Distribution Questions

[Blow-Me]

Can someone help me with the following problems....

I am looking at a product which we could get from the far east - we would get this at a better price than the UK distributor.

Now these grey market items are the right products for the UK however we would not be going through the correct channels.

What are the problems with this? Would the competition laws come into play? Who is responsible to stop us?

TIA

 

[dreamtex]

what kinds of products?anything related to textile?you can come to source from our site if it can helps you.

 

[sellickbhoy]

think you'll need to elaborate on what you mean by "not going through the correct channels"

guess your biggest worry will be customs and excise

 

[Blow-Me]

No no - let me explain.

I want to import say a branded TV (ABC tv's is a worldwide brand which has an authroised distributor in every country)

Now a Distributor in ANOTHER country can sell it to me at a better price than the UK one and is happy to do so.

I import the TV's pay all the import duty / tax / shipping and it still works out much cheaper. They are also the right TV for the UK market. These goods are GREY MARKET goods right?

Can the UK distributor sue me / stop me?

 

[vvaannmmaann]

If the UK distributor has an exclusive contract with the manufacturers,which they have paid a considerable amount of money for,I guess they would be miffed.
Stick with your thread,someone will probably come along with some better advice soon.

 

[Online Trader]

Hi

In a former life I was responsible for distribution of products for a large German Company throughout Asia

Distributors will always look to get extra sales by selling into territories that they have no rights to and this creates a lot of hassle for the principle as they have to sort the mess out once the country distributor finds out that he has been done over, you may get away with it for 1 or 2 orders but once the country distibutor finds out you can expect fireworks and you will then be forced to work with them and that coul dcause you problems with your pricing

My advise would be walk away as it will only end in tears..

 

[Blow-Me]

Hi

In a former life I was responsible for distribution of products for a large German Company throughout Asia

Distributors will always look to get extra sales by selling into territories that they have no rights to and this creates a lot of hassle for the principle as they have to sort the mess out once the country distributor finds out that he has been done over, you may get away with it for 1 or 2 orders but once the country distibutor finds out you can expect fireworks and you will then be forced to work with them and that coul dcause you problems with your pricing

My advise would be walk away as it will only end in tears..

Thanks - This has been going on for about 20 years with competitors in the UK.

What I want to try and understand is the law regarding this, what 'fireworks' is expected?

A distant friend deals with 'Grey Market' goods and has had a visit from the brand. They wont tell the brand where they get the goods from although they wanted to see if the products were genuine and that they were not de-valuing the brand - they were not and brand is happy.

Does anyone know what the distributor can do lawfully in this situation?

 

[RichardW]

I suspect your 'alternative' supplier will get into a lot of hot water with the brand holder, although not necessarily an issue for you.

However the UK distributor may well look to take action through the courts to stop you selling the goods if they have the means, even if they don't they will put pressure on the brandholder to maintain the integrity of the distribution network. As a result you may find yourself in possession of goods that you are unable to sell without any recourse to your 'alternative' supplier as they will correctly state that you knew the risks involved. Worse there might be a case for the UK distributor to seek recompense for sales you have made, although this is less likely.

You should also ask yourself how important this product is to your product range, strategically or otherwise, since if you upset the UK licence holder and effectively cut off your routes of supply you could find yourself with a gap in your product range.

However importing grey market or parellel goods is prevelant in the UK and I have in a previous life financed the import of these types of goods. My primary concern was always to ensure the goods could be legitimately sold in the UK. To that end I used a lady called Philipa Clare at edatachase (if you type that into google you should get their website, they're based in Rishworth, Yorks). To give them some credibility they have provided advise to House of Commons Select Committees on the topic.

If it were me I'd be talking to her before commiting to anything, you'll either save yourself a lot of hassle and money or find a new, cheaper supplier.

Hope that helps

 

[Planck]

There is nothing illegal about you buying from the unauthorised distributor, but they are likely to be in breach of their distribution contract, so the manufacturer does have the option of pursuing this.

However, another important factor to consider is warranty repairs. A % of your TVs (or whatever they are) will require repair within the warranty period. The UK distributor will want nothing to do with this, leaving you with the problem.

 

[Online Trader]

The brand owner may also decide that you are small fry and stop you selling what you have bought via the wrong distribution channel

 

[Blow-Me]

Worse there might be a case for the UK distributor to seek recompense for sales you have made, although this is less likely.

This is my main concern.

Why would this be less likely? Due to the fact you cannot really prove what business was lost and also the cost might not make it worth it?

Thanks - helpful first post!

 

[Online Trader]

Are you looking at a one off here or a continuation of imports as if it is the latter it is not going to happen for long as one of the parties will put a stop to it and to be honest if I was the UK Distributor I would not be very happy about it and would look at making life uncomfortable for you as you are depriving them of legitimate income.

Why do people always look to try and screw the system?

 

[Planck]

Why do people always look to try and screw the system?

Because they frequently don't understand that the key to doing good business and growing is making sure that you allow those you are dealing with to make money.

 

[RichardW]

I think proving the lost business would be fairly straightforward as they would simply use your sales records to demonstrate the volume, if it got that far.

Actually saying it is "less likely" was probably not the right thing to do as I don't know what their motivations might be and I also don't know the size of transactions we are talking about, who the main parties etc etc are. For example take a large multinational with vast resources who hold an exclusive distribution agreement for a product. They might consider it well worth spending much more than they could hope to recover from a legal action to stop copycat grey market importers who might follow in your wake. ( I know I'm making it complicated now, sorry).

Reasonably speaking though it is a much harder case to prove than showing that you have goods which are not legitimate for resale in the UK.

However I think you are facing two financial risks 1) Buying stock you can't then go on to sell and 2) the aforementioned recompense. I suspect the larger liability would be the investment in stock and also the more immediate problem.

I really would seek formal advice before entering into anything, especially if you / your company is investing substantial (for you) money in the project. If not edatachase then perhaps a solicitor known to you. I'm sure Philipa will give you some general advice for free though, or at least put you on the right lines.

 

[MH1]

Another consideration is the spec of the grey imports, if originally destined for outside the UK and europe the spec might differ, warranties might not apply as already stated, but the actual product might not meet european standards.

The big stores have done grey imports over the years and I seem to remember the courts ruled in the manufacturers favour on jeans or similar clothing recently against one of the big supermarkets, since it was seen to devalue their brand.

It would depend on the manufacturer, UK distribution agent and the number of lost sales as to how they would approach your grey import trade. If you sell just a small amount they might just ignore it, if they felt you were selling well they would almost certainly attempt to address the situation.