020, certifying that he had officially changed his name to Hugo Boss. In response to the explanation for the merchandise being moved, he stated that Hugo Boss despises those who use their name. So, unfortunately for them, he has changed his name to Hugo Boss and will be launching a brand new product called Hugo Boss soon. Hugo Boss has yet to reply to the incident. However, it comes after the fashion house’s recent legal fights, which have been controversial.

The Lucky 13 Saga

The Evergreen and Mega Popstar Taylor Swift settled a lawsuit filed by Blue Sphere, the clothing company that owns the “Lucky 13” trademark, in November 2015. The suit was filed after she started selling “Lucky 13” goods and fan merchandise and held a “Lucky 13” contest, among other things. While Swift claimed that 13 was only a lucky number for her and that the plaintiffs had harassed her, Her agents at William Morris Endeavor turned over all of Swift’s paperwork. At the same time, attorneys for Blue Sphere continued to look for materials like all images and films of Swift in which her buttocks or breasts were exposed somehow. Part of the work was to figure out how items were called, what other products might have been considered, and whether trademark records were searched in combination with all of this. The outcome of the lawsuit was not made public. What’s more interesting is that she has begun proactively trademarking additional words and lyrics she frequently uses to avoid future complications after this incident. She has secured a discreet arrangement outside of Court.

List of References:

https://www.thefashionlaw.com/an-ugly-industry-a-timeline-of-fashion-discrimination-cases/

https://www.nolo.com/legal-updates/supreme-court-rules-that-garment-design-elements-are-copyrightable.html

https://www.luxurydaily.com/dolce-gabbana-diet-prada-lawsuit-addresses-racial-bias-in-fashion/

https://www.worldtrademarkreview.com/brand-management/comedian-legally-changes-name-hugo-boss-what-brands-can-learn#

https://www.hollywoodreporter.com/business/business-news/taylor-swift-settles-lucky-13-838473/

A question that is often posed in front of various fashion designers, their labels and even big fashion brands is how to resolve any dispute. Like any other layman, they seek legal counsel but what is missing from their understanding is the knowledge of ADR and its multiple forms in which it offers dispute resolution. Alternative Dispute Resolution is a process that is quite different from the traditional approach used to resolve disputes, i.e., litigation. Different types of ADR Mechanisms are:

Negotiation: An approach wherein parties resolve the disputes by themselves and their legal counsel without any third-party intervention.

Conciliation: An approach wherein disputes are aimed to resolve with the help of a conciliator who meets with parties separately. Based on that, the conciliator proposes a settlement that the parties may or may not agree to.

Mediation: An approach wherein the mediator facilitates the process of dispute resolution and help parties reach an agreement on their own which is beneficial for both.

Arbitration: An approach wherein an arbitrator or a tribunal of arbitrator plays a judge’s role while resolving a dispute in front of them. Their interference in the matter is direct except that the proceedings are not in a court. They hold power to call witnesses or examine the evidence provided by the legal counsel. The award which they render has a binding nature, and parties cannot ignore it.

All mechanisms listed above are fast-paced and cost-efficient. They do not take years like judicial trials and court proceedings before delivering a judgement. They are quite beneficial because they not only help parties to prepare their settlements but also help in maintaining cordial relations between them. Another pertinent point that must be kept in mind is that every ADR mechanism is consensual, which makes the entire purpose of dispute resolution more effective in its essence.

Disputes in the Fashion Industry

Multiple types of disputes can be found in the fashion industry, largely depending on what kind of segment the dispute has arisen. It can range from the very beginning, when the creator is at its creative stage, to the very end when the product has been finalised and is out in the market. As per World Intellectual Property Organisation (WIPO) Mediation and Arbitration Centre^[1], here is a list of potential areas of dispute

• advertising
• agency agreements
• brand management
• copyright and related rights
• distribution agreements
• event management
• franchising agreements
• image rights
• industrial design rights
• internet retail and e-commerce
• IP infringements
• licensing agreements
• manufacturing agreements
• marketing agreements
• patents
• product development
• software
• sponsorship agreements
• trademark

It also lists down the potential parties which are involved in the disputes

• agents
• designers
• distributors
• event organisers
• fashion houses
• inventors
• non-profit foundations
• manufacturers
• model agencies
• service providers
• sponsors
• retailers
• television and media companies

However, the protection of ideas and the original content which a designer draws from a source of inspiration is always in dispute. These usually come within the ambit of Intellectual Property Rights. These are given to persons over the creations of their minds. In the fashion industry, industrial design rights are for the protection of a particular design; it must be registered, or else one can be subjected to the case of counterfeiting. Such disputes can involve complex legal issues.

