Supply/demand imbalance
Posted by munter on 19 October 2009 at 14:55 UAE time

There will always be demand for products that are not provided by the official agent. The level of this demand is driven primarily by price, to a much lesser extent in ME service/quality/reliability.

As a consumer it would be nice to have rights, however we all know that with the invisible hand of lobby groups such as MPAA, the chance of true market balance is zilch.

In sophisticated markets where parallel imports are embraced, the value to consumers is maximized. Primary agents tend to stay in business however compelled to compete so much harder on non-price components service/quality/reliability, this is generally a good thing for consumers.

Blocking market competition is akin to protectionism which is considered by many economists a key contributor to the great depression. As a global trading hub, the UAE should distance itself from protectionist policies.

Finally, any group oppressed long enough eventually wises up and votes with their feet. When channels are obscured as in UAE (local markets/alley ways/chinese ladies), it is likely you will never know the real impact until it is much too late to respond.

Agents Agreements
Posted by Mike Charlie Mike, Dubai, UAE on 14 October 2009 at 21:21 UAE time

Aamir, (aka Robin Hood) welcome to the arena and thank you for your non emotional and well thought out response. Yes I belong to a certain Ilk, but not the one you have labelled and generalized about. It’s probably much worse than you have imagined! My apologies for insulting your intelligence… really. Please grace me (Tribal and others) with your definition of a parallel import so we may better understand how it helps us as consumers. The local agents that some love so much here have absolutely no say in whether or not action is taken in a specific market in almost all scenarios regarding market rights or use of IP. The brand owner does. An agent is not a brand owner. So go ahead and love them or hate them, but this is not the issue, and I respect your opinion. I am not defending the rights of price gougers, particularly on what we consider essential goods. DVD’s and microwaves are not essential, and the majority of goods illegally sold or manufactured are luxury goods. If you paid too much for your microwave or video camera here, then caveat emptor. Agents do have the right to complain to the brand owner who can investigate and request action according to the laws of the market in question. The owner of the IP, the owner of the brand, not always the manufacturer, does have rights; and most countries with enough brains to actually make a product without stealing the idea from somewhere else have signed up to this. If there is an action requested in the UAE for example, in regards to either market rights or IP violation; in many cases it is not even the local agent who initiates the inquiry. It is the sole right of the brand owner who is usually located in another country. We are not talking about lettuce here brother.

Parallel imports (laughable term) can exist when agents in other markets cannot meet the volumes of sales agreed between them and the manufacturer, either intentionally or due to other conditions. In extreme cases the products are reaching the end of shelf life and need to be quickly sold to prevent commercial loss. So instead of losing the rights to distribute (or money) on behalf of the brand owner, they divert or re export to other markets in violation of their own (other) market agreement. Breach of contract / trust… Good for us on price as they would prefer to sell at a loss than have to eat the cost of the overhead they are unable to sell in a perfect world or their own saturated market. In order to make sure they at least break even they can find nice ways to avoid duties in the “parallel” market (smuggling cough) or they can mix with counterfeit to increase the margin. Better yet, use an unregulated free zone in another emirate! Parallel imports can be and is used often as a cover for counterfeiters and can also be stolen goods from other markets or even this one for example. Aamir would probably have us believe that guys are running all over the world finding legal branded products and due to their extreme abilities in getting discounts, can distribute products made from the same manufacturers at a better price, at the same quality after having travelled even further distances. Did it fall off the back of the truck in transit?

For the record I sincerely hope that everyone here gets the opportunity to be overpaid and is able to grasp a managerial position with a corner office and a view. Anyway, I must retreat as I need to get a gift for my mother in law. I will be looking into the souk for a good discount. If Aamir or any of his supporters can please get me a really good discount on an original branded item (more than 5 dirhams) while I am in the souk, please post your address and type of commodity here so the thrifty shoppers amongst us can pay you and your friends a visit.

Adios!

