What Is Parallel Importing?
Parallel importing offers young entreapreuners an opportunity to enter Australian markets at competitive price points, and consumers with cheaper goods.
Parallel importing poses a number of legal concerns. Otherwise known as ‘grey importing’ it refers to the importing and distribution of goods outside of official channels. Usually, an individual will purchase a product at a cheaper price overseas, import it, and then sell it for profit at a price still lower than what it is domestically. If all of this is performed without the manufacturer’s direct authorisation, it is considered a parallel import.
Parallel importing is becoming increasingly popular in Australia due to the commonality of price discrimination here. Particularly within the electronic goods and clothing markets, Australian’s pay much higher prices than elsewhere in the world. It offers a great opportunity for consumers to access these goods at lower prices than was available before.
Likewise, parallel importing is becoming favourable amongst young entrepreneurs looking to make fast cash. Being able to source cheaper goods allows new entrants to enter the market at a competitive price point, whilst retaining strong profit margins. While it is an appealing strategy, there are laws governing the process you need to be aware of.
Laws permitting parallel importing
In Australia, parallel importing is permitted for good bearing trademarks applied with the consent of the trademark owner. S 122A of the Trade Marks Act 1995 (Cth) (‘Trade Mark Act‘) outlines the laws governing this. It authorises parallel imports where the importer makes a reasonable enquiry into the trademark, and it is reasonable to conclude that the trademark was applied with the consent of:
- the trademark owner, or
- an authorised trademark user, or
- any associated entity of these two, or
- someone wielding significant influence over the trademark.
A ‘reasonable enquiry’ generally means to the extent that you can confirm its authenticity. So, for example, you can purchase a shirt from Calvin Klein in Germany directly from Calvin Klein, and then import it into Australia to resell it. However, if you were to purchase this online from a German reseller, you would need to confirm whether they are an authorised reseller.
Preventing parallel importing
As a trademark owner, there are some ways that you can protect yourself from this process. There is a particular incentive for trademark owners who manufacture their goods overseas. The more channels of distribution you control, the more of the proceeds from your work you will receive.
Under s 132 of the Trade Mark Act, trademark owners can lodge a notice with customs to seize any goods imported by an unauthorised distributor bearing their trademark. This has a dual purpose, as it will also protect against counterfeit good imports.
To protect against authorised distributors backchannelling imports into other countries, one can also use a distribution agreement to restrict distributors rights. Distributer agreements can control the circumstances in which an authorised distributor can import goods and to where.
Ultimately, parallel importing poses many moral questions. While it offers an opportunity for consumers to circumvent the issue of price discrimination, it retains some caveats. While you will retain most of your rights as a consumer under Australian Consumer Law with parallel imports, things like warranties or customer support may not be available.
Likewise, parallel importing inhibits the profits of trademark owners. Hence, distribution agreements will become crucial in protecting the rights of trademark owners.
If you are a trademark owner and wish to protect yourself against parallel importing, it is best to contact a lawyer to discuss your options.
Daniel is a Legal Tech Intern at Lawpath. He is currently studying a Bachelor of Laws/Bachelor of Business at the University of Technology Sydney. His principal fields of interest are in commercial, corporate and intellectual property law.