Parallel importation “fraught with risk”, warns legal expert as MAC and Target court case continues

MAC and Target will slug it out in court again over claims that MAC cosmetics sold by Target are fakes, with the case highlighting the ongoing debate over parallel importation in Australia.

At a directions hearing in the Federal Court yesterday, David Studdy, senior counsel for Target, said the retail giant did not know at this stage whether the products were counterfeits or parallel imports.

“We just don’t know and we’re obviously making urgent inquiries”, he said.

Stephen Stern, partner at law firm Corrs Chambers Westgarth, told SmartCompany the MAC and Target case demonstrates parallel importation is “fraught with risk”.

“It shows the problem in buying from people other than the genuine sources. The risk is you get counterfeits or you get some genuine products and amongst the rest are counterfeits,” he says.

Stern says the government policy which enables parallel importation into Australia was formed on the basis that it would lower prices for consumers.

While parallel importation may have reduced prices of some goods it also brought with it a whole range of problems, according to Stern.

“Unwitting importers often receive counterfeit products. The parallel importers never import spare parts or service information or material for products that require that,” he says.

“If you buy a product that requires servicing or warranty you get referred almost inevitably back to the genuine importer and often the products are different.”

Stern warns that genuine importers of a product suffer from parallel importation as well, as they often feel they have no choice but to provide parts or support warranty claims for products they have not imported.

“If they don’t support the parallel product their brand suffers in the marketplace so there are knock-on effects,” he says.

Stern warns there can also be health and safety issues with parallel imports that turn out to be counterfeits.

“It is common in the perfume trade that you will get counterfeits that are said to be parallel imports but what is inside the bottle, who knows,” he says.

“There have been counterfeits in the alcohol industry as well – after some I have seen I would never drink that brand again without checking the importer.”

Stern says the government needs to revisit its policy on parallel importation to weigh up whether it is delivering the promised benefits.

He warns businesses to be very careful if they are going to engage in parallel imports and says there are three key things to check.

1. Are you getting the genuine products?

“If they are coming out of Asia then beware, if you are told they are factory seconds that is almost always false,” says Stern.

2. Even if it is genuine, is the product intended for the Australian market?

In the recent Paul’s Warehouse case the parallel importer was found to have infringed Greg Norman’s trademarks through importation of products destined for the Indian market to Australia.

3. Are you going to be in a position to honour the warranty?

“You do have to honour the warranty if you sell products. Would you have the spare parts and the know-how? You can’t refer it to the genuine distributor who has never seen the products before.