Select Committee on Trade and Industry Minutes of Evidence


Examination of witnesses (Questions 400 - 413)

TUESDAY 11 MAY 1999

MISS E M CRATCHLEY and DR J L BETON

Mr Laxton

  400. Yes, there has but to clarify that, in many respects there is argument and it is an area of some debate and some potential court action, but it is alleged that there is hardly any difference whatsoever between a parallel imported motor cycle and one you will get through a main dealer or a main franchise operator.
  (Dr Beton) The main point is that the originator, Honda in this case, have no contract with the customer. They do not have to give them a guarantee or service if he has brought from outside their channels. I believe it is different with regional exhaustion because as I understand it, with German motorcars there is an understanding that guarantees will be honoured even if they are parallel imported. However, that is the single market. It is one of the benefits of the single market to the consumer and the manufacturers do not complain about that.

  401. Based upon some of the evidence we have received we have perhaps somewhat different views to yourself about certain aspects with regard to cars and motorcycles. You also said in part of your evidence to us that in many case, not all cases, a trading company, a grey or parallel importer, will put products on the higher-priced market with only a relatively small difference in price. If there is a relatively small difference in price and it is negligible, consumers would ask what the point is in purchasing it if there is hardly any difference in price between the bona fide article or imported in a traditional way as opposed to parallel imported. People would not go for the parallel or grey imported, there would be no market. What makes you come to this view that in many cases there is a negligible difference in prices?
  (Dr Beton) I am talking about the whole manufacturing sector, goods of all kinds not just the special situation we have with popular branded items of clothing and things of that sort, although there can be big price differences, we have seen that.

  402. Yes, there certainly can.
  (Dr Beton) If you like, with the motorbikes, but in general across trade, particularly in the pharmaceutical industry, it is not a case of that. The examples which are given, which I have seen, have been of the order of five to ten per cent. Interestingly, in the Swedish report, apparently the monopoly purchaser—because apparently they have a monopoly purchaser in Sweden—lays down that the parallel importer must give a price differential of ten per cent and this apparently has discouraged the parallel importers.

  403. It has discouraged them.
  (Dr Beton) It has discouraged them because they want to give a smaller margin than that.

Mr Berry

  404. The Committee has received evidence that manufacturers actually encourage parallel imports from outside the European Economic Area when it suits their purposes. Do you have any comment on that? Manufacturers whilst publicly decrying parallel importing actively encourage it in a number of circumstances.
  (Miss Cratchley) I worked for 20 years for Unilever and I never came across that in all the time I was there, is all I can say on that one.

  405. As an organisation you never heard of this allegation made, for example, in relation to motorcars or motorbikes or anything like that. You never heard it before.
  (Miss Cratchley) No.

  406. That is interesting.
  (Dr Beton) Not in the UK context but to be fair the Swedes do say that this can happen in their area. There is no doubt they are importing from the United States. American exporters would behave in a different way. There are some curious things in this Swedish report about the way in which Americans export very large consignments to the UK where they are broken down. Some of it goes through the proper trade and some of it goes through parallel importers.

  407. Perhaps this is not curious at all.
  (Dr Beton) That is not us. I do not think our manufacturers would do that.

  408. Perhaps that is not curious at all. Perhaps what would be curious would be if that did not happen. The view of the Parallel Traders' Association, when they gave evidence, was "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". Is that not just common sense economics? Is that not a perfectly rational thing for manufacturers to do?
  (Dr Beton) It might be in some circumstances but I doubt that is fair over the whole manufacturing sector.

  409. I am not suggesting it is done everywhere. I am simply asking whether that argument does not make absolutely solid economic sense?
  (Miss Cratchley) It probably does. If you have last year's stock you go and sell it somewhere far away and hope it does not come back I suppose.
  (Dr Beton) That was what happened.
  (Miss Cratchley) But they did not go far enough away.
  (Dr Beton) They went to Bulgaria.

Chairman

  410. May I clear up one thing? You made the point about Shield soap. Would it be the case that Unilever were really misleading the public by selling two soaps with different constituents in them?
  (Dr Beton) They were not misleading the public. One was for sale in the USA and one was for sale here.

  411. Yes, but you were also selling some of the British stuff in the US as well.
  (Miss Cratchley) No, we were not selling it. A parallel trader was selling it.

  412. Were you quite happy for them to do that or were you concerned?
  (Miss Cratchley) Shall we say our British company was quite happy for them to do it, because that meant they sold more soap, but our US company was not so happy because they were selling less soap.

  413. Do you find that parallel trading within multinationals is a cause of grief?
  (Miss Cratchley) Yes, it is a cause of grief; considerable grief.

  Chairman: Thank you very much, that was very helpful. We have no more questions, so thank you very much.


 
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