Chinese DVDs...
Posted by Doug, Dubai on 14 October 2009 at 16:57 UAE time

Don't buy from Chinese door-to-door DVD vendors. I'm sure most of them are as legit as anyone can be that sells pirate DVDs, but some of them are part of larger gangs - and selling DVDs door to door is a perfect pretext for them to be able to take a look at whether your home is worth breaking into at a later date.....

To Mike Charlie Mike, Tribal Funk and their Ilk
Posted by Aamir, Dubai, UAE on 14 October 2009 at 08:47 UAE time

All your gibberish in support of agencies and their overcharging ways does not hold any water. You are insulting the intelligence of AB readers / consumers when you think that they will be convinced by your hollow talk in support of these overcharging businesses, which do so because they have the sole rights to import /sell the products locally.
I am not supporting counterfeiting and stealing of IP, but I am against curbing of non agency / parallel imports. Leave it to the consumer to decide whether he wants to buy from the so called authorized agent, (who will overcharge / under deliver and exploit the customer) or the so called parallel importer (who sells the same product at a better price / offers you better service). I am sure most of those speaking out in support of the agencies are the overpaid managers of such franchises. These same people will be first to whine regarding overcharging by Etisalat or any other agency.

Chinese DVDs
Posted by Captain, Dubai, UAE on 14 October 2009 at 08:06 UAE time

Twice a month, a Chinese DVD seller rings our door bell (Despite having 24 hour security in the building)..but we always say no. Why buy when you can download? :). Plus it leaves a smaller eco footprint, which UAE tops the list for.

Tricky situation. Spot on "Mike Charlie Mike"
Posted by Tribal Funk on 13 October 2009 at 19:43 UAE time

Though i enjoy sipping my morning coffee with a spot of AB, reading what people have to say on the plethora issues that may or may not effect them. Often-times pondering whether to post a comment of my own, i have refrained until now...

From reading most of the posts, it is evident that the majority (of posters... anyway) are dissatisfied with distributor and retailer margins in the UAE and in the wider Gulf region. Thus though i am not trying to convince anyone i'd like to outline a few of my own thoughts from a distributors perspective for your consideration.

At the onset of a distribution or agency agreement, the burden of risk is usually carried by the importer (distributor). Goods are purchased and imported with no proven local track record in sales, unless the Principal has changed the distributor offering the newly appointed distributor inherited sales volumes. Once the product(s) arrives it is then the responsibility of the distributor, often-times in tandem with Principal, to create, maintain and develop a market for the product and meet the (sometimes stipulated) minimum import volumes.

Once the product is established in a market and the disributors have weathered the "introductory" storm, it is only right to receive a viable return on investment. the Distributors responsibilty is to both the Principal and the customer. Both of whom we work tirelessly to service.

Principal: Principals enter a market because they want to establish a market for themselves there. They appoint distributors who they deem will be able to help them achieve their objective. A distributor cannot stop building a brand once it is established. Competition dictates that we have to increase sales year on year all the while enhancing our infrastructure to deliver better results for our Principals. (Now consider the spiralling costs and fee structures in the Gulf)

Consumer: Consumers who have become reliant or have loyalty to a product need to be able to access that product at any time and at their convenience. Therefore, the greater the sales volumes, the greater the infrastructural requirement to service their requirements. Unfortunately, most retailers pass their increased costs onto the Distributors, whose margins are further squeezed between their own spiralling costs and the retailers bottom line.

Now add Copyright Infringement and parallel imports into the equation and you see the result. Sales are cannibalised by "Grey & Black market products" as Mike Charlie Mike said so eloquently. distributor sales volumes may fall or growth may slow when compared to projected volumes, Distributors have very little control over this issue with their only respite being that Black & Grey market products aren't available to the majority of their loyal users. Loyal users are by nature "Loyal" and will absorb a marginal price increase if required to do so albeit unwittingly to offset this drop in legitimate sales.

