Pressure to ease curbs on branded goods

Date: 05/11/1998

By Renée Cordes

SEVERAL member states are urging the European Commission to come forward with proposals to scale down trade mark restrictions on branded goods imported into the EU, claiming they harm consumers and hinder free trade.

Sweden is leading the campaign for the institution to amend or repeal a law which allows companies to ban the sale of trade-marked goods if they are imported from countries outside the European Economic Area (the 15 member states of the Union plus Norway, Iceland and Lichtenstein).

The debate has been sparked by a recent European Court of Justice case in which the judges ruled that an Austrian sun-glasses manufacturer had the right to ban a local discount retail chain from importing cheaper frames bearing its trademark from outside the EU and selling them at bargain prices.

The Court ruled that under a 1989 Union law, once trade mark owners put products on the market in the EEA, they could not control where they were bought and sold. However, this rule did not apply to goods brought in from outside the EEA area, which accounts for about 40% of world trade, through what is known as the 'grey' market.

The decision sparked an outcry in some member states, with retailers expressing concern that the ruling would restrict competition and lead to higher consumer prices.

Politicians also expressed fears that the verdict would undermine support for the single market among consumers, because it imposed restrictions on trade rather than encouraging competition.

Following the ruling, the Commission launched a study into the economic impact of such sales, known as parallel imports, which is due to be published by the beginning of next year.

A spokeswoman for Internal Market Commissioner Mario Monti said that while the institution was aware of price differences in some branded consumer goods such as jeans and compact discs, it did not yet know to what extent these resulted from cheaper imports being sold in the Union.

Since the ECJ delivered its ruling, Stockholm has led the way in pressing for Union legislation to be amended or bilateral agreements struck to allow the sale of cheaper branded goods imported into the EEA from third countries, arguing that this would encourage competition and ultimately lead to lower prices.

"We believe these kinds of laws are bad for Europe's consumers," said Niklas Johansen, an adviser to the Swedish trade minister, who added that while some trade mark restrictions were necessary, those which specifically applied to countries in the EEA hindered free trade.

"The issue here is not about pirate copying, but about the single market," he said, adding that EU rules on trade marks should be expanded to include countries such as the US. "We believe the larger the area, the more competition we will get," argued Johansen.

Finland, Denmark and the UK are also understood to be keen on easing import restrictions.

A Finnish diplomat, whose government passed a law banning parallel imports before the Court's decision in order to comply with EU legislation, said that while it was easy to restrict the sale and resale of products such as Levi jeans, setting boundaries became more difficult for goods such as pharmaceuticals and medical devices.

However, some EU governments, including France, Italy and Germany, have urged caution, warning that weakening trade mark rights could dampen investment and harm consumer service.

Given these concerns, internal market ministers agreed at a meeting in September that they would await the outcome of the Commission's study before deciding what, if any, action to take.

Monti himself has warned that measuring the economic impact of the restrictions is far from easy.

"The immediate direct impact on consumers through the price levels might be obvious, but the indirect impact in terms of quality, research, service and so on must also be taken into consideration," he said.