Memorandum submitted by The Parallel Traders
1. THE PARALLEL
Established in September 1998 the PTA represents
in excess of 20 companies and are founder members of European
Parallel Trade Coalition, which in turn represents in excess of
40 parallel trade organisations across Europe. The PTA is committed
to securing an amendment to the EU Trademark Directive to enable
parallel trade from markets outside of the European Economic Area
to take place.
The Parallel Traders Association welcomes the
decision by the Trade and Industry Select Committee to hold an
inquiry into parallel trade and trademarks. We believe that the
current situation, whereby brand owners are able to prevent parallel
traders from importing their goods from outside of the European
Economic Area, to work against the public interest.
Last year's ruling by the European Court of
Justice in the Silhouette case distorts the original intention
of the Trademarks Directive. Mr Amedee Turner QC was responsible
for drafting the original Directive and he has stated publicly
that the Directive was only intended to deal with the situation
within European Economic Area and is not intended to effect the
position of goods entering the EEA from outside. This issue was
not addressed in the Directive when drafted and was for further
discussion. The Directive was introduced to protect manufacturers
from copyright infringements, counterfeiting and "copycat"
goods. The Parallel Traders Association supports these aims. However,
the ECJ ruling bound by legalistic constraints, as is evident
from a recent opinion of Advocate Jacobs in a case before the
European Court of Justice known as Sebago, has led to a situation
where manufacturers' selective and anti-competitive distribution
networks, and the artificially high prices set, are protected
by the Directive. This was never the intention of the Commission,
the European Parliament, or Member State Governments.
The Parallel Traders Association is calling
upon the European Commission to amend the Trademark Directive
to allow universal exhausion, and secure a fair deal for consumers.
Parallel trade exists for a number of reasons:
First, it can occur when the price
charged in one country is lower than that in another to such an
extent that it makes sense for someone to ship goods between those
Second, parallel trade can occur
when a brandowner in one country produces additional goods in
order to boost sales figures, but no longer has a buyer for those
goods. In these circumstances they may wish to export them to
a third market to bring some revenue in while not depressing local
Third, parallel trade can exist where
a retailer approaches a licensed distributor in a third country
to gain access to stock that they have been refused access to
in their own country.
Fourthly, parallel trade is a direct
consequence of the ability of manufacturers to dump their products
on third markets, using high profits in their protected market
to subsidise market share in a third market.
There can be no doubt that brandowners value
parallel trade, and use it as a mechanism to shift surplus goods
to new markets. A number of our members have worked directly with
brandowners. Although it will never be acknowledged publicly parallel
trade is an integral part of many brandowners' corporate strategies.
Therefore, we would contend that many of the complaints or arguments
that brandowners advance are bogus.
Brandowners are not opposed to parallel trade
per se, far from it. They want parallel trade to continue,
but only if they have total control over the system. The ECJ ruling
means that at present parallel trade operates to the benefit of
brandowners not consumers. Brandowners give their consent to parallel
imports when they need to shift goods, dictating to consumers
what goods they can and can not buy through parallel trade.
4. PARALLEL TRADE
Parallel trade benefits consumers by making
exclusive goods available at more reasonable prices. A wide range
of goods are imported into the UK through parallel trade. The
consumer benefits from the ability to buy designer goods at cut
Research by the Parallel Traders Association,
and national newspapers such as The Sun and Daily Express, demonstrate
the benefits that consumers enjoy from parallel imports (see annex).
Parallel imported branded goods sold in supermarkets or other
discount stores can be up to 75 per cent cheaper than manufacturers'
recommended retail prices.
The Parallel Traders Association agrees with
the Chancellor that there is an absence of competition in certain
sectors in the UK. Before it was outlawed by last year's ruling,
the existence of parallel trade put pressure on manufacturers
to keep prices down. A good example of this being Honda's decision
to cut the price of its motorcycle range by £3,000 in the
face of strong competition from parallel traders. The removal
of parallel trade allows manufacturers to set their own prices
without effective competition. Without this important source of
competition prices are likely to rise even further.
The Consumers' Association supports the campaign
of The Parallel Traders Association. In January the Consumers'
Association agreed that pursuit of an amendment to the Trademark
Directive, to enable parallel trade to take place, should become
the organisation's corporate policy.
Parallel trade has also been praised by Consumer
Affairs Minister Kim Howells. Speaking in the Commons Dr Howells
said "I am glad that the supermarkets are pushing the
edges of the envelope by exploiting the possibilities offered
by so-called parallel or grey imports. They are introducing real
competition into the markets for such goods".
5. ARE TRADEMARKS
ECJ itself has made clear that it does not object
to parallel imports, and indeed pointed out that the EU could
decide to harmonise rules on the basis of the situation that existed
in the UK prior to the Silhouette ruling.
"Finally, the Community authorities could
always extend the exhaustion provided for by Article 7 to products
put on the market in non-member countries by entering into international
agreements in that sphere, as was done in the context of the EEA
In addition Advocate Jacobs in his opinion for
the Sebago ruling said that limitation of the effect of
the Directive as interpreted in the ECJ judgment in Silhouette
may seem desirable and would no doubt have been welcomed in
He went on to say that if the Directive is found
to have effects that are unacceptable, the correct remedy is to
amend the Directive.
In the opinion of the PTA existing legislation
without the actual benefit of limited exhaustion gives the trademark
owner ample protection against copies or counterfeits and trademark
law will protect the brandowner against passing off.
It is the contention of many leading manufacturers
that goods imported or sold by parallel traders are counterfeit
goods. This is simply not true. Goods supplied by parallel traders
are the same goods sold with the initial consent of the trademark
owner but supplied through different distribution systems. The
only difference between a parallel imported good and an authorised
good is the price.
The Parallel Trade Association agrees that steps
should be taken to reduce counterfeiting. However, the need for
free and fair parallel trade and the prevention of counterfeiting
are two entirely separate matters, and they should be treated
as such. Existence of the trademark directive does not mean that
there will be fewer counterfeit goods. It may have the opposite
effect as the consumer will be unable to obtain branded goods
at realistic prices and may, in consequence, seek to purchase
EU Commissioner Mario Monti has rejected the
brandowners view that parallel traded goods are counterfeit, telling
the Sunday Times that "we've got to firmly knock on the head
the idea that parallel imports are the same as counterfeit goodsthey
are not. They are genuine article but traded outside the companies
The Parallel Traders strongly believes that
the European Commission must revise the Trademark Directive. The
Directive has been distorted by the brandowners lawyers, who have
turned the legislation against the very consumers that the Directive
was designed to protect. The Trademark Directive is being used
to defend manufacturers selective (and we would argue anti-competitive)
distribution networks, and artificially high prices, a purpose
that was never intended.
The practice of supermarkets selling discounted
high quality branded goods had injected competition into the static
UK retail markets. The ECJ ruling means that this source of healthy
and desirable competition has been badly undermined. As the majority
of branded goods that parallel traders supply to supermarkets
are manufactured and/or distributed outside the EEA, manufacturers
are now in a dominant position and are using this position of
strength to restrict the availability of such goods.
Tony Blair, Gordon Brown and Stephen Byers have
all said publicly that prices in the UK are higher than abroad.
Parallel trade is one way to ensure that consumers are able to
purchase high quality goods at reduced prices. If, as Stephen
Byers has said "consumers are at the heart of Government,"
then the UK Government must lead the campaign to secure an amendment
to the Directive.