Parallel importing occurs when:
- branded or otherwise trademarked products are imported into Australia by a person or entity other than the owner of the brand and/or trademark; or
- when a trademark licensee sells products beyond the geographical scope of their license to importers.
The strong Australian dollar, minimum wage requirements and other retail overheads put sellers under pressure. Some business owners have chosen to import trademarked products and sell online, to maintain a competitive advantage. If you are planning to sell online any products which have been imported from overseas, there are 2 main issues you should consider.
Is it legal? You need consent
The Trade Marks Act 1995 provides that no trade mark infringement occurs when products are imported bearing a trade mark, if the owner of the trade mark has consented to it being used. The burden is on you, the importer, to prove that you have the consent of the brand owner.
Who can consent?
Generally, case law has provided that if a related company, such as an overseas branch, of an Australian brand owner, gives its consent to the importer, then the consent of the Australian brand owner is deemed to have been given. However, if:
- you purchase products from a third party who is not a related company, but is merely a company which has been licensed by the brand owner to manufacture the products; and
- the license prevents the licensee from selling those products outside of a particular area, e.g. so they cannot sell into Australia, then
- you cannot assume that consent has been given by the brand owner.
If you want to import products from other countries and resell them in Australia, you need to be careful. You need to verify that the products you are importing are genuine, and that whoever sold the products to you has the right to sell in Australia.
How do you control the quality?
Parallel importing raises concerns about the quality of the products. If you import products from overseas to resell in Australia, here are some things you should consider:
- Are the products going to have problems with customs?
- Do the products or ingredients of the products comply with Australian law?
- Who is responsible if the products are faulty or have defects?
- How can you ensure the quality of the products?
- How have the products been manufactured and tested?
- What happens if a consumer requires repairs on the products?
- Do the products come with warranties? If so, who will honour that warranty?
The quality of any products you resell is important. Selling products which are faulty or are not of merchantable quality exposes your business to potential liability. Liability can range from the hassle of dealing with complaints, to the issues involved with a major product failure.
Before you embark on selling imported products in Australia, speak to a business lawyer with consumer law expertise. Discuss parallel importing issues and address potential legal issues which may arise.