Silhouette and the limits of free trade

Abstract

EVERYBODY loves a bargain. Supermarkets have found that the sale of cut price designer goods along with the groceries gives them the edge over their rivals, when consumer spending on food is expected to slump (The Times, 22 April 1998). The catch is that trade mark proprietors, such as Calvin Klein, having nurtured brand images, in which high prices and exclusivity reinforce each other, decline to sell their goods to the supermarkets, preferring to control distribution through specialist outlets. The supermarkets' response has been to go shopping on the “grey market”: buying branded goods from third parties, which are sold more cheaply outside the European Community (EC) and the wider European Economic Area (EEA), and importing them into the EEA for resale. The issue decided by the recent judgment of the European Court of Justice, Silhouette International Schmied GmbH & Co. Kg v. Hartlauer Handelsgesellschaft mbH, Case C-355/96 (1998), was whether the importation and resale of such goods without the brand owner's consent constitutes trade mark infringement.