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• Goods Covered by the Survey
• Factors That Make Parallel Importing More Likely
• Methods Used to Prevent Parallel Imports
• Problems and Benefits of Parallel Importing
• Supply/Marketing Decisions
• Pricing Decisions
• Sales Lost to Parallel Importers

Goods Covered by the Survey

Trademarks were the most popular form of intellectual property right protection for goods manufactured by the firms surveyed. Interestingly, copyright was the least prevalent form of intellectual property right used. Of those that indicated that their goods were covered by copyright the majority (73%) indicated that these goods accounted for less than 20% of their UK turnover. Of those firms that had goods covered by copyright only 22.5% were aware of parallel imports in their products. This compared to 53.1% and 17.5% reported by manufacturers of goods covered by trademarks or patents.

Factors That Make Parallel Importing More Likely

Of those that were aware of parallel imports in their goods, most claimed that the volume of such imports varied over time. The reasons they believed caused this volatility are:

Methods Used to Prevent Parallel Imports

Most firms (65.3%) that were aware of parallel imports had tried to prevent parallel imports. Few (14.3%) had chosen not to do business in a country from which parallel imports might flow but other actions were used. Only 18 respondents were willing to state how they had attempted to prevent parallel imports but they indicated the following:

Problems and Benefits of Parallel Importing

The problems the manufacturers perceived were caused by parallel imports but there were some significant trends.

Interestingly, the pricing implications were perceived to be the most troublesome problem caused by parallel imports. Reputation effects were rated quite highly also, though the authors indicate in their report that they believe some firms may have confused parallel imports with pirated goods when answering this question. A number of the firms (30.6%) also indicated that there were some benefits to manufacturers from parallel importing. Competition for authorised dealers, wider access to supplies and an increase in the number of consumers introduced to the products were cited by the firms.

Supply/Marketing Decisions

The impact of manufacturers supply and marketing decisions is one of the most interesting and one of the most important changes that will arise from a change in the parallel importing restriction.

The UK survey asked firms whether they sold their products overseas and, if so, the methods used to supply overseas markets. Of the 168 firms who supply overseas markets, 92.9% used direct exporting as a means of doing so. Over half of the firms (54.2%) had a manufacturing subsidiary and 35.1% licensed an independent producer. Of those that supplied overseas markets, 28% were aware of parallel importing of their products.

The removal of the parallel importing restrictions within the EC provides a unique opportunity to assess how firms have reacted to the legitimate movement of parallel imports. Of the UK firms surveyed, 87.5 % supply the EC market. Interestingly, only 13.6% indicated that their supply strategy had been affected by the possibility of parallel trade within that market. The vast majority had not changed their supply strategy. Changes had occurred most in those firms that were aware of parallel importing with 41% of those firms changing their supply strategy. But again, the majority of firms did not.

The changes in supply strategy varied but the most popular were changing pricing policy by, for example, equalising prices within the community, or restricting sales to countries likely to be the source of parallel imports. Other changes also included making products more country specific using different labelling etc.

Pricing Decisions

The vast majority of firms (91%) that supply overseas markets used different prices in different markets. Most firms indicated that they sold their products at prices both higher and lower than the prices charged in the UK in different countries. The main reasons given for these differences were:

These responses did not vary significantly between firms that supplied EC countries or non-EC countries. The authors reported a correlation statistic of 0.99 which indicates a high degree of correlation between the two sets of responses. Similarly, there was little difference in response to this question from firms that were aware of parallel imports and those that were not aware.

Sales Lost to Parallel Importers

The survey asked the UK firms to indicate the percentage of UK sales lost to parallel importers. In the product markets firms named as having been affected by parallel imports, the 67 responses are summarised as follows: