Liberalization of parallel imports regulations and marketing strategies of international corporations.

Abstract

This article examines two developments that challenge the classical model of diffusing products abroad through an exclusive distributor in each foreign country: the growing tolerance of many states for parallel imports, also known as grey products, and the rapid rise of international internet selling. It explains how price differences for identical products across national markets create incentives for parallel trade and presents the main objection to it, that grey marketers free ride on the investments of official distributors in building brand reputation and goodwill. The article distinguishes between the issue of consumer confusion, where courts require buyers to be informed of differences in product, warranties or services, and the issue of the legitimacy of parallel imports, which turns on whether the exhaustion of intellectual property rights applies nationally or internationally. It notes that no international agreement settles this question and reviews developments in the United States, where few obstacles remain to the entry of genuine parallel imports, and in the European Union, where exclusive distribution within the Union has been treated as a hindrance to competition. Cross-border online shopping is shown to intensify the phenomenon, calling into question the traditional model of exclusive foreign dealerships. Finally, the article discusses a possible shift by distributors from a 'pull' to a 'push' strategy that relies on retailers and other intermediaries.

Abstract prepared by the editorial office from the full text of the article; the authors did not supply one.