Ampol service station rebranding strategy runs out of gas
While brand continuity and loyalty are important for commercial success, there are times when businesses need to update or change their aesthetic. The reasons for change can be positive and proactive – such as a brand refresh – or negative and reactive – where a business has lost the right to use its brands and logos. The ease with which a business can pivot to deliver on these branding changes can be critical to their success. When the business owns and controls all of the manifestations of a brand, it's relatively easy to make these changes. It's often more complex when third parties, such as a franchise or authorised distributor, are involved, especially where the third party operates its business using the brand on property owned and controlled by the business.
The Federal Court was recently required to consider precisely this situation in NSW Supreme Court proceedings brought against Ampol Australia Petroleum Pty Ltd (Ampol) by one of its significant, multi-site operators, EG FuelCo (Australia) Ltd (EG). In the proceedings, Ampol sought an urgent pre-trial mandatory injunction to require EG to allow Ampol to access and rebrand 87 petrol stations from Caltex to Ampol. Ampol's application for the injunction was part of a larger ongoing dispute between the parties commenced late last year against Ampol. In those proceedings, EG has alleged that Ampol had engaged in misleading or deceptive conduct in connection with Ampol's rights to use the Caltex brand in Australia.
As has been well reported in the media, in 2019, the international owner of the Caltex brand, Chevron Global Energy Inc (Chevron), announced that it was withdrawing permission for Ampol to use the Caltex brand in Australia. As part of that withdrawal, Ampol has promised Chevron that it will cease using the Caltex branding by 31 December 2022 and is reinvigorating the historic Ampol brand (last seen in Australia in 1995) to take the place of the Caltex brand on service stations across the county. To date, Ampol has successfully rebranded some 400 non-EG sites from Caltex to Ampol.
Ampol is relying on its contractual rights to give effect to that strategy with its licensed operators. In doing so, however, it has encountered a potential problem, as EG is refusing to rebrand and insists on continuing to trade as Caltex until the end of its Trade Mark Licence Agreement (TM Agreement) with Ampol. The relevant clause of the TM Agreement between EG and Ampol provides:
"8.1 Addition or Deletion of Trade Marks
(a) Subject to clauses 8.1(c) and 8.1(d), if [Ampol] proposes any changes to its branding and as a result desires to add new trade marks to this Deed or modify or delete any of the Trade Marks from this Deed, it must:
(1) provide [EG] with reasonable notice that it wishes to enter the Licensee Sites to implement such changes (including providing details of the change); and
(2) not unduly interfere with the conduct of the Business or any other business operated at the Licensee Site while at the Licensee Site to implement such changes; and
(3) pay for the costs in relation to the addition, modification or deletion of the Trade Marks in accordance with clause 16.3.
Ampol seeks urgent interlocutory injunction
In July 2021, Ampol filed an urgent application for a mandatory injunction (a form of compulsory order) against EG seeking access to EG's service stations to remove Caltex branding and replace it with Ampol branding. Specifically, Ampol sought orders that EG:
- allow Ampol access to each of EG's Service Stations to 'implement the additions, modifications and deletions of' the Caltex trade marks with the Ampol trade marks
- cooperate with Ampol 'in implementing the additions, modifications and deletions' of the Caltex trade marks with the Ampol trade marks.
In order to convince the Court that it should grant the injunction, Ampol first needed to prove that there was a 'serious question to be determined'. It then had to prove having regard to the interests of the parties competing (for and against the grant of the injunction) the balance tipped in favour of Ampol – which was a much harder test to satisfy. Traditionally, the standards applied by the courts for mandatory injunctions are much higher than for an ordinary injunction. Ampol argued delays in EG's rebranding would impact the success of the Ampol brand roll out, the damages for which it would be hard to quantify and expose it to claims for damages by Chevron. Given the possibility Chevron might re-enter the Australian market using the Caltex brand after 31 December 2022, Ampol was exposed to the possibility of injunctive proceedings brought by Chevron and there was a risk that consumers would be confused by the different parties using the brand.
EG's opposition to the injunction
EG opposed Ampol's application on a number of grounds – if the Court granted the injunction:
- it was unclear how Ampol would coordinate those works with EG's corporate rebranding programme that had already commenced
- Ampol's proposed works would disrupt EG and cause inconvenience for its customers and consequential loss of revenue
- EG's loss and damage would be hard to quantify.
Ampol had provided EG with a highly detailed 'Scope Summary' for the works, which set out a detailed programme of what was required to complete the rebranding exercise..
The Court's reasoning
The NSW Supreme Court considered the parties' arguments to be ‘very evenly balanced’ but ultimately declined to make the orders sought by Ampol. The Court's refusal to grant the injunction fundamentally turned on the form of the orders sought by Ampol, which Ampol had based on its express contractual rights. Effectively, Ampol sought a mandatory injunction from the Court to compel EG to comply with the TM Agreement. Unfortunately for Ampol, because of the vague nature of the relevant clause of the TM Agreement, the orders sought lacked specificity, as they did not detail precisely what things Ampol required EG to do (or not do) to assist with the rebranding. The Court was concerned that this lack of detail in the orders would mean EG's compliance might require significant supervision from the Court. Generally, Australian courts are reluctant to intervene and make orders requiring an ongoing supervisory role in day-to-day operational matters. The risk of this occurring was highlighted by the detailed Scope Summary and the numerous areas where disagreements could arise between the two parties.
While it is quite common for parties to mirror the terms of contracts in injunctive orders (to avoid arguments that the orders sought are an overreach of contractual rights), in this case, the vague and open-ended contractual terms ultimately proved Ampol's undoing. Importantly, Ampol could have improved the strength of its position – both in negotiations with EG and in its application to the Court - if the terms of the TM Agreement had been stronger and clearer. For example, the TM Agreement should have created clearly defined powers giving Ampol the right to:
- modify or discontinue the use of any of the trade marks, business name or use one or more additional or substitute marks
- change the corporate colours, trade dress, decor, uniform specifications, any part of any logo and any other design, appearance and operation attributes of the business
- enter EG's property and then remove, cover or change branded items on-site to reflect its new branding
- compel EG to:
- use the new branding and all of the above elements
- cease to use any trade marks, corporate colours, trade dress, decor, uniforms, designs, appearances or attributes declared by Ampol to be obsolete
- undertake all reasonable refurbishments, fit-outs, reprints and modifications to the premises, equipment, letterhead, business cards, stationery and uniforms.
If Ampol had included a dispute resolution mechanism for problems arising during the programme, it may have assisted their application. If the parties had agreed to an independent expert or umpire having responsibility for resolving any practical issues by way of a binding determination, there would be no requirement for an ongoing supervisory role from the Court, which ultimately determined Ampol’s application.
It is possible that, if Ampol had these types of rights, it could have been more precise with the orders sought and the outcome of the application might very well have been different.
What should you do?
Owners or license holders of trade marks and other branding that intend to license third parties to use those brands over an extended period need to carefully plan to change, modify or even abandon the use of those trade marks and branding. Such businesses should also not assume that their licensees (or franchisees) will cooperate with rebranding programmes and adequately plan for how they might affect any such rebranding programme. Failure to do so risks exposing those businesses in several different ways – much the same as Ampol.
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