Distributor wants me to withdraw their products from my shop

bubu777

Hi there!

This is my first post on the forum. I hope that maybe there is somebody who could help.

The sitiuation looks as follows;

I recently opened a supplements shop , before I did it I'v bought some stuff from official Irish distrubutor of one of the Polish brand. Later just before opening I bought most of my stock from polish wholesaler (the reason is the difference betwen VAT, and as long I am not VAT registered it's better for me to buy products on lower VAT rate in Poland).

After opening the shop the distributor made me a visit and said that my prices are too low and I need to change it (I did it). After few days I receiwed an email from the solicitor represinting the supplements company stating that I broke the copyright law publishing pictures of their products in my online shop(which is still under construction), I have to withdraw the products and pay approximately €2500 for each published picture.

I withdrew products from the website, and wrote an email that I didn't know that I'm doing something wrong publishing the products in the way as the producer doing it.

The main reason is that the company has a strict policy that are not allowing to resell their products in wholesale offer unless you are a official distributor of the products. So the wholesale company from Poland broke their agreement selling the products to me.

But I didn't do anything wrong since the company had their products in the offer.

Now I received an email from Irish distributor that he wants me to withdraw the products even from my retail shop, grounding that the company is not allowing me to use their trademarks, I am too close to the other shop which has their products in the offer and I ordered my products from Poland knowing that I have to order it from him since I did it before.


I would like to ask if somebody know where I can find some articles regarding Trademarks and the trade law in Ireland. I'v found some articles in Polish law stating that the copyrights are not concern if we talk about reselling the products with trademarks beeing relased on the market by the producer.

I think he can't force me to withdraw the products from my retail shop relying on those arguments. However I don't know if they don't accuse me for the product pictures that I published on the website if I won't agree to do it

What do you think guys? What should I do?

Buttercake

Stand firm for a start, act positive at all times. Acknowledge emails and say your own solicitor is looking into it and then talk to a solicitor, someone who deals with contract and commercial law, they usually give 1st consultation for free..

its a very expansive and expensive area of law dealing with trademarks, patents, copyright etc. I wouldn't waste my time trawling the web for articles, nip this in the bud quickly and move on.

I'd imagine its a tough game for distributors in any business, what's stopping the retailer going direct to the manufacturer? which it sounds like you did and the distributor is not happy and using this copyright images thing to play against you.

i'd put everything down on paper and go to a solicitor(not a mate) who will best advise. Good luck.

jimmii

Awkward situation. Definitely consult your own solicitor who is familiar with trademarks in Ireland and see where they think you stand. I know from dealing with distributors that often they do insist you get permission before reproducing their images and descriptions etc. Might be worth mentioning to the solicitor about them insisting your increase your prices as I don't think they should be doing that really.

Its strange for a distributor to sell to someone in another country who is covered by a different distributor for a product but I guess that is governed by the agreements the distributors have with the manufacturer I know I would certainly like to be able to buy certain products at UK prices but the distributor won't ship here!

The ideal situation would be to find a compromise so you can continue to stock the products from the Irish distributor so you and them can both keep on making money!

pedronomix

The laws governing importing and selling goods are completely different for trade in goods made and distributed within the EU and those branded goods made outside the EU. There is a free market for EU products withing the EU!!
Where are the goods made?
Where is brand owner located?

It is not possible to give any kind of a useful response without this basic information.

This may help you understand http://www.biztips.co.uk/the-grey-market-explained

bubu777

Thanks guys for you help

Buttercake I don't have a solicitor yest since I didn't need it, do you know somebody who give the first advice for free or any good solicytor who is not as ex? I'v made a quick reaserch but didn't find any with free firs advice. I also found kind a online advice for 25 quid from justanswers com but nut sure if it will be proffesional.

I hadn't bought it directly from the manufacturer but from wholesaler who has many other brands in offer including this one.

The warning I received was from Polish solicitor who represent the brand, but Iam sure that was because the distributor intervention.

jimmii he don't have to insist me to get permission to publish TMs since he can give it to me, however when I made my order from him he didn't say a word about it, but now I have a problem.

Like I said the place I bought from In Poland wasn't official distributor since the policy of the brand not allowing other companies in Poland to sell their product in wholesale offer, which didn't kwon since I found the products in the offer among other brands.

