Arbitrazh court supported FAS Russia approach: struggling against parallel import is an unfair competition

18 January 2018
Rozalina Ter-Avetikyan

On December 13, 2017, the Moscow Arbitrazh Court rendered decision in case No. A40-159212/17 in which KYB Corporation appealed against the warning letter of FAS Russia (hereinafter ─ FAS) regarding the violation of the antitrust legislation by struggling against parallel import.

Under the merits of the case, this warning letter was issued upon the petition from unauthorized importers of goods who alleged that KYB Corporation restricted competition and acted in bad faith (unfair competition).

According to the statements of unofficial importers, foreign trademark holders (including KYB Corporation) provide Russian companies with the status of an official dealer, which has the exclusive right to import original products and sale them at unreasonably high prices, while others are deprived of this right that leads to restriction of competition on the market of auto spare parts.

The applicants stated that they negotiated with the trademark holders to obtain consent to import the original goods by sending letters to the authorized dealers (one of which was KYB Corporation) but they did not receive any reply.

FAS asserted that KYB Corporation actions aimed at protecting trademarks and struggling against parallel imports are the violation of the antitrust legislation. KYB Corporation did not agree with the FAS decision and appealed to the Moscow Arbitrazh Court.

The Moscow Arbitrazh Court refused to satisfy the claim. According to the court’s approach:

«In case of import of the original goods of a foreign trademark holder by a legal entity, which does not obtain consent from the trademark holder for such importation, import of this goods can’t be recognized as „non-consented use of the trademark “, since such goods are produced by the trademarks owners».

The court held that the import of goods does not lead to any confusion and does not threat to public interests. The Moscow Arbitrazh Court took a step towards the legalization of parallel import by rendering this decision. The decision is being appealed and has not come into force yet. We will continue to monitor this case, but it is obvious that the decision does not comply with Art. 1484 of the Civil Code, stipulating the import of goods as a way of using the trademark, and Art. 1487 of the Russian Civil Code, allowing the use of trademarks by third parties only in cases where goods were brought into circulation within the territory of the Russian Federation directly by the trademark holder or with holder’s consent.

It is important to note that the Constitutional Court of the Russian Federation is also considering a case on constitutionality of the provisions of the Russian Civil Code that prohibit parallel import. It is likely that the decision of the Constitutional Court will determine the status of parallel import in Russia.