Parallel importation
Parallel importation (also known as participation in the grey market) is an issue of intellectual property and international trade. There are two features of parallel importation:
- goods are placed on the market in the place of export, the foreign country; but
- the owner of intellectual property rights in the place of importation, the domestic country, opposes their importation.
An (actual) example is 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. Another (actual) example is the 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.
Various laws of various jurisdictions govern parallel importation of various goods very differently. In the United States, for example, parallel importation is prohibited, and the United States Trade Representative lobbies other governments to prevent parallel importation in their respective jurisdictions. In Germany, the Bundesgeriscstshof 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 of the Union. In Hong Kong, parallel importation is permitted under the Trade Mark Ordinance, but not under the Copyright Ordinance. There is absolutely no consistency in the law of parallel importation between countries: neither the Berne Convention not the Paris Convention explictly prohibit parallel importation.
There are deep philosophical divides over the legitimacy of parallel importation. On the one hand, many people believe parallel importation benefit consumers, offering them the cheapest choice in goods. On the other hand, others believe that parallel importation undermines the valuable investment of intellectual property owners in their intellectual property assets, discouraging investment in such businesses, and also encourages intellectual property piracy. In essence the point is about 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 forgoes sales to those who would be prepared to buy at a price between the monopoly price and the competitive price. Allowing grey markets prevents the holder of rights from exploiting the monopoly further by market segmentation, i.e. charging more to one set of customers than to another set.