FAS threatens brand owners with prosecution for unfair competition

26 October 2017


This article was originally published in IAM Weekly, and has been republished with permission.

Parallel imports have been a hot topic in Russia for some time (for further details please see "Parallel imports sneak into Russia through procedural loophole" and "New proposed Eurasian trademark system").

Russia upholds national exhaustion of rights as set out under Part IV of the Civil Code, which stipulates that it is a form of trademark infringement for goods to be introduced into commerce in Russia, without consent, by anyone other than the owner of the registered trademarks.

Russia's national exhaustion regime recently switched to a regional exhaustion regime because of the country's membership in the Eurasian Economic Union. Industry exceptions were expected for parallel imports in sectors such as automotive, pharmaceutical and medical devices.

Businesses are concerned that full or partial legalisation of parallel imports will lead to an increased volume of counterfeit goods entering the Russian market because grey goods are often commingled with counterfeits.

On August 4 2017 Kommersant reported that Vice Prime Minister Igor Shuvalov would hold a consensus meeting on August 8 to decide Russia's official position on parallel imports. However, the outcome of that meeting has yet to be disclosed.

It now seems that the implementation of the industry exceptions approach to otherwise illegal parallel imports might take (at least) another 18 months, possibly two years or even longer.

In the meantime, the Federal Anti-monopoly Service (FAS) is trying to take matters into its own hands. According to information published on its website in July 2017, the FAS has issued a warning to Daimler AG, Renault, KYB Corporation and YD Diagnostics suggesting that these companies may be breaching Russian anti-monopoly laws because they are unreasonably refusing, when asked on a case-by-case basis, to consent to parallel imports of goods.

The FAS warning stems from routine requests made by goods importers seeking permission from brand owners to import genuine branded goods made elsewhere. Supposedly, the brand owners have either refused permission or simply not responded. The FAS asserts that failing to consent may be a form of unfair competition.

According to RusAutoNews the FAS appears to be trying to discourage manufacturers of spare parts and medical equipment from interfering with imports of genuine goods by legitimate but unauthorised distributors.

In his interview the deputy head of the FAS Andrei Kashevarov clarified that a refusal by a brand owner to consent to an import request can be justified in cases where the goods are not genuine or when their production is already localised in Russia. He also noted that, at present, the FAS has not determined whether Daimler or Renault have localised production in Russia. The FAS position seems to be aligned with the government's broader programme aimed at increasing localisation (ie, localised manufacturing by foreign companies in Russia).

The warning to Daimler, KYB Corporation, Renault and YD Diagnostics simply obliges the companies to stop restricting independent imports of their products within one month or face a fine of up to Rb500,000 (around $8,500) under the Code of Administrative Offences (195 FZ).

The FAS is acting under the Law on the Protection of Competition (Federal Law 135 FZ) and FAS Decree 57/16 of January 22 2016, which requires legal entities to comply with an FAS warning within the term specified in the warning (see Article 39.1(5) of the Law on the Protection of Competition and Section 3.1 of FAS Decree 57/16).

If notice recipients fail to comply, the FAS may initiate administrative proceedings and the decision may be appealed in court within three months.

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