Competition within brands should drive prices down

21 june 2017

"It was an initiative by the Russian Antimonopoly Service that prompted us to take a closer look at parallel imports. The Antimonopoly Service keeps track of any and all moves aimed at restricting competition, including through licensing agreements for the sale of goods using specific trademarks. The position of the Russian Antimonopoly Service is that competition within brands should drive down the price for the consumer," Deputy Head of the Analytical Center Tatiana Radchenko said, speaking at the Second World Congress of Comparative Economic Studies titled 1917-2017: Revolution and Evolution in Economic Development.

There is also a different opinion:  Russia should keep the current regime if it wants to ensure favourable conditions for foreign investment and stimulate localization of production in Russia because under the current set-up investments can get re-couped faster.

In her report on the problems and prospects of legalizing parallel imports Ms. Radchenko notes that there are arguments both for and against the legalization for parallel imports. The positives mentioned by Ms. Radchenko include:

• lower prices for branded products: this happens as a result of increased competition between the official dealers and independent (parallel) importers;  

• more incentives to offer innovative products: companies will have to compete by improving product quality rather than on price;

• lower prices on consumer goods will increase sales;

• development of non-price competition through improvement of service as well.

The negatives that the expert mentioned include limiting rights holders in their ability to use brand names to lock in a monopolistic position in their market niche, the possible redistribution of profit between the dominant company and the parallel importers, less incentive for right holders to invest in brand promotion and manufacture of brand name products, possible review by foreign companies of their development programs and localization plans, and an increase in the share of black market sales as a result of a possible increase in the amount of counterfeit products being sold in the country.

The compromise that the Russian government has proposed involves selecting several categories of products to see what the effects of parallel imports will be in those categories. Tatiana Radchenko talked at length about a study that the Analytical Center conducted in 2015-2016 to choose product categories to experiment with parallel imports in. The analysis conducted by the Analytical Center allowed the experts to identify criteria that were then used to select the following product categories that the international rights exhaustions regime should be applied to: Clothes, footwear, bags and headgear, accessories, printed products, paper products, textiles and fabrics, optical tools and devices, photographic and cinematographic goods, the expert summed up.

Picture from open sources