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Is Parallel Importing Legal?

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The growth of online shopping in Australia has made it easy for consumers to purchase products from overseas. It has also allowed certain retailers to provide Australian consumers with goods that are available more cheaply overseas. Goods that are imported and sold outside the official distribution channels are known as ‘parallel imports’, or sometimes ‘grey’ or ‘direct’ imports. 

For example, sneakers purchased from Nike in the USA and subsequently imported to Australia for sale (without the authorisation of Nike in the USA) would be a parallel import.

Parallel importing raises a number of legal concerns for manufacturers, brand owners, importers and consumers. Until recently, trade mark owners were able to stop parallel importers from selling these competing goods in certain circumstances. However, new changes to the law are making it increasingly difficult for Australian trade mark owners to stop parallel importing. This article will set out:

  • what parallel importing is;
  • when parallel importing is legal. 

What is the Purpose of Parallel Importing?

The primary reasons for engaging in parallel importing are that a product is:

  • available overseas for a lower price than in Australia; or
  • not available in Australia through official channels.

Australian consumers are commonly victims of price discrimination. This means that goods sold in Australia are often overpriced compared to those available overseas. Certain IT products are often more expensive in Australia, such as:

  • software;
  • music; and
  • videos.

In some cases, a manufacturer will make different versions of a particular product to sell to different markets. The manufacturer will then only sell each version in its intended market. This is common practice for electronic goods such as mobile phones.

Therefore, policy around parallel importing pits protecting intellectual property rights against consumers’ rights to fair competition in the market. Previously, the law typically prioritised the rights of intellectual property owners. However, recent changes to the law have favoured consumers by softening restrictions on parallel importing.

Are Parallel Imports Legal?

In Australia, there are laws that expressly permit parallel importing. The Trade Marks Act 1995 has recently strengthened the defence to trade mark infringement where the trade mark has been applied to goods with consent from the trade mark owner. Under the Act, a person infringes a registered trade mark if they use the trade mark without the permission of the trade mark owner. The trade mark must be used in: 

  • the course of trade; and 
  • relation to the same or closely related goods or services to those for which the trade mark is registered.

Under the new changes, the circumstances in which the parallel importation of trade marked goods does not infringe a registered trade mark are clearly set out. Parallel importing is legal if, after making ‘reasonable enquiries’, a reasonable person would come to the conclusion that the trade mark had been applied to the goods with the consent of: 

  • the trade mark owner;
  • one of the trade mark’s authorised users; 
  • someone with significant influence over the use of the trade mark; or 
  • an associated entity of any of those persons. 

Reasonable enquiries may include seeking a certificate of authenticity from the supplier. This means that, for example, you could legally purchase a laptop from the Apple store in the UK and sell it in Australia under the new changes. 

What a ‘reasonable enquiry’ means will depend on the circumstances at hand. Although a certificate of authenticity from a reputable supplier is likely to suffice, sighting a certificate of authenticity is unlikely to be sufficient where the:

  • the importer is purchasing products at a significantly lower price; or
  • goods appear different and the importer suspects they might be counterfeit.

In these cases, further enquiries will likely need to be made. 

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Can I Prevent Parallel Imports?

Under this new law, it is now far easier for importers to legally import these grey goods into Australia. This presents great difficulties for manufacturers or brand owners, who may wish to prevent other parties from engaging in parallel importing of their products. However, it may still be possible to prevent parallel importing. Below, we discuss some practical steps available to manufacturers or brand owners seeking to preserve their product distribution model.

Distribution Agreements

Trade mark owners can still control the distribution of their products through distribution agreements to a certain extent. For example, a trade mark owner may enter into an agreement allowing a distributor to sell goods only in the USA. If that distributor starts selling the goods in Australia, they will be in breach of contract and the trade mark owner could claim an injunction and damages.

Customs Notices

Trade mark owners can lodge a notice with the Australian Customs and Border Protection Service (ACBPS), requiring ACBPS to seize any goods bearing the relevant trade mark that an authorised party has not imported. This will help if the goods are counterfeit or unlawful parallel imports. However, trade mark owners will need to pay the costs involved in seizure, storage and destruction of any seized goods. Fortunately, assuming the trade mark owner takes action and is successful, these costs may be recovered from the importer, 

Key Takeaways

Parallel imports are controversial. On the one hand, many businesses rely on traditional models of product distribution to maintain their brand image and service quality. However, these traditional models often involve price discrimination. The recent updates to the law that protect parallel importing are a positive development for Australian consumers. Although challenging for manufacturers and brand owners, these changes mean that they will likely have to rely on more restrictive distribution and licencing agreements to protect their rights. If you have any questions about parallel importing, contact LegalVision’s trade mark lawyers on 1300 544 755 or fill out the form on this page.

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