Australian parallel importers face additional legal risks

Posted by AFN Staff Writers on 20th June 2012

A recent Federal Court of Australia decision together with an earlier unconnected ruling issued by Australia’s food agency each have considerable potential to hit parallel importers.

According to a leading food industry law specialist, importers of many well-known brands sourced from countries without involvement by the Australian distributor, face greater legal risks. Letters threatening legal action are already being sent to importers by some of Australia’s top law firms.

What is parallel importing?

Parallel importation of branded products usually involves legitimately produced branded goods (as opposed to counterfeit items) that have been manufactured for an overseas market, being sourced from that overseas market for importing into Australia. The process bypasses the authorised Australian distributor, and the products are typically bought and sold at a cheaper price than like-branded products that were specifically designed for and distributed in the Australian market. Parallel importing is not possible for all products depending on circumstances. The operation of different parts of the Australian Trade Marks legislation can allow a parallel importer to operate only if strict legal requirements are met.

The market for parallel importation is sometimes referred to as the ‘grey market’ (as opposed to a black market).

Federal Court Decision

According to food lawyer Joe Lederman of FoodLegal, the Federal Court of Australia’s decision handed down by Justice Gordon on 5 June 2012 in the case of Lonsdale Australia Limited v Paul’s Retail Pty Ltd [2012] FCA 584 makes it clear that parallel importers will need to do a lot more homework to ensure their branded imports are not blocked by the owner of the Australian trademark. On the particular facts of the case, Mr Lederman said the judge held the requirements for legitimate importation were not all met.

“The case has established that direct importers of goods into Australia bear a significant onus of proving that the registered owners of the Australian trademarks have given consent for the use of their marks to the competing goods that were acquired from another overseas channel. This decision may drastically affect the parallel imports market, as in many cases it will be very difficult for the importer to obtain all the facts,” Mr Lederman said.

Mr Lederman said it was critical for importers to act immediately, to begin by getting good legal advice on what they need to do in order to establish the legal defence requirements of the Trade Marks Act and to protect themselves from potential closure by the Australian brand-name owner or licensee.

Food Standards Australia and New Zealand (FSANZ) Ruling

On another issue, that also has potential adverse impacts for parallel importers, Food Standards Australia New Zealand (FSANZ) in February 2012 issued an Interpretation the Australia and New Zealand Food Standards Code that specifies a much stricter lot identification requirement for imported foods.

“FSANZ has interpreted the lot identification requirements of the Code in a way that could prevent re-coding of some food products for Australian traceability purposes,” Mr Lederman said.

According to Mr Lederman, the Federal Court decision together with FSANZ’s ruling each have their own potential to change the future, both for parallel importers and trademark owners alike.