Parallel import

A parallel import, also known as a grey product, refers to a genuine (ie. non-counterfeit) product placed on the market in one country, which is subsequently imported into a second country without the permission of the owner of the intellectual property rights attaching to the product in the second country. Parallel importation is synonymous with involvement in the grey market, and concerns issues of international trade.

Parallel importers ordinarily purchase products in one country at a price (P1) which is cheaper than the price at which they are sold in a second country (P2), import the products into the second country, and sell the products in that country at a price which is usually between P1 and P2. See arbitrage.

Examples

Hong Kong

Importation of Colgate toothpaste from Thailand into Hong Kong. The goods are bought in markets where the price is lower, and sold in markets where the price of the same goods is, for a variety of reasons, higher.

New Zealand

The practice of luxury car dealers in New Zealand buying Mercedes Benz vehicles in Malaysia at a cheap price, and importing the cars into New Zealand to sell at a price the same as or lower than the price offered by Mercedes Benz to New Zealand consumers.

International approach

Parallel importation is regulated differently in different jurisdictions; there is no consistency in laws dealing with parallel importation between countries. Neither the Berne Convention nor the Paris Convention explictly prohibit parallel importation.

Germany

In Germany, the Bundesgerichtshof has held that the doctrine of international exhaustion governs parallel importation. The European Union allows the doctrine of international exhaustion to exist between member states, but not outside the EU.

Hong Kong

In Hong Kong, parallel importation is permitted under the Trade Mark Ordinance, but not under the Copyright Ordinance.

United States

In the United States, parallel importation is prohibited, and the United States Trade Representative lobbies other governments to prevent parallel importation in their respective jurisdictions.

Critique

There are deep philosophical divides over the legitimacy of parallel importation. On the one hand, many people believe parallel importation benefits consumers, offering them the cheapest choice in goods. On the other hand, others believe that parallel importation undermines the investment which intellectual property owners put into their intellectual property assets, discourages them from making such investments, and also encourages intellectual property piracy.

In essence the tension concerns the rights and duties of a protected monopoly. Intellectual property rights allow the holder to sell at a price above that which would prevail in a competitive market, but by doing so the holder relinquishes sales to those who would be prepared to buy at a price between the monopoly price and the competitive price. Allowing parallal importation prevents the holder from exploiting the monopoly further by market segmentation, ie. charging more to one set of customers than to another set.