A little victory for the parallel import of alcoholic drinks
The Commission for Protection of Competition imposed a fine on DIAGEO for restriction of competition upon delivery.

By Teodora VASILEVA, Boryana BACHVAROVA, Zhana IVANOVA, Capital Newspaper, Issue 29, 22-28 July 2006

The Commission for Protection of Competition passed judgement in favour of a parallel importer.

The antimonopoly administration sanctioned three companies of the group of the alcoholic drinks producer DIAGEO for a total of 600 thousand BGN for violation of competition. The fined companies – the Dutch Diageo Brands BV, the British Justerini and Brooks Limited and the Irish R&A Bailey and Co., have the rights of international alcoholic drinks brands like Johnnie Walker, Gordon’s, J&B, Baileys, Smirnoff and etc. The Commission for Protection of Competition was approached by BEGEIN in Varna, which defines itself as a parallel importer, importing in the country about 30-40 containers of alcohol of the same brands annually. BEGEIN complaints that since 2001 the company has been subjected to permanent pressure by the holders of the brand through different institutions – the company’s goods have been detained, confiscated, its warehouses sealed and etc. On their side, the representatives of the three companies claim that the company based in Varna, consistently violates their rights of intellectual property.

The antimonopoly office finds the three foreign companies guilty under Art.9, par.1 of the Protection of Competition Act. The Act forbids agreements aiming at or resulting in the avoidance, limitation or violation of competition on the respective market. The Commission for Protection of Competition imposes the sanction for the fact that in 2002 on behalf of the three companies an Agreement was offered binding BEGEIN not to import and/or sell in Bulgaria registered brands, possession to Guinness (now Diageo) without the explicit written agreement of Guinness in each specific case. (At that time the companies are represented in Bulgaria by UDV – Central Europe and Asia Ltd. –Bulgaria branch. After it was terminated the company based in Varna names the three companies defendants. Later on, lawyer Borislav Boyanov appears as their representative before The Commission for Protection of Competition (CPC). In return, the former representative of the alcoholic drinks producers in Bulgaria promises BEGEIN to release their alcohol detained on the grounds of the so called border control measures and to terminate the legal claims, filed against the company on this matter. The border control measures allow the customs to detain the import of goods with specific brands on request of the owner of the brand rights for the country. The point is to protect the intellectual property and internal market from imitations and counterfeits.

The agreement has not been signed but to the CPC even the fact that this has been proposed is a violation. The representatives of Diageo (Guinness) do not deny that they have offered such an agreement to BEGEIN and other parallel importers. As a part of the transcript from the CPC a similar signed document was presented by another parallel importer of alcohol – Jolly Trolly. “Hence in the specific case the regarded agreement project is part of a consistent policy of the companies on the Bulgarian market”, consider the members of the Commission. In their position before the CPC Diageo (Guinness) explain that BEGEIN is a systematical violator of their rights of intellectual ownership. “As for the fact that Diageo’s propositions for agreements have not been accepted, the consideration of this matter is pointless”, claims lawyer Borislav Boyanov.

“It is undisputable that the regarded agreement project has as a subject the Controlling of the supply sources of BEGEIN. The application of the agreement practically would result in cooperation of BEGEIN only with the exclusive distributor of Guinness for Bulgaria. This violates its free choice of suppliers that offer lower prices, better trade terms and so on.” states the CPC. “Before our case, only the brand-holders filed complaints in the commission about parallel import, but the CPC found these claims to be unwarranted in most of the cases. Ours is the first case in which parallel importer company says it has a monopoly of the market”, explained Svetlomira Zhelyazkova, one of the legal consultants of BEGEIN. On the Diageo case the antimonopoly committee bases its argument on a number of resolutions of the European Commission according to which agreements for limitation of the parallel trade aim to limit the competition and are forbidden. They force the consumers to pay prices, which are not formed as a result of the normal competition process of the respective market” says CPC. “Basically the parallel import expands competition” says Velichka Marinova of the commission’s Antitrust directive. But she specifies that each case shall be considered individually by the CPC. The rendering of the commission on such case takes up a minimum of a year because of a few-month research by the CPC and almost guaranteed following appeals. “We do not agree with the verdict and we will appeal” said Angelica Patrouba, director of “Public relations” of “Diageo” for Southeastern Europe.

