Tuesday, July 08, 2008
Big retailers at loggerheads with MNCs over brands [India]
serious conflict is brewing between Indian retailers and multinationals over imports of global brands. To stay afloat in the dog-eat-dog world of retail, local retailers have reached arrangements with overseas players to bring in some international brands, rattling many MNCs who manufacture or market these products locally. In some cases, these brands have not yet been introduced in India. Several major MNCs with a long presence in India are invoking the Intellectual Property Rights (imported goods) Enforcement Rules 2007 to stop retailers from importing foreign brands. Hindustan Unilever, L’Oreal, Lancome Perfumes, Oakley Inc, Nivea and Mico have already registered several brands with the Customs department. Sources said other MNCs are expected to follow suit. Market circles perceive this as a move to prevent Indian retailers from getting first access to these brands. Some of the retailers are debating plans to legally contest the move, since they possess a free sale certificate from the source of import. Retailers like Big Bazaar & Food Bazaar, Reliance Retail, Spencer’s and Sankalp Retail (MyDollarStore), among others, have begun importing sizeable consignments of leading consumer brands and their variants for better fill rates, product variety and higher margins.
However, the multinationals are not amused, and claim that it leads to loss of business opportunity, unfair competition and product cannibalisation. The fundamental issue here, according to analysts, is that the Indian arms of the leading FMCG companies would like to control the way their brands are marketed and sold. They would also like to determine when new products and variants of existing products should be introduced in India. Retailers sourcing directly from abroad disrupt the extent of control the FMCG companies can wield. The legal issue is whether IPR rules can be used to block such imports. The Customs department has the right to confiscate consignments and alert the owner of the IPR — which could be a trademark, design or patent. The 2007 rules are intended to protect IPR owners from violations of intellectual property by way of import of goods.