'PARALLEL' AND 'GREY' TRADE
6. Throughout the evidence we received, the phrases
'parallel trade' and 'grey trade' are used somewhat indeterminately
to describe goods brought into a country other than through the
principal distribution systems. The DTI notes that "parallel
or 'grey' imports are goods which have been marketed for the first
time by the rights owner, or with his consent, outside the European
Community and are then imported into the Community".
The City of London Law Society Intellectual Property Sub-Committee
states that "parallel importation describes the practice
of buying genuine branded goods in one country where they have
been put on the market at a relatively low price and importing
them to another country without the consent of the trade mark
owner where they can be sold at a higher price".
The European Commission uses 'parallel' trade to refer to intra-EU
trade, stating that "the Commission has always insisted on
the freedom for intermediaries to respond to price differences
between Member States and engage in parallel trade as central
to its policy of ensuring that distribution arrangements have
a market integration and not a market partitioning effect".
Mr Macgowan of the Retail Motor Industry Federation pointed out
in oral evidence the distinction they make in the case of cars:
"parallel imports, which in my book means vehicles which
are normally available in Europe and may come to the United Kingdom
from some other European country but meet all the European standards,
versus 'grey' imports which are vehicles that are not normally
routinely sold in the UK and that have come from outside the European
Union and therefore fall outside the European specifications".
7. Attempts to prevent parallel trade between EU
states are contrary to the principles of the Treaty of Rome, although,
as Davies Arnold Cooper put it, the insistence of brand owners
that they would never try to shut down intra-EEA parallel trade
"is not borne out by experience".
There were a number of cases in the 1980s of companies being fined
by the European Commission for such anti-competitive behaviour.
For example, in 1987 Konica was found guilty and fined ECU 75,000
for practices aimed at preventing the export of Konica colour
films from the United Kingdom to other EC Member States and the
resale of parallel imported Konica colour film on the German market.
In recent years, Volkswagen was fined ECU 102 million in January
1998 for systematically prohibiting its dealers in Italy from
selling cars to foreign buyers, mainly from Germany and Austria.
Further investigations into the new car market are currently underway.
8. In this report, for ease of reference we refer
to goods imported into the UK from outside of the European Economic
Area (EEA) as 'grey' imports and those that are imported from
within the EEA as 'parallel' imports.
We have some sympathy with the view expressed that the name 'grey'
trading may be thought to carry an implicit reference to the 'black'
We use such terminology purely for ease of definition.
The doctrine of Exhaustion
9. The doctrine of exhaustion provides that once
a product has been placed on the market by the trade mark owners,
or with their consent, trade mark protection is deemed to have
been exhausted and cannot be used to prevent further resale or
circulation of that product. Most of the current debate focusses
on trade mark exhaustion; the concept can, however, apply to other
types of intellectual property. One crucial issue surrounding
exhaustion revolves around how narrowly or widely the 'market'
is to be defined: whether exhaustion should be applied geographically
within the EEA or internationally. 'International'
exhaustion signifies that placing a trade marked product on any
single national market is taken as exhausting the owners' rights
to restrain its circulation elsewhere. During our visit to the
WTO, we were informed that the negotiations for TRIPS had specifically
excluded the concept of 'international exhaustion', as it was
believed that its inclusion would jeopardise the entire Agreement.
Article 6 lays down that nothing in the Agreement should be used
to address the issue of the exhaustion of intellectual property
rights. It was suggested in evidence to the Committee that TRIPS
"may provide for international exhaustion of rights in any
Mr Weston of the Chartered Institute of Patent Agents (CIPA) stated
that "TRIPS does not prohibit worldwide exhaustion of rights".
In the deliberate absence of any accepted rule of international
exhaustion, countries are free (providing there are no other constraints)
to decide how to apply the doctrine of exhaustion. The
Silhouette judgment has, however, impacted on this freedom
for countries within the European Economic Area.
10. The other crucial issue is what constitutes 'consent'.
Mr Keep of A&G Imports told us one of the problems they face
as parallel importers is that "it is very hard for us to
prove when consent was given to sell those goods. That is going
to be the major issue for everyone to analyse".
The City of London Law Society Intellectual Property Sub-Committee
stated "the definition of consent by a trade mark owner is
fundamental to any analysis of exhaustion".
In the absence of an internationally agreed norm, the issue of
whether actual or implied 'consent' has been given to the placing
of a trade marked product on the market has to be decided afresh
on the facts of each individual case.
1 Trade and Industry Committee, First Report, 1998-99
Vehicle Pricing, HC64 Back
and Industry Committee Press notice, Trading, Trade Marks and
Competition. PN6 98/99 Back
The Committee visited the World Trade Organisation and the World
Intellectual Property Organisation in Geneva in March 1999. Back
Marks Act 1994, Part 1, 1(1) Back
p145, paragraph 2.2 Back
Patent Office website (http://www.patent.gov.uk) Back
1 (1) Designs Act 1949 as amended by section 265 Copyright, Designs
and Patents Act 1988 Back
98/71/EC of the European Parliament and of the Council of 13 October
1998 on the legal protection of designs, Article 1. Back
10 http://www.aslib.co.uk/ipi/index.html Back
only for twenty years from the end of the year of first marketing Back
are exclusions for features dictated solely by function, and features
dependent on the appearance of another article of which the article
is intended to stand part. Copyright, Designs and Patents Act,
section 213 Back
p145, paragraph 2.4 Back
Green Paper on vertical restraints in EC competition policy, Executive
Summary, p.iii Back
16 Q191 Back
Commission Decision of 18 December 1987 relating to a proceeding
under Article 85 of the EEC Treaty (IV/31/503 - Konica) Back
EEA comprises the 15 EU Member States plus Iceland, Norway and
p202, paragraph 38 Back
22 Q416 Back
23 Q339 Back