Counterfeit and parallel imports are by no means the "Voice of the people" existing to take from the rich and give to the poor. They are a business just like any other, except they choose not to operate within some legal parameters, pay the associated fees or subject themselves to the hardships and financial obligation of providing customer service, etc.

As i said earlier, i am not trying to convince anyone of anything, merely in as concise a way as possible share some thoughts on one avenue of distributors concern in the humble hope that next time any of us open our wallets to pay for an "illegitimately made or represented" product a legitimate company with "Real" operational costs and requirements, my suffer.

Copyright violation
Posted by bhls, dubai on 13 October 2009 at 14:54 UAE time

Mr. Butler represents the Motion Picture Assn. of America. He also represents the Arab Anti Piracy Association. Has nobody notice the clash of interests? When goods seized in this case were presented to the authorities in Abu Dhabi, they were returned with 'no objection'. Some of the dvds were seized from a retail outlet, the majority from a warehouse. As far as I know, no titles listing was made for either seizure. Virtually all the seized titles were from independents with whom the distributor had valid contracts. All were royalty paid. The titles mentioned in the search warrant were not in either shop or warehouse. The judgement does not mention any title by name. Why not ?
If the anti piracy association is serious about tackling piracy, why are we still bugged by the Chinese ladies who sell us not only pirate goods, but even porno?

It is a crime
Posted by Mike Charlie Mike, Dubai, UAE on 13 October 2009 at 13:55 UAE time

Agreed that this was not truly a case of protecting someone’s IP rights and based on the facts presented in the article it was actioned by someone due to violation of "the" market agreement by selling original goods in this market against the principle agent(s) market agreement. Very common here actually. These agreements exist globally and are not a phenomenon of the UAE laws that require a son of the soil to operate domestically. Agent or channel distribution agreements can actually lower costs by increasing volume. So without prejudice, I shall respectfully disagree with the direction some of the comments have taken in seeing this as purely a pricing issue. It is not. Although I genuinely applaud the authorities and the commercial company AAA for getting some press out on this, and actually convicting someone, the message between the lines is that foreigners were arrested. Are we to believe that the violators were operating in a vacuum without local sponsorship? Possible, but unlikely. It would be interesting for Mr. Butler (whom I respect) to comment on that, and I would welcome his experienced opinion on IP enforcement in this dodgy venue. There is much for us all to learn here.

Counterfeiting is a crime, and most grey good are smuggled rather than openly and legally imported. The leadership of this country wisely made it a crime because they understand grey and black market for what it is. Trade agreements are also a current issue in getting better trade agreements in place which will also assist the UAE economy and assist in employing Nationals and expats while making it easier for good companies here to expand abroad. Counterfeiting is far more dangerous to the economy and even general security than most people realize. It is in some cases used as the replacement for the money that cannot be so easily laundered anymore, and it destroys the true market value that could support more employees or "agents". Rhetorically, who do you think profits from the counterfeiting (sales) operations taking place in Iraq right now? People understand Blood Diamonds due to education, so let’s change the commodity for a moment. Your "non original" washing machine or cigarettes might serve as a similar enabler in conflict areas.

I am actually defending the legal local "agents" here now, and I will continue to do so in these regards. Foreign backed, locally sponsored counterfeiters flood markets with their goods at a reduced rate using the cheapest staff and lowest quality needed to trick consumers. This easily destroys market value and places extreme pressure on the bottom line of the legal agent. This actually makes them have to raise their prices! They pay rent, maintain licenses and insurance, sponsor and employ UAE nationals and expats alike. As their markets thin, their margins decrease and the price can either go up, or they can close the doors or discontinue the products as non competitive. How are your prices lately? As prices go up consumers start looking for relief and will unwittingly (or not), choose the cheaper alternative of non dutied (smuggled) Grey Market or Cheaper Black market goods. Therein lies the evil; the black marketers are actually the cause of much of the price increase you complain about and as consumers look for relief they get you hooked. So I ask you again. Who is exercising control on the market? I don't believe the actual agent is unwitting enough to price himself out of business. Many agents who are not as diversified may even join the party in an effort to keep their business alive. Manufacturers and brand owners go to extreme lengths to make sure that channel distributors and agents can sell in sufficient quantities to remain competitive in the market. In isolated incidents it may not be so noticeable to the economy, but in the MENA region counterfeit is replacing legitimate business at an alarming rate. The MENA region has always been rich in sales and production of counterfeit goods and in the current economic climate counterfeit is becoming an option to stay in business whereas in times past it was more akin to syndicated black market networks.

