Examination of witnesses (Questions 400
TUESDAY 11 MAY 1999
MISS E M CRATCHLEY
and DR J L BETON
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
(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 purchaserbecause
apparently they have a monopoly purchaser in Swedenlays
down that the parallel importer must give a price differential
of ten per cent and this apparently has discouraged the parallel
403. It has discouraged them.
(Dr Beton) It has discouraged them because they want
to give a smaller margin than that.
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
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.
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
Chairman: Thank you very much, that was very
helpful. We have no more questions, so thank you very much.