Buyer Beware – Potential Perils of Purchasing a Parallel Import

There can be no denying that online shopping has been a blessing in disguise during these unsettling times. Not only has it provided a way to purchase necessary goods during lockdown, it has provided some much-needed online retail therapy from the comfort of your own home.

It has further proved to be a useful mechanism to stimulate the economy while shops remain closed, saving many retailers from going under and providing consumers with a way to purchase goods while practicing social distancing.

Apart from the obvious risks involved in online shopping e.g. credit card fraud, identity theft or fake online stores, those who are fortunate enough to be able to access and purchase goods from online shops are often not aware of an additional risk involved in purchasing certain online goods.

Next time you log onto your favourite online retail site and scroll for deals at your leisure, make sure to be on the lookout for any products marked as a ‘parallel import’. If you decide to purchase such a product, please remember to carefully check the specifications of the product which should contain a paragraph stating the following:

“The goods have been imported without the approval or license of the registered owner of that trade mark and that no guarantee or warranty in respect of such goods will be honoured or fulfilled by any official or licensed importer of such goods.”

South African retailers (even online) are by law required to place a conspicuous notice on and draw your attention to the fact that the goods it is selling is a parallel import.

What is a parallel import?

Simply put a parallel import, also referred to as a grey good, is a genuine product that has been imported into South Africa without the permission (and often knowledge) of the intellectual property owner of such goods i.e. the manufacturer or local distributor.

Parallel imports or grey goods are not counterfeit products and the importation of such products, provided they do not infringe intellectual property rights, is generally acceptable . Such goods are not uncommon, especially on online retail sites, as they can often be bought in and imported from other countries and sold at a lower cost than would have been the case if the product was sourced directly from the manufacturer or purchased from a local distributor.

Naturally, this type of trade is likely to be detrimental to the business of a local distributor who has validly obtained a license to sell such goods in South Africa. Manufacturers and local distributors do have recourse against those who import and sell grey goods by claiming intellectual property infringement against such parties. Intellectual property rights can be used to stop parallel imports under certain conditions e.g. if the product is genuine but where the trade mark is applied to the goods without the consent of the trade mark owner or arguably where there is a breach of contract by the licensee which may occur where goods are sold out of the licensed country. Other examples include where the local manufacturer or distributor owns the copyright in the packaging and where, in certain circumstances, the products have been relabeled. The South Africa Copyright Act, 1978 contains useful provisions exactly for this purpose.

The provisions in local law fortunately do not contain provisions to chastise individual consumers who wittingly (or not) purchase a parallel import for personal use. However, this does not mean that consumers may come off entirely unscathed by giving in to what seems to be a great deal for a genuine product.

Potential consequences of purchasing a parallel import

Purchasing a parallel import, although not illegal, does place you at risk, which could include that:

  1. The product may not be not safe to use / does not comply with the local regulations as it has not passed local safety tests and is uncertified. Any damage to property or injury, or death, could involve all relevant parties in serious legal action;
  2. Local distributors will likely not honour the manufacturer’s warranty or guarantee;
  3. No replacement, refund or after sales support is likely to be provided by a local distributor or the seller/importer; or
  4. The importer/seller will likely not assist with the replacement or refund faulty goods. You will have to locate and send the product back to the original manufacturer – an often impossible feat.

Know your consumer rights

South Africa has enacted legislation to try and protect consumers against the above risks.

Section 25(2) of the Consumer Protection Act, 2008 (“CPA”) provides that “ a person who markets any goods that bears a trade mark, but have been imported without the approval or licence of the registered owner of that trade mark, must apply a conspicuous notice to those goods in the prescribed manner and form”. The accompanying regulation 8(2)(c) to the CPA further provides that if the grey goods bear a trade mark, such notice must clearly state that the goods have been imported without the approval of the registered owner of the trade mark and that no guarantee or warranty will be honoured by any authorized importer of such goods.

For online retailers this means that they must apply the notice in a visible place where a consumer is likely to see it in a legible size (e.g. in the product description line). Furthermore, the retailer must draw the consumer’s attention to such notice, in plain language and explain this to the consumer (e.g. by adding an emboldened paragraph in the specification of the product).

The aim of this provision is to ensure that the consumer is made aware of the fact that the goods are grey goods and are not covered by any guarantee of the manufacturer or authorized distributor in South Africa. Thereby, ensuring that you, as the consumer, make a well-informed decision.

Please keep this in mind the next time you are scrolling the net for your next e-purchase and come across an incredible deal bearing a ‘parallel import’ notice. The cost saving is likely only because you are forfeiting your after sales guarantee or warrantee.

Daniëlle van Rooyen
Associate | Trade mark Attorney