Parallel Importers Confuse Consumers
By Grace Jiu and Sonia K

Bandar Seri Begawan - A rising tide in what is known in commercial circles as 'parallel imports' is causing serious concern among sole distributors, due to unfair competition, while it tends to confuse consumers as well.

This phenomenon invariably has generated a ground for competition, compromising exclusivity enjoyed by sole distributors of consumer products.

Parallel imports are generally genuine goods per se, as opposed to counterfeit ones.

The Weekend Bulletin in a bid to investigate various issues on the local sole distributors' business situation and consumers' side in terms of any disparity in quality and safety of the parallel import, in particular food items, as compared to the sole distributor's goods, found out that consumers are not actually at risk or potentially at a disadvantage. Sometimes they seem to benefit with the presence of parallel imports.

Parallel importing allows retailers, wholesalers and other parties to obtain goods subject to intellectual property directly from licensed or authorised overseas sources, rather than dealing with local suppliers, licensees or agents. As such, parallel importation presents the scope for competition between sources of the same or similar goods.

On parallel imports, the same brand of product may exhibit minor perceivable differences from the sole distributor's imports, such as the ingredients used, place of manufacture, and in some instances, the packaging, and characteristics for example as well in terms of taste.

It has been known for example that the same brand of cocoa products, among others made in different countries would have slight variations in their features such as the way it tastes, looks and feels but generally speaking, both meet the quality and safety standards of the importing country.

It was learnt that the major motivation for the persistence of parallel importing is a significant price disparity.

'Parallel importers, generally speaking managed to source goods at a lower cost and offer them at a cheaper price in the market. It is therefore common to see these parallel imports appearing at the local corner shop as they see it cheaper to buy it in bulk and sell it at price ceilings of the licensed distributed product.

With particular reference to food importation, a spokesperson for the Ministry of Health, one of the responsible organisations in authority with regards to the permission of food imports said that all food imports to the country will have to go through the same screening procedures to ensure quality and safety standards are being met, and that there is no demarcation between sole distributors' imports and parallel imports.

Parallel-imported goods are sometimes confused with pirated and counterfeit goods. Parallel imports are goods that are manufactured and put into circulation in another country either by, or with the consent of, the owner of the applicable intellectual property rights.

In contrast, pirated and counterfeit goods are infringing goods produced without the consent of the owner of the intellectual property right.

Currently a multi-line local company is facing a very serious, problem with an animal food product, which is found very much cheaper in Thailand, an opportunity for parallel importation to be exploited, whereas the sole distributor's source is from Malaysia, which he also reckoned sources from Thailand.

In an interview with the Weekend Bulletin, the trading manager of the company said that even when the general parallel importer goes through a middleman and not the producer, and yet still earns, "They declare everything, that should be considered legal as long as they are not the fake products," said the trading manager.

"In some ways it helps to widen the distribution ... but if it's continuing, we cannot develop the products properly, I think they are not concerned about the quality of the products," he said. According to him, the problem has been in existence over 30 years ago. Now it's more serious with the advancement in communication, which allows parallel importers, their sources and potential bulk buyers to communicate swiftly.

To combat this matter, the company has got the green light from the mother company to run trade offers such as buy ten free one, to challenge their parallel rivals, but without change in the pricing agreed. Sometimes they challenge in terms of prices to discourage them from parallel importers more but it doesn't always work.

On the legality of parallel imports, a legal advisor, and an informed source from the Attorney General's Chambers, said that parallel importation is not against the country's laws, for one, by virtue of the Asean Free Trade Area (AFTA) Agreement, it is apparently not an issue.

According to informed sources pertaining to this matter, basically under trademark laws too, parallel importation is not a crime, given they are genuine goods. Based on Chapter

98 Trade Marks Act, `trade mark' means any visually perceptible sign capable of being represented graphically which is capable of distinguishing goods or services of one undertaking from those of other undertakings. A trademark may in particular consist of words (including personal names) designs, letters, numerals or the shape of goods or their packaging.

Another authorised sole distributor also faces the same problem of parallel imports. According to the senior marketing manger, they have contractual obligations as a sole distributor to fulfill such as how much to sell. The pricing difference of parallel imports and theirs can be very big even up to 30 per cent, he said.

"I won't say there is a different issue (in quality)," he commented that there is no issue of inferiority in parallel products. "The question of whether they are lesser in quality, I think not," he added.

"This is also attributable to the stringent food and safety act the country enforces," he commented.

`...every time you bring in something,' you have to bring in all kinds of certificates, health, manufacturing certificate, among many crucial things... (required by) the food and safety act ...I always question where do the parallel importers get those certificates, as some of the principals he had spoken to did not issue those certificates to a company in Brunei, other than us," he commented.

He also said that his mother company has no idea of parallel importers and they may have got their goods from wholesalers, and not from the mother company's producers. He also said that the matter of parallel importing is highly difficult to control, likely due to the massive numbers of producers and wholesalers for some products.

The possibly only tell-tale sign to distinguish parallel imports and that of the sole distributor's is the country of manufacture and importer with the indications on the product, he said.

Conclusively the sole distributor who's given the official authorisation by the product's mother company to supply its products in the country seems to be the only party who suffers when another company is able to procure the exact or similar goods from elsewhere.

Consumers, on the other hand, may opt for cheaper choices of parallel imports based on their individual preferences.  -- Courtesy of Borneo Bulletin

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