DBA takes restrictive contract dispute to OFT

Blue chip fmcg clients are trapping design consultancies in restrictive and potentially unlawful contracts, according to the Design Business Association.

The DBA has already taken the matter to the Office of Fair Trading and the European Union. Informal guidance indicates that contracts restricting consultancies from working on competitors’ business in the future are unlawful.

Up to 50 design consultancies are estimated to be involved. In some cases they face never being allowed to work for their clients’ competitors – in perpetuity. Other clauses allow clients to automatically own all rights to all work and to make design groups solely responsible for issues concerning the implementation of designs.

The DBA cites restrictive contracts as one of the most important issues it has had to address for some time. It has written to a number of consultancies identified as likely to be affected, in an effort to establish the extent of the problem. Fmcg clients appear to be the worst offenders.

DBA chief executive Ian Rowland-Hill believes that while each unfair clause has its own implications, the restriction on design consultancies ever being able to work for client competitors raises the most serious questions.

“Design consultancies’ ability to gain experience in selected areas could be restricted because they are unable to work with other companies in a particular field,” says Rowland-Hill. “They should not be put in the position where they have to agree to restrictions that distort competition, nor should they underestimate the seriousness of issues that could land them in court on the wrong end of a plagiarism lawsuit.

“These [contracts] involve significant projects with global businesses and are therefore at the upper end of the fee-income scale,” Rowland-Hill adds.

Global Design Register partner Kate Ancketill says, “It is not unusual for consultancies to sign contracts with a client that prevent them from working with competitors if they are part of a roster or retained, but if this is not the case then this is laughably ridiculous.”

DBA lawyers will have further meetings with the OFT and Directorate General 4 of the European Union once the DBA has established the extent of the problem.

The DBA wants to create a code of practice that “will satisfy the legitimate demands of the client but ensure the competitiveness of the UK design industry”.

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