Can Parallel Import Be Restricted?

Accordingly, parallel import is defined as the importation of real goods offered to the market in the export country by the right holder or a person authorized by the right holder without the permission of the right holder by third parties. Law No. 4054 on the Protection of Competition (the “Law”) does not directly regulate parallel imports. However, since Art. 4(d) and Art. 6(a) of the Law prohibit acts with the purpose of preventing competing undertakings from entering the market and making their activities more difficult, preventing parallel imports may also constitute a violation of competition as it indirectly leads to these consequences.

A. Notion of Parallel Import

Parallel import is defined as the process of importing the same goods offered to the market in a country by the trademark right holder or by another person with its authorization, to that country in accordance with the legal procedure by third parties by obtaining the same goods from another source. In other words, it is the trade that takes place outside the distribution system established by a particular undertaking. Parallel traders buy goods in regions where it is cheaper and sell them in regions where it is more expensive.

The main element of parallel imports is the existence of significant price differences between the country where the goods are exported and the country where the goods are imported, thereby creating a competitive environment between different undertakings selling the same brand products.

For the existence of parallel imports:

• The imported goods and the goods previously offered to the market in that country shall be identical,
• The goods shall be placed on the market in accordance with the law,
• The goods shall be original, and
• The goods shall be produced and placed on the market by the owner of the trademark right in the exporting country or by an undertaking authorized by the owner.

B. Analysis Regarding the Principle of Trademark Exhaustion

As the principle of trademark exhaustion and the concept of parallel imports are closely related, it is necessary to refer to this principle. The principle of trademark exhaustion regulates under Article 152 of the Turkish Industrial Property Law that once the goods are placed on the market, third parties cannot be prevented from offering the goods for sale. Thus, once the goods are placed on the market, the trademark right is considered as exhausted. However, it should be noted that in cases where the goods are changed or deteriorated by third parties after the goods are placed on the market, it is not possible to talk about the exhaustion of the trademark right in such cases, since the function of the trademark is to guarantee the quality of the goods will disappear. Moreover, in these cases, the conditions of parallel imports, which are that the goods are identical and that they shall be placed on the market in accordance with the law, are not fulfilled, and therefore, it shall be deemed that parallel imports have not occurred.

C. Approach of the Supreme Court

According to the precedent-setting decision of the 11th Civil Chamber of the Supreme Court regarding parallel import; if goods with the trademark are placed on the market in Turkey by the trademark right holder or by a third party authorized by the trademark right holder, a third party, without obtaining permission from the trademark right holder, may obtain the same goods from another country through parallel imports and place the same goods on the market in Turkey, based on the principle of trademark exhaustion.

In other words, if the goods with the trademark are offered to the market abroad but not in Turkey, the trademark right holder will be able to prevent such parallel imports based on the trademark right. However, if the goods are placed on the market in Turkey, then preventing such importation cannot be made. In summary, according to the Supreme Court, after the goods with the trademark are introduced to the Turkish market by the trademark right holder or authorized persons with the permission of the trademark owner, the principle of trademark exhaustion will be applied if the goods are supplied by third parties from another country through parallel imports and introduced to the Turkish market without the permission of the trademark owner.

D. The Practice of the European Union

In the European Union (the “EU”) the principle of territoriality, which indicates that a trademark may be exhausted for the borders of a territory formed by more than one state, is accepted in terms of parallel imports. Therefore, preventing parallel imports is considered as a violation under the EU competition law. The main reason is that the principle of free movement of goods is the main principle in the EU region. Thus, in Centrafarm v. Wintrop Decision of the Court of Justice of the EU, it was stated that the trademark right is exhausted within the region and therefore parallel import cannot be prevented. However, it is observed that there is a more favorable approach to the prevention of parallel import in the pharmaceutical sector in the EU region.

E. Conclusion

Parallel imports have the effect of increasing intra-brand competition by offering opportunities such as lower prices and additional after-sales services in favor of consumers. Therefore, acts to prevent parallel import activities will constitute a violation of Art. 4 or Art. 6 of the Act as such acts will lead to consequences such as preventing undertakings from entering the market and making their activities more difficult. Consequently, preventing parallel imports for intellectual property reasons, such as protecting brand quality and facilitating control, would constitute a violation of competition under Turkish law. Therefore, in order not to cause any violations, an evaluation should be made for each concrete case.

Duygu Bozkurt Kadirhan, Senior Associate
Dilara Atılgan, Trainee Lawyer