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PARALLEL IMPORTS.
Term Paper ID:29998
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Discusses the problem of the sale of unauthorized brand name goods.... More...
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Paper Abstract:
Discusses the problem of the sale of unauthorized brand name goods. Defined as parallel imports or "Grey Marketing," merchandise is sold at a lower cost by intermediaries not authorized by an authorized distributor or sales agent. Gives an example of a imaginary company located in France that has created a software program which becomes part of the grey market. Importance & problem of parallel importing in world trade. Arguments supporting parallel imports; arguments against.
Paper Introduction:
Parallel Imports
What Are Parallel Imports?
The usually accepted definition of parallel imports, sometimes also referred to as “Grey Marketing” is that it is the sale of “genuinely branded merchandise distinguished only by their sale through unauthorized channels by intermediaries other than the trademark owner” (Myers, 1999, 14). Defined less formally, parallel importing refers to the act of bringing unauthorized goods into a market and selling them at a price lower than that price charged by an authorized distributor or sales agent.
An example will help specify this activity. Assume that Company X, located in France, has created a software program called “WebProfit.” WebProfit has a suggested retail price of $325, and is only distr
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Should it be controlled? Removing the prohibition will be good for both consumers andbusinesses. Myers, M.B. & Kasturi, V (1988, June), Gray markets:Causes and cures. Itdoes affect consumers. He places an order for 2 ,9 unitsof WebProfit from the manufacturer, and they are imported to him in thecountry of his home office, for this example Country A. Heading back to the European continent, the EU ban on parallelimporting from countries outside the EU made the companies within the EUhappy, but at the same time angered many others. None of the arguments against parallel importing are based on how theaction affects the individual consumer. 1), Incidents of Gray Market Activity AmongU.S. , New Zealand Infotech Weekly, 7. All of those questions are beingargued daily in courts of the world, and, more importantly, in the courtsof public opinion, the press. But EU legislationoutlaws parallel imports of cheap branded goods, such as jeans or CDs, fromoutside the EU" ("Parallel Imports", 1999, 12). May it do so under the Lanham Act? It can ask that the distributor only sell within his owncountry, but then it is at risk of losing the other orders. Again,unlikely. (2 , May 15), Labour may rethink its parallelimport strategy, New Zealand Infotech Weekly, 9. Pullar-Strecker, T. . Let's assume that this 12th distributor gets orders for 2 ,9 unitsfrom the five countries he controls. They saythe law helps brand-owners to restrict competition and fleece Europeanconsumers" ("Parallel Imports," 1999, 12). Except tangentially, most of these issues were not applicable in either the District or Appellate Court, but they were discussed by both the District Court and in dozens of briefs submitted to the Circuit Court (Supnik, 1984, 71). This will mean that:the level of competition will increase, with multiple sellers of the sameproduct vying for market share by trying to offer the best possible packageto consumers and businesses (Pullar-Strecker, 2 ). Journal of International Business Studies, 12. The analysis carried out by the Government shows thatthere is no intellectual property rights reason to justify this continuedprice discrimination against New Zealand consumers. If, however, he sells the software for $245,or $8 less than it could be bought anywhere else in the world, then he hasentered the Grey Market. Pullar-Stecker, T. Of utmost interest is that very little of the discussion on parallelimports is taking note of the impact of the Internet, and the threat thatit could have to the entire act of export and import. Myers (1999) observes that, in the main, grey marketers are generallybrokers who buy goods in an alternative market where there is a priceadvantage, either from a manufacturer or an authorized dealer, and importthem into a country where prevailing prices are higher. The 12th distributor, however, has offices in five separatecountries, all of which are different from the countries controlled by the11 other distributors. One of the primary arguments used by those attorneys and governmentofficials and businesses that support the concept of parallel imports isthat no company has the right to determine how, and in what manner, and forwhat price, can the products it makes be "resold." Arguing for the concept, the Economist (1999) pointed to companiessuch as Levi that are challenged trying to charge different prices indifferent markets. He turns aroundand fulfills the orders for the software that had come in from countriesB,C,D, and E. Will itdeny the orders? Supnik, P, (1984, Jan.-Feb.), Parallel imports, The TrademarkReporter, 71. As Supnik points out, "the complexities of the caselaw still perplex. The software is not sold on theInternet. "Microsoft saysthat the key problem with the removal of parallel importation restrictionsis that it makes it far more difficult for copyright owners to control theimportation and sale of pirated software" (Pullman-Strecker, 2 , 7). (1999, Jan. Parallel Imports What Are Parallel Imports? The distributors pay$162 for the software. Asglobal product availability is enhanced and the cost of price informationin different markets decreases, unauthorized distribution will continue tobe a problem for exporters" (Myers, 1999, 15). Will its trademark image be damaged? References Cespedes, F.V., Corey, R.E. The only way that a customer can buy the software is by dealingdirectly with one of the authorized distributors. Of course not. In other words, the problem exists. The Tariff Act? That remains to be seen.Will customers continue to pay $325 for software that they can buy for $2 from the Internet? 