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4 July 2023

How do you destroy a brand?

A High Court case involving Virgin is testing the nebulous concept of “brand value” that underpins so much business.

By Will Dunn

One of Britain’s best-known business groups, Virgin, has gone to the High Court this week to defend its status as “a brand of international high repute” in a trial that will test how the nebulous concept of brand value can be conferred, measured – and destroyed. The trial will also examine the personal reputation of Virgin’s founder and owner, Richard Branson.

Virgin Enterprises Ltd is the company that operates the Virgin “master brand”, which it licenses out to other companies or subsidiaries such as the airline Virgin Atlantic, the Virgin Active health chain, Virgin Money, Virgin Media and others – known within the company as “VCos”.

In April 2019 Branson visited Miami Central Station – briefly renamed “Virgin Miami Central” ­– to celebrate the launch of a new VCo, Virgin Trains USA. This was not a new company but the rebranding of America’s only private intercity train operator, Brightline, which operates routes in Florida and had signed a 20-year agreement to operate as a Virgin brand. However, the rebrand was never fully completed and in April 2020, Brightline wrote to Virgin claiming that it had ceased to be “a brand of international high reputation” and that its identifying marks, the Virgin name and signature logo, had lost their “high quality status”; in July 2020 it served a notice that it was terminating the agreement.

Virgin argues that Brightline did not have a right to end the agreement, and is now seeking payment of an exit fee of $106m and unpaid royalties of $9.4m. The trial is expected to take around three weeks, and a judgement is expected in early October.

In opening remarks on Monday, Virgin’s lawyers said the original contract showed both parties agreed that Virgin was “of international high repute”, and that Brightline must therefore show that there was such a significant deterioration in its status that continued use of the Virgin brand would have meant that “passengers would be repelled by the Virgin name… or that investors would walk away”, causing material damage to Brightline’s business.

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A Virgin spokesperson said: “While litigation is never our preferred option, our case against Brightline seeks to uphold our contractual rights and protect our brand following Brightline’s attempts to breach our long-term licensing agreement.”

[See also: The age of greedflation]

However, Brightline’s lawyers said they would show that the Virgin “master brand”, which in the contract was held to have “a special, unique and extraordinary character”, became troubled by the performance of other VCos. They cited Virgin Trains – one of the best-known and most widely used VCos – which lost the franchise for the East Coast Mainline in the UK in 2018 and the West Coast Mainline the following year. They also referred to the public perception of Branson.

In opening remarks, Brightline’s barrister said that while Branson is not a litigant or a witness in the trial, his presence is “all over the documents” and is “inescapable”. He highlighted an internal presentation, created two days before Brightline terminated the contract in July 2020, which reported “growing evidence that people are backing away from the brand” and that the Virgin brand and Branson were “too entwined in people’s minds”. One set of Virgin brand guidelines shown to the court featured pictures of Branson on eight pages.

Branson’s personal reputation became a point of particular controversy in April 2020, near the start of the Covid-19 pandemic, when it was reported that the billionaire businessman had asked the UK government to provide a £500m bailout for Virgin Atlantic; as a resident of the British Virgin Islands, Branson does not personally pay tax in the UK. Brightline’s barrister read from a “coverage analysis” document in which a Virgin content and communications director described “unprecedented negative sentiment towards Richard and the brand, ten times what we have seen at any previous previous point”, constituting “a long-term catastrophic brand risk for Virgin”.

Lawyers for Virgin argued that the company’s image and reputation, as measured by a “brand health tracker” created using a regular online survey of more than 15,000 people, did not suffer more than a few “dips”. Brightline’s defence counters that this data has been used selectively. When measuring how many consumers expressed “love” for the brand, for example, they claim Virgin used only the data that contained the most affectionate responses; when a wider range of responses is measured, they argue, a more significant decline in respondents’ feelings becomes apparent.

The case is therefore likely to hinge around the contested science of interpreting consumers’ feelings about a brand from real-world data. As such it will examine some of the principles on which other large companies – particularly the online advertising giants, Meta and Alphabet – base their businesses.

It will also examine the extent to which a company’s stated morals affect how it is valued by consumers, investors, the government and the media. Virgin says that it’s “brand DNA” is built around the central purpose of “changing business for good” and the ambition to take “a more meaningful role in people’s lives”. But the real-world impact of Virgin companies and Richard Branson was, Brightline argues, very different. This created the risk, Brightline’s barrister claimed, that the company could be “contaminated by continued association with a contaminated brand”.

[See also: Richard Branson’s ship of fools]

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