There have been a plethora of small businesses using social media sites such as Facebook and Instagram in recent years. In particular, many small business owners are choosing to start selling fashion and clothing on social media. There are some legal considerations that such sellers should consider before starting their business.

Parallel Importing

Often, clothing and fashion sold via social media are a form of parallel importing. Parallel imports occur if your business sells genuine products directly to consumers in Australia outside of any formal manufacturer distribution channels. For example, if you bought a dress from an online supplier in China and resold it through Facebook to an Australian consumer, this is considered parallel importing.

Parallel importing is legal in Australia and in general supported by the government as it increases competition. However, as the seller of parallel imports, there are some legal obligations you should be aware of.

Inform Consumers

One of the guarantees under the Australian Consumer Law is that the seller has the right to sell the goods – that is, they have clear title – or if not, to alert the consumer that they have a limited title. Hence to best protect themselves, the ACCC has recommended for sellers to inform potential consumers that they are selling parallel imports.

Consumer Guarantees

As the seller/owner of your business, you have the full legal responsibility to your consumers under the ACL. This means that you are responsible for any faulty products and must answer to the consumer guarantees. If a product you have sold has problems, then, in general, you will be held responsible for any refunds and returns. The supplier you bought it from or the authorised distributor will not be considered connected to your business. Under the ACL, you cannot refuse to help or ask the consumer to contact the original supplier/manufacturer instead.

One of the most relevant consumer guarantees for fashion business owners is that products must match the descriptions made, whether on labels or advertisements. Many sellers like to add a description or a photograph of the clothes or accessory they are selling. Hence, it is useful to know that a consumer who buys a product which does not match the description will be entitled to a remedy. For example, this includes goods that appear in a different colour from what was described. The case of Cavalier Marketing (Australia) Pty Ltd v Rasell (1990) 96 ALR 375 stated that even if the difference is ‘unavoidable’, the consumer is still entitled to a remedy as long as it can be shown that the difference is ‘substantial’. As the seller, you ensure your description of the product you are selling is as close as possible to it in reality and that vague descriptions are avoided.

Trademark Infringement

Under the Trades Marks Act 1995 (Cth), a person who uses a registered trade mark about goods does not infringe the trade mark if the mark has been applied to goods with the consent of the registered trade mark owner. This has traditionally worked as the defence to parallel importers and trade mark infringement claims as ordinarily it is expected that a genuine good would have the trade mark applied with the owner’s consent.

However, the recent case of Sporte Leisure Pty Ltd v Paul’s International Pty Ltd (No 3) [2010] FCA 1162 has held that in some cases, the consent of a trade mark extends only to specific territories. Therefore, the seller of parallel imports should ensure that this trade mark consent extends to Australia before selling the goods, or if not, to obtain consent to sell it. Note also that the case of Paul’s Retail Pty Ltd v Lonsdale Australia Limited 2012] FCAFC 130 has stated that if the brand is global and is owned in Australia by a group based in Australia, then it will be difficult to argue consent has been given. It is the onus of the importer to prove there is consent.

Copyright

Regarding clothing, it is unlikely that a particular garment will be copyrighted and that as the seller, you can be held liable for infringing copyright. The recent case of Polo/Lauren Company L.P. v Ziliani Holdings Pty Ltd [2008] FCA 49 held that big fashion brand and copyright owner Polo was unable to rely on its copyright to prevent parallel imports as a clothing label is a ‘non-infringing accessory’ in which case copyright is not infringed.
On the other hand, photographs are protected by copyright as long as the work is original. Using a photograph without the permission of the photographer can constitute a breach of copyright. This means that using the supplier’s photograph of a model in a skirt without permission will be a copyright violation.

Key Takeaways

If you are the owner of a social media fashion related business, be aware of whether or not you are engaging in parallel importing as there are legal considerations that come with it. Additionally, ensure you are not infringing any original supplier’s trade mark or copyright as you advertise and promote your business and its products.

Lachlan McKnight

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