SEPTEMBER 2008
Avoid the risks of using foreign manufacturers
Brands such as Wal-Mart and Mattel have suffered from problems caused by foreign manufacturers. Oliver Herzfeld and Richard Bergovoy provide some guidance on how to minimise the risks
| One-minute read |
| In a brand owner's worst nightmare, goodwill that has taken years to generate can disappear in a flash with publicity about wrongdoing in a factory half-way around the world, which is contracted to manufacture goods by a licensee. Such wrongdoing typically takes the form of unsafe products or unfair labour practices. While legal liability risk may be low, brand damage can be high. Victims include the Kathie Lee Gifford apparel line licensed to Wal-Mart as well as toy company Mattel. But brand owners can limit the damage caused by incorporating safeguards in the licensing agreements and manufacturer's agreements. These should set out the responsibilities of both the manufacturer and the licensee. They should also include provisions on what to do if and when any problems arise. Taking these steps at the contractual phase should help minimise damage to your brand. |
It's a brand owner's worst nightmare. You spend decades building the goodwill of your brand. Then, suddenly, headlines appear – gradually at first, later in a deafening crescendo – alleging wrongdoing in a factory halfway around the world with which the owner has no direct contact, but with whom a licensee has contracted to manufacture goods bearing the owner's trade mark(s). Child labour, lead paint, adulterated or unsafe ingredients .... virtually overnight, all of the owner's goodwill vaporises in a cloud of litigation, congressional hearings, and angry editorials.
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