Public Understanding and Private Expectations in the 1980s
By the early 1980s, the uncertainty which had characterized the law of parallel importation for well over half a century remained its predominant feature. Now aptly referred to as the "gray market," the business of importing and selling genuine goods in the United States was entering a phase of unprecedented growth. A combination of low trade barriers and a strong U.S. dollar created attractive opportunities in the international arbitrage of trademarked goods; the lure of high profit margins drew many new firms into the field of intrabrand competition.
Inevitably, disputes arose with the established U.S. distributors, themselves eager to take advantage of the favorable exchange rates, and a stream of cases flooded into the federal courts. During the decade of the 1980s, the volume of reported gray market cases was twice that of the previous five decades combined. Cases arose, for example, involving the importation of Japanese cameras, Belgian batteries, Spanish figurines and dolls, and German toothbrushes. 1 In one typical scenario, Brazilian-made talcum powder found its way into the American market:
177,000 packages of JOHNSON'S Baby Powder (8 days supply) in an English language export package were bought in Brazil for a U.S. buyer by a trading company named TELEXPORT Importacao e Exportacao Ltda. The price was $0.34 per container of 400 grams (approximately 14 ounces). The product, after resale to a U.S. retailer, was put on the shelf in New York for $1.88 per container. [ Johnson & Johnson Baby Products Company's] price to the trade in the U.S. is $1.91 per container. The pre-tax profit loss to the Baby Products Company and the corporation is in excess of $200,000 in 1984. 2