From the DTI website
http://www.thedti.gov.za/ccrd/parallelimportationofgoods.htm
Parallel Importation of Goods
This Consumer Alert pertains to the prohibition of certain unfair practices perpetrated by parallel importers of grey goods, i.e. "importing goods destined for other markets to another without authorisation ".
What is Parallel Importation?
Consumers buy goods or products without knowing the destined market or country of origin of these goods. To an average consumer goods or products in the market are supposed to be safe or meet certain minimum standards. This is not always the case. The business practice of parallel importation or trading in grey goods occurs when goods, which are intended for sale in one market, are exported from their original destination to another country without the authorisation of the manufacturer or the licensed importer.
The goods are not necessarily inferior. They are genuine products but not destined for the South African market for example.
The practice is potentially harmful to competitors of grey goods and consumer of such goods.
How is parallel importation marketed?
The marketing, sale and distribution of parallel imports are usually done through middlemen (licensed importers) in conjunction with or to the exclusion of direct selling by manufactures. The middleman is the only link between manufactures and consumers. Manufacturers would, if they chose to sell directly to consumers, establish offices in those countries where their target market is placed and stock the necessary parts and technical expertise for those relevant products.
In the majority of cases middlemen are appointed by their foreign principals as the exclusive importers of the principal's product. Most of the parallel importation in South Africa is done through middlemen or licensed importers. The middlemen, it must be noted, is an independent businessman and is not controlled by the manufacturer. The effect of the license is that it allows the licensee i.e. the middleman, to have access and exclusive importation rights of the manufacture's products while at the same time it guarantees the manufacturer access to the market. In return the licensed importers assume certain obligations such as marketing, after-sales and protection of the goodwill acquired, by ensuring consumer protection and satisfaction.
What action can you take
On the face of it parallel importation is a legitimate business practice. The obligations of a local distributor or licensee to sometimes ensure that the imported equipment is approved by South African Bureau of Standards (SABS); and of licensed importers have to be recorded in certain instances as registered users of the brand in terms of the Trade Practice Act in certain instances, indicate that it is a legitimate business practice.
The problem arises where the parallel importation parasites on another parallel importer illegally, and consumers are exploited with use of false information or total non- disclosure.
Two examples may be used to illustrate instances where parallel importation may amount to unfair business practice:
Where goods or products are sold without a guarantee from the manufacturer or his/her authorised agent. Such goods are usually referred to as "grey goods";
Firms in the business of parallel importation and sale of grey products via distributors of the foreign principal of the local licensee based in other parts of the world in breach of the distributors' obligations to the foreign principal;
A significant feature of parallel importation "grey goods" is that although the goods are sourced indirectly from the foreign manufacturer, they are not distributed through the preferred or authorised distributors or distribution channels or with authorisation, which usually imposes some obligations.
In representations made to the Consumer Affairs Committee on behalf of distributors of hi-fi equipment, television equipment, video cameras, watches, photographic equipment, it was alleged that parallel importers tend to enter markets where the demand for particular products has already been stimulated. As a result, they are sharing in the gains without having made any contribution.
Parallel importers of grey goods do not generally disclose to consumers that they are not authorised dealers of the foreign principal or local licensed importer. The consumer is also disadvantaged because they do not disclose that they have none the benefits and obligations of being authorised dealers. Parallel importers do not provide service and back-up facilities, and consequently licensed distributors are compelled to provide repair services on goods that they, as licensed distributors did not sell.
The Committee has investigated the matter and concluded in a report contained in Notice 1077 of 1993 that parallel importation has multiple facets.
According to the Notice following conditions must be met before the sale of parallel imports can be regarded as a legitimate business practice:
Dealers indicate clearly in their warranty related literature and where appropriate on all sales receipts:
Whether any guarantee is supported by the manufacturers;
Whether the guarantee is supported by the seller only/or any organisation unrelated to the manufacturer or the licensed distributors network, specifying that the consumer may not be entitled to any rights, including any rights for repair or replacement against licensed dealers of the product or the manufacturer, except as provided by common law or statute;
If there is no guarantee.
Dealers who have been notified by or on behalf of the manufacturer that the goods being sold by the dealer are in a form or state which is approved by the owner of the trade mark under which they are sold or offered for sale to inform customers accordingly;
Retailers to refrain from representing goods as having a sponsorship, approval, status, guarantee repair and back-up services, affiliation or connection recognised by the proprietor of the trade mark under which they are sold.
Remedies, penalties and fines
The Consumer Affairs (Unfair Business Practices) Act, 71 of 1988, is an enabling piece of legislation. It confers wide investigative powers on the Committee and recommends corrective action to the Minister to ensure the discontinuance of unfair business practices. If the Minister accepts the recommendation of the Committee, an order is published in the Government Gazette declaring an unfair business practice prohibited.
An infringement of an order by the Minister is a criminal offence, punishable by a fine not exceeding R200 000 or imprisonment for a period not exceeding five years or both a fine and imprisonment.
What action can you take?
If you are uncertain or you have not been provided with clear disclosure that you are purchasing grey or parallel imported good or product, or need further information or advice, please contact:
the dti Customer Contact Center at 0861 843 384 (ask for the consumer help line) or facsimile (012) 394 2436
Or write to the dti at:
the dti
Consumer Complaints
Consumer and Corporate Regulation Division
Private Bag X84
PRETORIA
0001
Other Services:
The Education and Compliance directorate issues this information as part of an overall education service to consumers. The directorate also offers the following services:
Advisory opinions and clarifications
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