Liberty vs Discovery
  • The high court has dismissed Discovery's attempt to stop competitor Liberty from using Vitality status in calculating life insurance premiums, with costs.
  • The Vitality level of a Discovery client is the personal information of that client, and they can disclose it to anyone they want, the court said.
  • Asking for that status is not a trademark infringement, nor unfair competition, the court ruled. In fact, Liberty's competition with Discovery protects Vitality members from Discovery developing a monopoly – which is good for the members.
  • And the court thinks Discovery actually benefits too from Liberty's piggy-backing.
  • For more stories go to the Business Insider South Africa homepage.

It is not going to stop competing life insurer Liberty from using the Vitality status of Discovery's customers in its own business, the high court said this week, dismissing Discovery's request that it do so with costs.

In fact, the court found, rather than the unlawful competition Discovery had alleged, Liberty's piggy-back use of Vitality status is to the benefit of Vitality members – and to the benefit of Discovery's Vitality business too.

And Vitality members definitely own their status in the reward programme, and can do with that information what they like.

In mid-2019 Discovery went to court to stop Liberty from offering a discount on life insurance it sells depending on the Vitality level of customers the two companies share.

See also | The war over Vitality: Why Discovery is taking Liberty to court

Because they actively manage their health, Discovery says, people with higher Vitality status tend to live longer. That makes them less risky as life insurance customers, which is why Discovery Life offers discounts on life insurance premiums based on Vitality status.

But Liberty, Discovery argued, should not be allowed to ask customers to disclose their Vitality status and then also offer such discounts, because it had not been granted the permission to do so.

Liberty disagreed, leading to a fierce legal fight that provided an unusual level of insight into how Vitality deals with its partners and competitors.

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Discovery offered up two sets of legal arguments: that Liberty was infringing on its trademark on Vitality, and that it was engaging in unlawful competition.

It is self-evident, Discovery said, that it would suffer economic harm when Liberty sells more life insurance policies because of its discount strategy.

But in a 40-page judgment, high court judge Raylene Keightley dismissed Discovery's arguments, finding that Liberty had not breached the law, and was arguably doing at least one part of Discovery's business a favour.

Vitality status "is the members’ personal information, and they are free to make it public," Keightley said. In asking for that information Liberty didn't try to pass Vitality off as its own, nor was it confusing Vitality members on who owns the programme, she said, so there was no trademark violation.

Nor was Liberty's use of that information a bad thing, she said.

"Liberty’s motive in using the Vitality status of its customers is obviously to compete with other insurance companies, like Discovery Life. There is nothing inherently wrong with this. In fact, the law protects its right to do so," Keightley found.

Discovery had argued that, although its Vitality and Life businesses are separate companies, its group of companies should be treated as a single economic entity for the purposes of its legal challenge. Then, it said, the court could take into account that Discovery Life will lose money when Liberty uses Vitality status (much as Discovery Life uses it), in a "group wrong" approach.

Keightley was not impressed by the implications doing that would have.

"It is difficult to fathom how the chilling effect that an acceptance of this approach would have on competition in the insurance industry could possibly be in the public interest. Instead, it would encourage a monopoly by the Discovery group in offerings in the insurance sector, to the detriment of Vitality members and the public. It is so that the Discovery group has been a major innovator in various business sectors, including in the insurance sector. But this does not give them licence to stifle competition that is plainly in the public interest. Innovation itself is not a basis for placing unreasonable constraints on what competitors may do with one’s innovations. If this was the case, our society would not have progressed much beyond the invention of the wheel."

As for Discovery Vitality, she said, giving its members another benefit – from a life insurance company that may compete with its insurance sibling but not with Vitality itself, is actually good from the company.

"In actual fact, it cannot be gainsaid that in its use of the Vitality status in its offering, Liberty encourages its customers to remain or become members of Vitality. Liberty’s Wellness Bonus scheme is therefore compatible with, and in this sense, advances, Discovery Vitality’s commercial interests."

See also: FNB says it can estimate how long you will live using eBucks – amid a bloody fight between Liberty and Discovery about measuring life expectancy with Vitality status

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