Competition Policy and Parallel Trade

The term “parallel trade” refers to goods produced in one Member State and exported into another Member State by using other distribution channels outside the manufacturers official distribution system. Companies might benefit from using their own distribution system because this enables them to exploit price differences of different countries resulting from national differences in consumer tastes and behaviour. However, it might be beneficial for other companies to arbitrage the price differences by purchasing the product in low price countries and exporting them to countries in which the product can be sold at a higher price. This process is called “parallel trade” respectively “parallel importation”.3

Manufacturers might protect their sales agents from other competitors by hindering the market penetration of their products through other distribution channels. Furthermore, manufacturers might try to inhibit parallel importation by prohibiting their sales agents in various countries to export the products outside their area in which they operate. In contrast to this technique, sales agents might not be allowed purchasing and importing products from other sales agents and using other informal distribution channels.

The Treaty of the European Community contains several Articles which are used to stop undertakings inhibiting parallel trade.

Article 284 deals with the prohibition of quantitative restrictions on imports and all measures having equivalent effect between Member States.

Examples of quantitative restrictions are quotas as well as import and export bans, which are mostly seen as non-proportional reactions to the restricted trade in the European Union. Measures which are equivalent to these restrictions are mostly defined by important case decisions made in the past. These are illustrated by court decisions issued in Dassonville Formula, Cassis Principles, and Keck cases. 5

Court rulings mandated that goods legally produced and marketed in one Member State should not be prohibited in another Member State. Restrictions were defined by directly or indirectly, actually or potentially hindering intra-Community trade.