The practice of parallel importing is a hot topic in Australia at the moment, particularly given the tough economic environment for traditional bricks and mortar retailers and the strong Australian dollar. Price is an important factor for many Australians, and the effect of the strong Australian dollar is two-fold: consumers are enjoying access to cheaper prices for a wider range of goods online, prompting a downturn in traditional sales; and the strong dollar has made purchasing from overseas markets more attractive prompting many retailers to source supplies from outside of the official distribution channels.
Although the parallel importation and sale of goods in australia is a legal practice (mostly), it gives rise to a whole host of issues for both importers and brand owners to consider. For brand owners, this has required an adjustment to their overall commercial policies in order for them to maintain a competitive stance in the marketplace and to preserve their existing supply chain arrangements. For importers, the high Australian dollar, local distribution and retailing overheads has created more price pressure and less incentive to maintain the existing status quo. This tension prompts consideration from both brand owners and importers alike.
KNOW YOUR LIMITS AND REMEMBER - CONSENT IS KEY
Parallel importation of goods into australia is not a practice which should concern Australian brand owners alone. For international companies who enter into exclusive distribution agreements with Australian companies, or establish subsidiary companies in Australia, parallel importation is a live issue which has real potential to affect the bottom line, particularly in the form of licensing revenue.
In recent years, intellectual property holders in Australia have sought to rely on either trademark or copyright infringement as a method of preventing the importation of parallel goods, with a majority of cases being decided in favour of the importer. However, a recent string of cases in the Federal Court of Australia have created uncertainty for importers over whether or not products can be parallel imported risk free.
For importers, these recent decisions place the onus squarely on them to ensure that they make the necessary inquiries about the conditions of supply and consent prior to importation. for brand owners, these decisions reinforce the merits in having strong contractual terms regarding manufacturer and licence agreements, and highlight the importance of ensuring that well-considered intellectual property protection and licensing strategies are in place so as to maintain the status quo and preserve existing supply channels.
KEEP YOUR EYES OPEN
One of the most frequently cited arguments against parallel imports is that they raise serious concerns about quality assurance and product safety. In addition, customs compliance, uncertainty in supply, defect and warranty issues and consumer protection concerns have all been raised as potential risks of parallel importing from a consumer quality perspective.
- Questions for importers to keep in mind include:
- Where have the product's materials been sourced from?
- Under what conditions have the products been stored?
- Have the products been tested and if so, under what conditions?
- Have the products been manufactured for your country?
- Do the products contain ingredients which breach laws in your country?
- How will the consumers obtain spare products/replacements of the products?
- Do the products come with guaranteed warranties and if so, who is responsible for honouring them?
The risks raised by the answers to these questions are even more heightened for the genuine brand owners themselves. For companies who have invested a significant amount of expertise and money in research and development of their products and brands, and take their commitment to deliver the highest quality products very seriously, parallel imports can have a profound effect on brand integrity and corporate reputation.
IT PAYS TO CHECK YOUR TARGET
A recent and on-going case in Australia between one of the world's most iconic cosmetic brands, Estée Lauder, and one of Australia's largest retailers, Target Australia, serves as a timely reminder of the importance of having good professional relationships with suppliers and manufacturers, and proves that businesses should tread carefully when it comes to parallel importing. While alternative supply channels may be more cost effective in the short term, importers should be wary of the complex compliance issues associated with parallel importing and the potential risks involved.
© DLA Piper
This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.
DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to www.dlapiper.com