Monti backs trade-mark status quo

Date: 14/01/1999

By Peter Chapman

INTERNAL Market Commissioner Mario Monti has signalled his support for maintaining the EU's controversial ban on reimporting cheap trade-marked goods from outside the Union.

His move will add to the gloom of retailers campaigning for changes to rules banning them from reselling branded goods such as Levi's jeans.

In response to a question from German Christian Democrat MEP Werner Langen, Monti has indicated his support for the existing regime, including the principle of 'Community exhaustion' of trade-mark rights.

This means that once a trade-mark holder has licensed a retailer to sell its goods in any EU country, other companies are free to buy these products and resell them anywhere within the Union.

If, for example, Calvin Klein products are sold through a licensed dealer in Athens for less than they cost in Paris, it could be worthwhile for a French company to reimport them rather than buy from local dealers.

By contrast, firms such as UK hypermarket chain Tesco want this freedom to be widened to a system of 'international exhaustion', which would allow them to scour the world for cheap branded goods. These products, which are marketed outside the Union by their manufacturers, could then be reimported legally.

"Community exhaustion is likely to have certain advantages for consumers, depending on the product," said Monti in a written answer to the MEP's question. "In particular, it can guarantee the sustained quality of the products moving around the internal market and ensure continuity of after-sales service."

Firms have called for a change to the EU's 1988 trade-mark directive after becoming embroiled in legal action with manufacturers. Levi's is currently suing Tesco for reimporting its jeans from outside the EU and selling them at prices well below those at the manufacturer's stores.

Tesco chief executive Terry Leahy claims consumers are paying the price for the current system. "What it boils down to is that a wide range of goods are priced higher than they need to be," he said. Leahy believes that Levi's would ultimately gain if he was free to sell large quantities of low-priced jeans.

But Monti defends the legislation. "The trade-mark directive has had the effect of heightening competition between producers within the internal market," he said, adding that the EU's "main trading partners" did not apply the principle of international exhaustion.

However, Hendrik Abma, a policy adviser to the Foreign Trade Association, denied this, claiming that both the US and Japan recognised the principle.

The campaign by parallel importers and member states, such as Sweden and the UK, prompted the European Commission to order a study into the issue by market research specialists NERA.

Internal Market Commissioner Monti has signalled his support for maintaining the EU's ban on reimporting cheap trade-marked goods from outside the Union.