Other definite types of disputes can arise in the compliance part as a designer creates every fashion creation for commercial purposes, which inevitably brings out the business side of the fashion industry. Like all other businesses, even fashion brands or a single designer will be subjected to legal issues relating to contract, delivery, manufacturing, brand compliances, including licensing, labour laws, outsourcing, environmental protection, etc., to name a few.

Some disputes also arise in the marketing and promotion area, especially relating to the brand endorsement^[2] and advertisements done by celebrities or by lifestyle/fashion influencers online as per the latest trends. Disagreements between them and the brand may lead to any form of dispute.

Cybersquatting refers to online ransom where someone misuses a domain name with the intent to make a profit from other’s trademark goodwill.^[3] Often the domain names are similar, which can easily confuse the not so aware consumers. In a 2018 report by the WIPO arbitration and mediation centre, famous brands such as Fendi, YSL, & Givenchy have sought ADR mechanisms to resolve this issue on a fast track basis.

Need to resolve such disputes

As we can see, even the cybersquatting issue, which is usually within the ambit of criminal law and is an offence, is resolved by ADR mechanisms as per parties wish. This is because the fashion industry is very fast-paced. It is so versatile and dynamic that it is constantly evolving and changing with time. It is difficult for a brand or a designer to move ahead if any kind of issue remains unresolved. This industry demands a quick response as most of the brands fall under the fast fashion category, where the aim is to manufacture quality trendy products in a short period. If taking the road towards litigation, there will be plenty of time bumps and an increase in legal expenses as the disputes may last up to many months and years before being resolved. Not only that, in the fashion industry, many cross border disputes arise as it spread and dealt across all over the world, so often we’ve found our clothes designed somewhere else and manufactured somewhere else, and if at all any dispute arises between two parties who do not share the same jurisdiction, court litigation itself becomes almost impossible, and the only way to resolve such disputes is through international mediation or International arbitration. Some other advantages which are associated with ADR are listed below.^[4]

• Party Autonomy is given the utmost importance to ensure that both the parties are satisfied with the agreed settlement and business can be carried forward without any remaining issues. It is also used when selecting an arbitrator having expertise in the subject matter.
• A single procedure is involved that makes sure that all the disputes are covered even if they do not belong to a single jurisdiction.
• Confidentiality helps the parties focus on their advantages arising from the dispute without any fear of public scrutiny, which can hamper their public reputation.
• They also help preserve business relationships and make sure they can continue their alliances for future collaborations where both of them will benefit.

As we all know by now, time and cost savings are fundamental reasons parties prefer to adopt the ADR process.

Some setbacks during the resolution process

Like any other good thing, even ADR mechanisms carry some limitations and setbacks. Although in the fashion industry, one may not give weightage to this as they do not limit the ultimate goal of resolving disputes except in some cases where parties can’t afford to be flexible. One of the biggest setbacks in ADR for the fashion industry’s related dispute is limiting the discovery process, which is essential for trademark disputes. It may reduce the scope and cost allocated for such discoveries, which otherwise are allowed in the traditional litigation approach. One thing which also needs to be kept in mind is that it is not necessary that a solution may arise even if the parties become flexible on their end and what once was considered an investment may turn into a waste of resources. Sometimes parties do not have a choice but to resort to the mandatory arbitration clauses inserted in a contract if any kind of dispute arises between them. Unless both the parties waive this clause, they must go through the process laid down in the clause. Often arbitration clauses are hybrid, i.e. they include various mechanisms of ADR within a clause an example would be med-arb-med or neg-arb-med, etc. where parties can try mediation or negotiation first for some disputes and later they can seek remedy for the remaining issues via arbitration and even then if some disputes are left those can again be resolved in negotiation or mediation whichever the parties may prefer. When it comes to arbitration, the only setback is that once an award is rendered, it is binding in nature, so it may happen that sometimes a party do not benefit from it simply because the other party won. Moreover, arbitration awards are only limited to monetary issues; they cannot issue an injunction and compel a party to act or not to act in a certain way.

All these aspects must be kept in mind, and it is totally on parties to decide whether they are ready to take such risks if they arise. 