According to Eli Gerganova, a proxy of one of the managers of “Diageo Bulgaria” Single Member Ltd., the parallel import on the alcohol market is currently about 20%. Her observations are that it is shifting outside of the brands, for which border control is requested. Albena Trifinova, managing director of “Alayd Domek” (“Perno Rikar Bulgaria), explained that on their brands (Jameson, Passport, Chivas Regal etc.) the parallel import is minimal and it continues to drop on the market. "Within the European Union the parallel import is not an actionable phenomenon and its limitation is forbidden. The case for goods, intended for markets, outside of the European Union, however, is very different”, said Albena Trifonova. “The parallel import is a reality, in which we have been living for a long time and I wouldn’t say that it has that much of a destructive effect on our business” she added.

The Commission for the Protection of Competition is taking up the Nokia case

The Department reported that the Commission of the Protection of Competition (CPC) is currently inspecting the dispute for the import of mobile phones and accessories with the Nokia trademark in Bulgaria. The parallel importers “Joeli”, Handy tel”, “Riva com” and “Cellsoft” have requested by the CPC to examine the practice of “Arsis Consulting” as legal representatives of Nokia for Bulgaria on the same art.9 (for forbidden agreements) on which “Guiness” (“Diageo”) is sanctioned. The parallel importers complain that at the customs, which execute the so called border control measures on request of “Arsis Consulting” since the fall of 2005, shipments with original import of all distributors, apart from the authorized “Alfakoli” and ”Total telecom” have been detained. The companies which filed a complain with the CPC consider that there are no legal grounds to detain original goods, such as theirs, only because they were bought from a Nokia distributor from another part of the world. According to them, as a result of such import the consumers in the country can buy cheaper mobile phones than those of the official importers. “Arsis” opposes on two lines. According to them the so-called original mobile phones, for the most part, lack the original usage instructions and Bulgarian software and the re-chargers and batteries do not comply with the Bulgarian standards. In addition, they interpret the Protection of Trademarks and Geographical Indications Act (PTGIA) in a sense that gives the customs the right to detain goods not only when there is a reason to believe they are imitations, but also when they bear a trademark without the consent of its owner. On the line of import, the right is ceded through a licensing contract. Customs Agency, however, interprets the law in a sense that the border measures are not applied against the original goods and that they currently detain only goods, which are not manufactured by Nokia Corporation. About two months ago, the parallel importers announced that, as a condition for the release of their phones, Arsis Consulting offered them to sign a declaration, stating that they withhold import of Nokia produce for Bulgaria. Arsis specified that it was not a declaration, but rather for notification letters for the undertaken measures on the border control.

If it is accepted that in most cases the parallel importers work with original products, it is evident that someone outside the law and to the detriment of the consumers forbids the parallel import, declaring it a counterfeit. The proof of this violation, however, passes through the court and through the cooperation of the company-manufacturer in order to be verified the origin of the confiscated goods. And with a lack of interest by the CPC this can turn out to be an expensive and phlegmatic process for the smaller importers of mobile phones.


What is parallel import?
The parallel transportation is a kind of international trade, in which a country imports original goods from abroad which carry copyrighted trademark and are manufactured according to the requirements of the trademark owner, but without his given permission (to the parallel importer – editor’s note) for the distribution of these goods on the territory in which they are imported. According to some international definitions “the parallel import is an import of foreign goods by a multitude of importers”.In the specialized literature the trade with goods – subject of parallel import, is often marked as gray market. The end effect of parallel trade is that it decreases the expenses of the consumers. This states the website of the newly instituted National Association of the parallel importers in Bulgaria (NAPIB) http://napib.org/bg Its representative is the manager of “BEGEIN” Georgi Yordanov. According to information, provided by the NAPIB, “Per 2002” and “Andromeda 77” are also members of the association

Limitations
13 brands of alcohol currently have the protection of the border control measures, reported the Customs Agency. This happens by the power of six petitions filed by owners of trademarks.