Select Committee on Trade and Industry Minutes of Evidence


Examination of Witnesses (Questions 322 - 339)

TUESDAY 27 APRIL 1999

MR BILL KEEP AND MR DILESH MEHTA

Chairman

  322. Good morning, gentlemen. We invited you this morning, partly because you submitted evidence to us, but mostly because we recognise that you are parallel importers who have been in the business for some considerable time. It might be helpful if you could tell us where your goods, both A&G and Shaneel, originate. Do they come within the European economic area or are they from outside?

  (Mr Keep) In response to that, we have to say that the majority of the goods purchased come from within the EU. I think historically, which is the whole issue, of course, many of them were coming from outside. As a company, which has been established for 16 years, we would say that originally the initiative was found from far distant lands; and it has really been a progression over the last 15 years or so where we have seen the European Community become far more of a productive ground to purchase products. Obviously, in the event of what has been happening in recent months and years, it has made us far more restricted as to where we can purchase the goods.

Mr Laxton

  323. Already, in the process of this inquiry that we are undertaking, we have had evidence that parallel and grey goods are more often sourced direct from the manufacturers themselves. Is that something that you would concur with?
  (Mr Mehta) That is true. What has happened now is that the manufacturers themselves wanted to get things under control so they set up what is called Mass Market Activities. Therefore, indirectly they are themselves looking into how to control the grey market, so from the selective view or the niche market, entrepreneurs, they supply the mass market. They are direct.

  324. In terms of perfume manufacturers, if I can take that as an example, is it something that generally applies in your experience—both of you have been in business for a good number of years now—is it your general view that they are quite happy to supply?
  (Mr Keep) You cannot take a general view because obviously there are a number of manufacturers who will police and protect their brands very vigorously.

  325. Could you be specific about that. This would be helpful as well.
  (Mr Keep) In terms of the brands?

  326. Yes.
  (Mr Keep) Companies such as Este«e Lauder and Chanel, which over the years have always been viewed to be companies with prestigious products which they want to control. I would say that obviously there have been times when certain products have been available, but generally they are two of the stronger companies to do this.
  (Mr Mehta) They are mainly privately owned companies, ie not publicly owned companies. You find that their control of the products is much more severe than the ones which are under the public shareholding. They are on an autonomous basis, profits and all that. They are private companies, many families owned like Chanel, which are very difficult to get to.

  327. If you are not picking up supplies it is a little a bit patchy, as you indicated. What are the other sources from which you can pick up supplies, if not direct from the manufacturers?
  (Mr Keep) The very nature of our business is that we spend years tracing the sources to buy the goods. Now they come from various areas. They can come from agents or representatives for various countries of those brands. They can come from duty free suppliers, which is all connected to the comments we have heard, regarding being supplied with excess quantities. So you could say there, again indirectly, that manufacturers are probably aware that they are over-supplying their official outlets, they are doing this knowingly, knowing that the goods are going to have to be sold to a third party. I have no evidence to back it up but generally in the industry it has been recognised that anything between 20 and 25 per cent of global sales in fragrances end up in the grey market. As I say, we cannot give you the hard and fast facts.

  328. 25 per cent.
  (Mr Keep) It has been a recognised figure.

  329. Okay. I will need to be a bit careful in this area because there are a number of cases of litigation floating around, at the moment, but may I ask both of you your opinion as to why, on the one hand, in this particular area, manufacturers might be quite happy to supply you; but, on the other hand, some of them start throwing out legal writs against grey imports. Have you any opinion as to why you are, perhaps, facing in a number of directions?
  (Mr Keep) Hypocrisy always comes to mind because we know that they do not play the same rules on both sides. Even in the case of some of the organisations, not necessarily will all members of that company know what the other side is doing. We know that ourselves. We currently have an issue with a brand and yet we know that this product is still available to us in out-and-out quantities. These are the areas which are very frustrating.

  330. With that particular brand, they are in the process of going down the legal road?
  (Mr Keep) Yes, that is right.
  (Mr Mehta) Over the last five years, what has happened is that 80 per cent of my sources come from non-manufacturing, non-brand numbers. In the last year or so I buy 80 per cent from manufacturers and 20 per cent from the grey market, as you call it. The whole area of trading has changed, in a sense, and the manufacturers themselves are having to deal on a controlled basis. However, they are trying to create a cartel within a cartel system, which is the problem.

  Mr Laxton: Thank you.

Mr Butterfill

  331. Obviously we have to be careful in asking these questions because there are some cases which are still currently challenged. Shaneel, in particular, has a number of cases with French Customs, amongst others.
  (Mr Mehta) That is true.

  332. Are you surprised when these goods are withheld? Is it difficult for you to tell what is going to be acceptable and what will not be?
  (Mr Mehta) I am not a lawyer, to be honest with you. In a sense, I am a businessman. I am qualified in some things but not in international law or French law. As far as trading is concerned, business is concerned, it is a nightmare to trade nowadays. If you are travelling to France, the Customs officers can seize your goods. The law is different from what it is in the United Kingdom. This goes on when goods are in transit to America, going through France. The whole law is different.

  333. Some people have suggested that the Customs authority in here or France or elsewhere are hand-in-glove with the brand manufacturers and are co-operating with them. Is that your experience? Would you support that contention?
  (Mr Mehta) More in France.

  334. More in France than here?
  (Mr Mehta) Because the goods in question, which have been seized over the last 18 months, the Customs officers themselves seize them for the first seven days. Then it becomes a civil matter in the country.

  335. Do you think they are trying to protect their domestic product?
  (Mr Mehta) That is part of their defence.

  336. You do not have any particular problems with English Customs at all?
  (Mr Keep) We have to say that certain issues we have had internally with the United Kingdom, have definitely stemmed from possible intervention from private investigators or ex-Customs officers, who have used their own contacts to gain access to information and products; and then tried to take an action against us effectively, from the information they say they have gained. Unfortunately, there is not much we can do to enforce any action against them.

  337. I believe there has been an important judgment called the Silhouette Judgment, is that right?
  (Mr Keep) Yes.

  338. What effect does that have?
  (Mr Mehta) In two senses. The Silhouette Judgment, as far as the trading patterns and day-to-day are concerned, we cannot import anything made outside. Let us say the goods are made in France, they enter Dubai but have been officially made in France, and one shipment is made to Dubai and one is made to the United Kingdom from France, the shipment from Dubai cannot come into the EC boundary, there is a wall around it now. No-one can bring it in except the trade mark holder importer himself. So basically if you to go Dubai, you buy something in the duty free, technically you can be stopped from bringing it in. If you buy a camera for £2,000, you can be stopped from bringing it into the United Kingdom and selling it on.

  339. Selling it on, but they cannot stop you personally.
  (Mr Mehta) Not for personal use. Only for selling it on. Also, we are led to believe, maybe rightly or wrongly, there is the issue of the powers on how they control the trademark.
  (Mr Keep) The Silhouette Judgment did not visit the issue of consent. One of the problems we have, as we mentioned in our submission, (and I am sure has been visited by a number of people), 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 everybody to analyse.


 
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