Examination of Witnesses (Questions 322
TUESDAY 27 APRIL 1999
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.
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 experienceboth of you have been in business for
a good number of years nowis 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?
(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
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
(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.
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
(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.