In support of the economy, the goods agents openly and legally import create duties and money for UAE customs and revenue for UAE logistics companies, local owned companies, jobs... need I go on? National employment issues again. There is not one segment of the economy or issue we typically rant about here in economical or employment terms, which is not in some way adversely affected by diverted (Grey) or Counterfeited (Black) goods. By the way, did your multi million dollar villa start falling apart sooner than expected? How about your light switches and flaky electrical system? Did your kids bus stall in traffic on the way home from school? Have you had any problems with your eyes after wearing your cost effective makeup? Is the heart medicine you are religiously taking having an effect on your health and recovery at all? Love them or hate them, but agents bring consistent revenue into this market starting from the governmental to the commercial sectors, and affects everything from your quality of life to your safety and health. In IP terms; in regulated and enforced economies business typically compete on quality, customer service and other added values. People also take higher wages in those markets by the way. I could go on forever here but it will probably be like beating a dead horse. Over “here” the issue IS like rocket science or so it seems.

I support and thank the authorities who are fighting a tough battle internally and externally. Period. Even though we rant about it, the fact it made the press at all also deserves recognition. "We" hope to see this trend of openness being extended to black market goods, and as a consumer, if I can’t afford to get it at the price from the legal importer, maybe I can’t really afford it all? I choose not to support establishments that may indirectly help to fund conflict, do not care about who they do business with, who they do business for, and who don't care about my health and that of the community I live… regardless of where I live.

Grey Market laws are Grey in themselves
Posted by N.Khan, Camberley, UK on 13 October 2009 at 12:52 UAE time

It states these were original products so not counterfeit. So the rights holder at some point did get revenue? I don’t support any form of counterfeiting as its stealing another person’s intellectual property and profiting from it at zero cost or royalty payment. It also supports organised crime and most probably these people don’t pay taxes as a corporation or as individuals. So buying counterfeit feeds these cretins.
I believe this is local law enforcement posturing to show the rights holders they are acting. The rights holders have very powerful lobbying groups mainly based out of Washington. They also run an annual black list of countries with high levels of piracy and if the Government is seen to do nothing then US aid and co operation is diminished. It’s called “Congressional group's 2008 International Piracy Watch List. http://www.internetnews.com/bus-news/article.php/3597216

Perhaps what needs to be done is educating the consumers that their dirham spent on a counterfeit ends up in criminal pockets and do they really want to support that? As for grey imports consumers have no responsibility as you can’t tell a grey from a legitimate import by examining it. Big question is why are the local companies profiteering and creating such an imbalance of pricing that grey becomes viable. In my experience up to 20% price differential from one country to another does not encourage grey. Its only when they get greedy that they open the door.

Trading and commerce for thousand s of years relies on buying cheap and selling it in a market that has demand at the right price. No law will ever defeat that commercial principle.

parallel imports
Posted by bhls, dubai on 13 October 2009 at 12:38 UAE time

Being directly involved in this case, I can assure you that 10,000 of these dvds were World War 11 documentaries, region 0 and completely legal. 7,500 were Japanese Manga cartoons with ceritificates from the appropriate ministry etc. I also possess a ducument from the Ministry of Economy in Abu Dhabi stating that Regional Coding is not a concept which is found in UAE law.