I don't think he is able to go for such a compromise because there is an other shop close to me where they have a good relations and he is probably doing that to protect the other shop as well.

pedronomix that is really helpful article, thanks for sending the link. My case falls the closest to the case number 3. The concern products are manufactured in UE, however I didn't bought It directly from manufacturer but from a wholesaler who stock plenty of brands. The article doesn't actually stating if I need to have a permission of the company to import their products within EU. I tought that it is free market in UE and I can buy the goods from anywhere in EU and sell it anywhere in EU if the products are allowed in particular country.

Do you think they can demand to withdraw the products from my shop?

Axwell

If your business is important enough to you then paying for a consultation with a solicitor should not be a stumbling block. Looking for a free one is by all means fine but at the end of the day for a few quid you will get the answers you need and see what your next step is.

It would be in your interest to know that the information you get is correct rather than taking a gamble with some answers on a website or some free/cheap solicitor who might not know the area.

There's a lot of legislation etc in place around trademarks and distribution etc so paying a few quid now for professional adivce could save you a lot of money down the line for making mistakes.

Best of luck with it.

bubu777

Thank you Axwell, I'v already contacted with good solicitors specialized in trademarks. Will post here when I get some answers.

Thanks again

Greenmachine

Sound like a grey import tbh. How important is selling this particular product or range of products to your future business plans. In the short term there is likely little they can do if you quickly dispose of the stock, however if you have a particularly strong motivation to continue to sell this range of product they could make things very difficult for you.

bubu777

Well it is quite important to have those products, but it seems I'm gonna have to change the plans. I wouldn't order the stuff from if I knew I am gonna have such of problems. However I think that one of the main reasons of that situation is that I opened my shope close to the other shop, a part of the franchising system that is ordering majority of products from this distributor. Now ist very little I can do.

Could you develop your though that it is likely litle they can do If I quickly dispose the stock? I am not able to do it within 7 days as he expected me to do.

Manach

The usual not legal advice but ... the copyright/image owner had a right to request removal of their images. However, from the fact scenario you were using the images in a good faith and not in a manner which was damaging to the brand. Hence for there to be a demand for monies where there is no perceived damage, the online still being a WIP, would seem a stretch of the applicable statue - my 2c.

RUDOLF289

bubu777 wrote: »

Hi there!

This is my first post on the forum. I hope that maybe there is somebody who could help.

The sitiuation looks as follows;

I recently opened a supplements shop , before I did it I'v bought some stuff from official Irish distrubutor of one of the Polish brand. Later just before opening I bought most of my stock from polish wholesaler (the reason is the difference betwen VAT, and as long I am not VAT registered it's better for me to buy products on lower VAT rate in Poland).

After opening the shop the distributor made me a visit and said that my prices are too low and I need to change it (I did it). After few days I receiwed an email from the solicitor represinting the supplements company stating that I broke the copyright law publishing pictures of their products in my online shop(which is still under construction), I have to withdraw the products and pay approximately €2500 for each published picture.

I withdrew products from the website, and wrote an email that I didn't know that I'm doing something wrong publishing the products in the way as the producer doing it.

The main reason is that the company has a strict policy that are not allowing to resell their products in wholesale offer unless you are a official distributor of the products. So the wholesale company from Poland broke their agreement selling the products to me.

But I didn't do anything wrong since the company had their products in the offer.

Now I received an email from Irish distributor that he wants me to withdraw the products even from my retail shop, grounding that the company is not allowing me to use their trademarks, I am too close to the other shop which has their products in the offer and I ordered my products from Poland knowing that I have to order it from him since I did it before.


I would like to ask if somebody know where I can find some articles regarding Trademarks and the trade law in Ireland. I'v found some articles in Polish law stating that the copyrights are not concern if we talk about reselling the products with trademarks beeing relased on the market by the producer.

I think he can't force me to withdraw the products from my retail shop relying on those arguments. However I don't know if they don't accuse me for the product pictures that I published on the website if I won't agree to do it

What do you think guys? What should I do?

Good morning,

once goods are in "free circulation" in the EU, the intellectual property is deemed to be exhausted. Even if the goods are imported from outside the EU by an official distributor, the goods can legitimately be sold within the EU. There is significant jurisprudence available both at EU level and Irish Level

Only when you import from outside the EU (so called Grey Imports), can the distributor (or indeed the original manufacturer or owner of the brand) take out a case against you and stop you from selling the product.

If the local Irish distributor is trying to make a case, he is outside EU competition law. Because goods can be sold freely within the EU (there are some restrictions on medicines), any "exclusive distribution" agreement is by its nature anti competitive and can not be enforced.

You are free to sell these products, provided they are not classed as medication or come under the remit of the Irish Medicine Board. In that case you would have to apply for a parallel import license.