Indian Scenario

India has a history of the textile industry from before independence. This is because India has been a land that is quite rich for extracting different types of raw materials used for making cloth or any fashion product. Even for sustainable fashion, the materials required, such as jute, cotton, and bamboo, is widely available in India. Besides that, with the advent of globalisation and relaxed foreign investment policies, India became a hub of all things fashion. Imported brands made their presence and got a huge profit from targeting upper-class people. Many Indian designers also started to target a specific group and sell their products with an exclusive label. However, trends have flipped as we see many fast fashion brands have made their presence within the middle-class people. They aim to maximise sales by reducing the price at an affordable rate. Even after this, a large population in India still can’t afford and access such brands, and it’s only because of this we’ve seen multiple counterfeit practices take place which infringes a lot of rights of such brands such as Adidas and Nike, to name a few. Apart from that, new fashion brand companies continue to grow and make their presence in the Indian market, leading to more disputes for which ADR is an excellent choice. Here is a list of some legislations in India which protect fashion designs^[5].

• The Copyright Protection Act, 1957 aims to protect any original literary, musical, dramatic and artistic work. It only provides an exception for fair use and compulsory license.
• The Patents Act,1970 protects the inventions which can be integrated with a product. Fashion designers can only claim a patent for a particular invention they’ve made, be it any procedure for making a product or maybe the product itself.
• The Design Act, 2000 is the one that protects every original design a designer makes, be it two dimensions or three dimensions in nature.
• The Trademarks Act, 1999 protect the brand name mostly. They protect the name, product shape, graphics, letters, even words and colour combination. Fashion companies mostly prefer trademark law within IPR as it covers most of the things for them via registration.

International Scenario 

Internationally, fashion has always been moving from different continents; styles and trends have been shared across the globe. However, this certainly calls for newer challenges and cross border trade, and transactions have increased. This is why stakeholders from the fashion and luxury industry seek an efficient way of resolving disputes. World Intellectual Property Organisation (WIPO) is the one-stop destination for adopting ADR mechanisms for any dispute resolution. WIPO ADR Services for Fashion Disputes include the WIPO arbitration and mediation centre^[6], which aims to provide guidelines and procedures for cost and time effective mediation and arbitration. Established in 1994, it is an independent body of WIPO and a leading global centre for resolving internet domain name disputes. A few examples are cases where a mediation process for distribution dispute for luxury goods was resolved; in this case, the dispute was between a European watchmaking company and a US-based distributor company. Also, with the help of arbitration, a trademark coexisting of a luxury good was resolved where a trademark specialist arbitrator was appointed. As per his award, the Asian company in dispute with a European company claimed remedy. WIPO also offers a Fashion Panel of Neutrals which includes top-class experts in mediation and arbitration. Parties can select mediators or arbitrators as per their requirements. Apart from this, WIPO actively advocates and provides guidance and pieces of training to practitioners who are interested. 

Conclusion 

It Is safe to say that the fashion industry is driven by trends, which do not stay for a long time. Fashion designers and brands need to up their game almost every season to keep up with such trends. Whether it’s a creation of a new trend or a reemergence of a past trend, with so much creativity around, disputes are bound to happen. In addition to this, after the pandemic, there is a rise in the usage of e-commerce retailing, and new disputes are already at our doorsteps. Thus, people working in the fashion industry must resort to ADR and its mechanisms to thrive faster and better.

References:

^[1] WIPO, Arbitration and Mediation for Fashion, WIPO, https://www.wipo.int/amc/en/center/specific-sectors/fashion/

^[2] Abey Thomas, ADR in India’s Fashion Industry, DE LEX DOCTRUM, https://delexdoctorum.com/?p=6822

^[3] The Fashion Law, Fashion Brands continue to be among the most attractive target for Cybersquatters, THE FASHION LAW, April, 05, 2019  https://www.thefashionlaw.com/fashion-brands-continue-to-be-amongst-most-vulnerable-to-cybersquatters/

^[4] Heike Wollgast, Chiara Accornero, Ida Palombella, Federica Caretta, Managing Risks and Disputes in the Fashion Industry, WIPO MAGAZINE, March 2021 https://www.wipo.int/wipo_magazine/en/2021/01/article_0008.html

^[5] Abanti Bose, Why the fashion industry should adopt alternative dispute resolution: An Indian Perspective, IPLEADERS, May 28, 2021, https://blog.ipleaders.in/fashion-industry-adopt-alternative-dispute-resolution-indian-perspective/

^[6] Chiara Accornero, Resolving Fashion and Luxury Dispute through WIPO Mediation and Arbitration, TAILORED, https://tailored.gr/portfolio_page/resolving-fashion-and-luxury-disputes-through-wipo-mediation-and-arbitration/