Top 3 fashion predictions

by Elena Varese and Valentina Mazza

As “fashion fades and only style remains”, here you have our (hopefully stylish) guess on the top three fashion predictions for 2019.

1. Fashion influencers: a new approach by advertisers needed

Apart from the Ferragnez wedding (i.e. the wedding between world-famous fashion blogger Chiara Ferragni and rapper Fedez), 2018 has probably been the biggest year for influencers, and legal professionals could no longer ignore them.
Although ad hoc regulations are still missing, the first decisions on misleading advertising performed by fashion bloggers were issued by the Italian Advertising Authority (IAP), which challenged some social media posts on the grounds that they did not indicate in a clear manner that the contents communicated by the influencers were sponsored by fashion brands through the inclusion of the relevant hashtags provided by the Digital Chart (e.g. #ad, #adv or #sponsored).
As a consequence, both fashion companies and fashion influencers are taking measures to comply and started a constructive dialogue with IAP, which led in November 2018 to the adhesion to the IAP of TBS Crew, the company of Chiara Ferragni.
In 2019, we thus expect companies to be more cautious with respect to digital marketing, entering into written and detailed sponsorship agreements with the influencers, expressly binding them to comply not only with relevant advertising laws, but also providing specific instructions on actions to be taken, misbehaviors to be avoided and consequences of potential breaches.
In addition, the type of employment relationship and the relevant tax treatment of the influencer will be more carefully assessed since it is under the radar of authorities, with the Italian Antitrust Authority (AGCM) and the Italian Tax Authority having already started investigations on some influencers.

2. The fight against counterfeit continues: blockchain and ISP’s liability

While widely known as the underlying technology for Bitcoin, blockchain has a huge potential for industries focused on the protection of the quality and craft of Made in Italy products, the fashion industry in the first place.
One of blockchain’s most promising applications is in the supply chain management, enabling the tracking of items from raw materials to the point of sale. This will be an extremely powerful tool in the fight against counterfeited goods, since right holders will be able to determine at what point the chain was broken. Because consumers increasingly care about the origin of what they buy, another important application relates to environmental and sustainability claims as blockchain could back up brands’ claims about ethical supply chains and sustainability, offering a verified record of where a product came from and whose hands it passed through to get to the consumer.
Although it is too early to assess whether blockchain will disrupt the fashion industry, it seems that it can contribute to overcome a number of pitfalls encountered by fashion brands and consumers. To this purpose, organizational hurdles, investment landscape and social understanding will play a fundamental role, together with the regulatory environment. While legislators around the world are establishing a blockchain-friendly environment, Italy removed the provision recognizing legal value to the blockchain from the Simplification Decree 2019.
On a different note, also Italian case-law is extending liability for the sale of counterfeited goods over new members of the supply chain. In a case involving a well-known luxury brand, which sued the two owners of an online platform of e-commerce selling counterfeit watches, as well as the hosting provider Aruba for trademark infringement and unfair competition, the Court of Milan ordered the provider to disable access to the websites through which the watches were offered (Court of Milan, June 13, 2017). The decision went a step further and found Aruba liable despite ordering the websites’ owners to stop the violation and informing the judicial authority upon receipt of a warning letter by the right holder. In addition, access to the websites had already been disabled.
The decision of the Court of Milan proves that, when it comes to counterfeiting and e-commerce, the trend is to extend liability from the website owners to all other entities in the chain of the sale of counterfeited goods online. This is particularly true after that GDPR compliance obligations and the increasing use of cloud services made it impossible to identify the website registrant.
Therefore, we expect that in 2019 new rules will be set in the fight against counterfeited goods, holding liable not only Internet Service providers, but for example, also payment service providers and ‒ taking it to the next level ‒ perhaps people renting the physical spaces where the infringing goods are manufactured or sold.

3. End of Geo-blocking and out-sourcing fosters the revolution of online shopping

Major changes in the e-commerce world have been brought by the EU Geo-Blocking Regulation (EU) 2018/302, applicable starting from December 3, 2018. Under the Regulation, companies can no longer block or limit a customer’s access to their online interfaces “for reasons related to the customer’s nationality, place of residence or place of establishment”, or redirect a customer to a different version of their website, unless the customer gives his/her consent.
This means, for example, that Italian companies must not restrict access to the original Italian website for other EU customers and redirect them automatically to their national version of the website unless the customers expressly chose to do so.
We expect the Geo-Blocking Regulation to encourage fashion companies to spread online sales over the EU and allow consumers to enjoy a wider range of products at the same conditions. However, the Regulation only requires companies to make purchases of goods available, and not the delivery of such products, thus hindering a full benefit for the e-commerce market in the EU.
In addition, the major fashion houses are claiming back control over their e-commerce websites, announcing that they will take e-commerce in-house, apparently putting an end to the outsourcing era.
In this scenario, it will become crucial for in-house lawyers to carry out adequate activities of clearance and to make sure that the company’s trade secrets and confidential information will be protected. After the Trade Secrets Directive (EU) 2016/943 and its implementation with the Italian Legislative Decree No. 63 of May 11, 2018 trade secrets are currently a hot topic in Italy.
To this purpose, we thus expect fashion companies to increasingly draft non-disclosure agreements and internal policies to be signed by their employees as well as confidentiality clauses in the single supply agreements for each component of the final product.
We will see how fashion players will deal with this matter and we cannot exclude that 2019 will see more decisions on trade secrets protection involving a fashion company.