27), TheEconomist, 12. Assume that Company X,located in France, has created a software program called "WebProfit."WebProfit has a suggested retail price of $325, and is only distributed byWebProfit distributors in 12 countries. "Consumer groups,parallel importers, and many retailers are up in arms over this. We can see that it isnot an easily defined activity, which is why the term "Grey" began beingused. Conclusion Parallel importing is a fact of life in the business of exportingproducts to countries outside the principal market area of themanufacturer. Highly unlikely. While trademark law offers the most certainremedy when and if likelihood of confusion plainly can be proven, thisoften will be a burden difficult or impossible to meet" (Supnik, 1984, 74). If he sells the software at the same price ($325) he is only partiallyguilty of parallel importing. In a series ofvarious arguments, the New Zealand government concluded that withoutparallel importing, New Zealanders were paying more for some goods thanoverseas consumers. But is it legal? For instance, if the12th distributor used in the example above, were to establish a web site,and offer WebProfit for sale at $2 , and he receives orders for 3 , copies from all over the world, how will the French company react? Will it penalize the distributor? What Are the Arguments Opposing Parallel Imports? That is the challenge of dealing withparallel imports. Can it becontrolled? In fact, there is usually offeredanecdotal evidence that customers will suffer "brand confusion", and havetheir "choices marginalized" (Cespedes, Corey & Kasturi, 1988). Under what (if any) circumstances is an American trademark registrant an American trademark owner that can prevent parallel imports? To what extent can an American trademark owner exclude genuine imported goods and otherwise prevent the marketing of such goods? The Tariff Act appears to say one thing, while Customsinterprets it to say another. Defined less formally, parallel importing refers to the act ofbringing unauthorized goods into a market and selling them at a price lowerthan that price charged by an authorized distributor or sales agent. Previously exclusive distributors were able to charge NewZealanders higher prices than were charged in other countries, preventcertain products being sold here, and delay their release here. Exporters: Occurrences, Characteristics, and Consequences. How Important are they in World Trade? It does affect businesses. Of interest to the trademark bar is the refinement of thinking on the long perplexing subject of parallel importation and sales of so called 'genuine' goods. Eleven of the 12 distributors only have offices within the officialborders of their countries, and do not deal with customers from othercountries. Is it ethical? Between countries within theEU's single market, such "parallel" trading is legal. Sharp traders can "easily buy products where they arecheap and resell them where they are dear. Instead it is all a shadeof grey. Supnik's excellent article is seminal to the case of parallel importsbecause: A) it confirms the widespread problem of Grey market imports inworld trade, B) it traces the legal intricacies of trying to prosecute ordefend cases of suspected grey marketing, and C) confirming that there isno legal protection and that each case must be argued on "intricatereasoning of common sense and unique precedent, which can be accepted ordenied" (Supnik, 1984, 72). . Now anybodywill be able to import the goods from other countries. In general, the arguments against parallel importing include: . Based on Microsoft's arguments, and those of many other softwarecompanies and entertainment companies, the government of New Zealand isconsidering reversing itself again and modify its position and reimpose"parallel import restrictions on copyright-protected goods--books, videos,films, CDs and software --with the ban effective during the first two yearsafter any product is released in New Zealand" (Pullman-Strecker, 2 , 7). The WebProfit company hasseveral options. It will negatively impact distributor relationships and could, in some instances, call for reinstatement of tariffs that had been removed by previous treaties. An example will help specify this activity. Parallel imports: Hardly the full Monti, (1999, Feb. On the opposite side of the world, the government of New Zealand iszealously supporting the concept of parallel importing. (Cespedes, Corey & Kasturi, 1988). By its very nature, parallel importing is widespread, but figures ofdamages are hard to prove, although educated sources agree that the valueof these imports reaches billions of dollars annually and "[this figure] isexpected to increase as the number of export operations increases. It will lead to ineffective and unfair pricing policies. Pullar-Strecker, in a different article, points out that one of themost vocal opponents of parallel importing is Microsoft. The usually accepted definition of parallel imports, sometimes alsoreferred to as "Grey Marketing" is that it is the sale of "genuinelybranded merchandise distinguished only by their sale through unauthorizedchannels by intermediaries other than the trademark owner" (Myers, 1999,14). If the companydoes nothing, and lets the distributor sell at the reduced price, then italso is at risk of losing its other distributors. What can be done? What Are the Arguments Supporting Parallel Imports? It can lead to low sales force morale, poor customer service, and ambiguous measurements used to evaluate employee performance. Nothing is black and white. It is an act which is considered to be legal within verystrong strictures. Paul Supnik, one of the leading attorneys of the Trademark Bar,explained the problem thus in a 1984 Trademark Reporter article. Harvard Business Review, 75-82. There are as manyforms of grey marketing as there are distribution channels, and they allshare the same characteristics, and generally have the same results, whichare "reduced or cannibalized sales for the manufacturer in countries whereprices are higher, and jeopardized relationships with authorizeddistributors who possess contractual rights for their markets" (Myers,1999, 15). (2 , June 26), Microsoft wants parallel importban extended.
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