Supplementary memorandum submitted by
the Parallel Traders Association
EVIDENCE FROM DIRECT COSMETICS LTD
1. THE EUROPEAN
The ETD has given control of supply to Trademark
owners. This allows them to control distribution and, effectively,
eliminate competition and price reductions.
It is only as a result of cheaper Parallel Imports
(PI) that many groups of consumer goods have been available more
cheaply throughout the year rather than at odd sale times.
PI has also increased availability to customers
by broadening the number of retail outlets offering goods.
Many PI goods are produced in the EEA before
being distributed both inside and outside of the EEA. This particularly
applies to the area of perfumes and toiletries.
As the goods are then sold at a profit into
various markets, how is it that wholesale and retail prices can
vary so widely?
For Example In March 1999 we notes the
COMPARISONS OF UK Vs US WHOLESALE PRICES
| US Wholesale|
| Yves St. Laurent Jazz After Shave 50ml|
| $8 (= £4.95)|
| Parfums Balmain|
| $4 (= £2.50)|
| Levi 501's (Retail)|
| $352 (= £22.00)|
1Retail Price at Selfridges, UK excluding VAT
2Retail Price at Maceys, NY, USA excluding Sales Tax
It should be noted that the Jazz & Balmain were both
manufactured in France and sold, at a profit, before coming on
sale in the UK and USA at vastly different prices.
Furthermore, Levi's manufactured in the UK were on offer
in New York at the same price as jeans produced in the USA.
The list goes on ad infinitum.
It is claimed that the cost of doing business in the UK accounts
for the difference. This is patent nonsense.
Whilst basic Social Security costs in the UK are 10.5 per
cent against 7.5 per cent in the US, the USA has many other costs
such as Health and Unemployment Insurances which reduce the difference.
THE USA ARE
THE USA SOME
60-70 PER CENT
THE ETD HAS
THE UK MARKET.
ETD GIVES THEM
UK MARKET BY
3. THREATS TO
At a recent meeting of SACIP, it was suggested that Parallel
Importing threatened Levi's jobs in the UK. If one looks at their
recent record, this claim does not bear examination.
In 1997, Levis cut 7,000 jobs in the USA. They then closed
four European plants at a cost of 1,560 jobs.
In February 1999, they announced the closure of 11 of their
22 US plants with a loss of 5,900 jobs.
At no time have Parallel Imports been mentioned as a factor.
Reasons given were marketing errors and cheaper competition. They
are moving production from the factory closures to "contractors
around the world". By that, one assumes they mean Third World
countries with cheap labour.
We are aware of no company that has ever cut jobs because
Parallel Imports do, in fact, create jobs by bringing new
wholesalers and retailers into the distribution chain.
The Committee is doubtless aware, all big brand owners concentrate
on Global Branding to create demand and establish brands in world-wide
markets as opposed to local markets. The Yves St Laurent perfume
in the UK, USA and elsewhere is identical worldwide. Only the
5. INNOVATION AND
There was no shortage of Research and Development prior to
the effect of the ETD and we doubt that there can be shown to
have been any quantum leap since Brand Owners gained protection
of the ETD; either in product development or support of fringe
activities, as claimed by the Music Industry (why are identical
CD's from the same production 40 per cent cheaper in the USA?).
6. BIZARRE ANOMALIES
Identical products produced in the same place at the same
time; some can now be illegal.
Item 1is sold in the EAAno
Item 2is exported direct from the
EEA manufacturer to a buyer outside the EEA. If that product is
then imported back in to the EEA it is classed as an illegal product!
Item 3In this case the goods are
sold to a buyer outside the EEA, and the goods are then resold
to a buyer in the EAA, without the goods ever physically moving.
When the goods are subsequently shipped to the second buyer in
the EEA, the goods are illegal.
In these three cases, it is the same product with the same
origin but in two out of three situations the products are illegal
due to the ETD.
This was never the intention of the ETD, but this is the
effect it is having. The ETD, as incorporated into National Laws,
is the most anti-competitive piece of legislation imaginable.
It's effect punishes consumers interests enormously.
We realise that these effects were unforeseen and were not
the intention of the Directive.
We earnestly request that the UK Government should press
for an early and urgent amendment to the law and a return to Global
Exhaustion of Brand Owners rights.
17 May 1999