It was the early 2000s. The Y2K panic had been replaced by hope for the new century. The TV show ‘Friends’ was in its prime. The skinny jeans era was on the horizon. A pesky retailer scoured the world, trying to bring the cheapest branded trousers to its customers, wielding a Nokia 3310 and fuelled by a steady diet of Capri Sun..
The retailer found a good deal. It turned out that importing Levi’s jeans from the United States actually cost less than buying them directly from Levi Strauss in the United Kingdom – a shock on the level of finding out that your crush had blocked you on MSN Messenger.
But Levi Strauss wasn’t having it, and neither was the European Court of Justice. The American denim giant took the retailer, Tesco, to the European court to prevent the imports and won. No discounted jeans for Brits. The judgment blocked the ‘parallel import’, where genuine branded goods are imported into a country without the permission of the trademark owner to be sold at lower prices than those set by authorised distributors.
These grey-market goods were historically allowed under UK case law dating back to the 19th century. However, this situation changed after Britain joined the European Economic Community and trademark rules were harmonised in the 1990s. The European Union allowed parallel imports within the bloc but barred all external importations.
The restriction has empowered manufacturers to price discriminate against Britons. It means we pay more for branded goods, from clothing and shoes to perfumes and toiletries, books and electronics. It also means less supply chain flexibility and fewer choices for consumers, who can be restricted from accessing goods altogether.
This situation can change now that we have left the EU. But instead, like with many other Brexit opportunities, we’re stuck in a holding pattern.
Immediately following Britain’s exit, the government decided to maintain the status quo: allow parallel imports from within the EU, to avoid supply chain disruptions and higher costs, particularly for pharmaceuticals used by the NHS. A study found that the NHS saves hundreds of millions of pounds each year due to parallel imports from the EU, but then continues banning them from outside the EU.
This is entirely illogical and inconsistent. Why are parallel imports a good thing when they come from within the EU, but suddenly bad when they come from outside? It may also breach World Trade Organisation rules, which generally require imports to be treated equally. The government undertook a consultation on the situation in 2021, but never offered any sort of reply.
In theory, the UK could resolve the inconsistency by banning parallel imports globally. However, this would harm British consumers by enabling multinationals to set prices even higher than those in the EU. It would also reinforce a principle, long rejected in UK law, which permits intellectual property owners to block the cross-border movement of legitimately licensed products solely to sustain price disparities. A more rational and practical approach to addressing the inconsistency would involve permitting imports from around the world, possibly with specific exceptions for certain products (like pharmaceutical products sold at below-market rates in developing economies).
There is substantial evidence supporting the advantages of lifting parallel import restrictions from other regions. A 2009 study by the Australian Competition and Consumer Commission revealed that eliminating these restrictions led to a 13% decrease in CD prices. Additionally, another multi-county study that involved Australia, Canada, Hong Kong, Israel, Malaysia, the Netherlands, New Zealand, Norway and Singapore reported a price reduction of between 7.2% and 7.9% for CDs.
In a 2012 study commissioned by the New Zealand Ministry of Economic Development, Deloitte Access Economics discovered that lifting restrictions led to lower consumer prices and had no adverse effects on the domestic music, book publishing or computer software industries. This finding contradicts industry claims that restrictions on parallel imports are necessary to stimulate domestic creative production.
So here we are, over two decades after Tesco’s ill-fated battle to bring us cheaper Levi’s, still paying more than we should for branded goods. We’re stuck, like a dial-up connection that won’t load the next page. Thankfully, we now have the opportunity to break free from this outdated restriction, to follow the likes of the United States, Singapore, Hong Kong, South Africa, India, China and, for most goods, Australia and New Zealand, which all allow parallel imports. We can boost choice and lower prices; it’s a matter of will.
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