Suggest you have a look at the following links ;

http://www.biztips.co.uk/the-grey-market-explained

http://www.juridice.ro/31763/parallel-grey-imports-v-exhaustion.html

http://www.tca.ie/images/uploaded/documents/Discussion_Paper_8.pdf

http://en.wikipedia.org/wiki/Grey_market

Perhaps a lot of reading, but you are quite safe. The official distributor can not stop you from selling products you have bought in Poland.

Cheers,
Rudolf289

RUDOLF289

Greenmachine wrote: »

Sound like a grey import tbh. How important is selling this particular product or range of products to your future business plans. In the short term there is likely little they can do if you quickly dispose of the stock, however if you have a particularly strong motivation to continue to sell this range of product they could make things very difficult for you.

They can make a lot of noise and issue a lot of threatening letters, but EU law and by extension Irish law is quite specific.

If the goods originate from outside the EU, you can not sell them in the EU without permission from the IP owner.

However, if the goods are brought into the EU via legitimate channels, the IP owner or their corresponding distributors in the EU can not stop you from buying the product and selling it. In legal terms once the goods have been placed on the market with the permission of the owner of the brand the Intellectual Property (IP) is deemed to be exchausted.

Cheers,
Rudolf289

Gloomtastic!

I don't know about anyone else, but I swear I heard the OP's sigh of relief after reading Rudolf's response.

In this situation I would call up the owner of the brand in Poland (not his lawyer), and explain to him the situation.
Tell him your a loyal customer to his brand, and in a free market you obviously went to get his products from the cheapest possible place. You were unaware of exclusivity agreements at this time, and it is not in his interest to blame you for the other party in Polands transgressions.
Calmly try and solve the misunderstanding

If he then persists about trying to penalise you, tell him he's welcome to sue you but first you would advise the hiring of a proper solicitor who understands EU regulations, before burning his customers.

bubu777

Thank you so much Rudolf!

That is really loud sigh of relief for me , especially after the email which I received in the morning from solicitors who measured an advice fo this case at level €850-€1000! An probably would give me a similar answer.

I'v read the content of your links and it's very valuable. My case seems to be one of the simpliest comparing to others described out there.

However its not soliving the problem completely, I am sure they don't give up and let me selling the products easily and will be threatening me as long as I stock their products.

How about the IP of the pictures I published on my website do you think they can charge me becouse did it without permission? If I would like to sell the stuff throught the online shop, do you think the only legal way would be to make my owny pictures of the products? Could I use the brand and product name without braking the law?

Cheers
bubu

bubu777

El Rifle I was trying to call the guy in poland from sales team where I could explain everything but they told me that he is on holiday at the moment. But I am going to speak with him when he's back.

RUDOLF289

bubu777 wrote: »

Thank you so much Rudolf!

That is really loud sigh of relief for me , especially after the email which I received in the morning from solicitors who measured an advice fo this case at level €850-€1000! An probably would give me a similar answer.

I'v read the content of your links and it's very valuable. My case seems to be one of the simpliest comparing to others described out there.

However its not soliving the problem completely, I am sure they don't give up and let me selling the products easily and will be threatening me as long as I stock their products.

How about the IP of the pictures I published on my website do you think they can charge me becouse did it without permission? If I would like to sell the stuff throught the online shop, do you think the only legal way would be to make my owny pictures of the products? Could I use the brand and product name without braking the law?

Cheers
bubu

Hello Bubu,

I am not familiar with copy right. I know sufficient about Intellectual Property and Grey / Parallel Imports because I am involved in importation as part of my business.

It all depends I suppose if the Irish Distributor has registered the images. However, you perhaps should ask permission from the brand owner to use pictures of their products (even if you take them yourself).

Finally, in relation to pricing, you mentioned that you were told to increase your prices. That is anti-competitive and considered price fixing. This can not be enforced by the distributor. If you come under renewed pressure in this respect, have a look at the Competition Authority website ; http://www.tca.ie/en/About-Us.aspx

Best of luck

Cheers,
Rudolf289

bubu777

Hi Rudolf,

Thanks for sending that on, another helpful link that I probably woldn't find bymyself

I am actually responding for the email from local distributor where he wants me to withdraw the products. One of the arguments he's grounding that my shop is too close to the other shop which he is supplying.

Do you think that is a reasonable argument?

Or is that rather anti-competetive play from his side?

I think that one of the main reason he wants to pull me down is the shop next to mine and the fact I am very competetive to it. The email he sent me was actually addresed to me and to the competitor's shop, like he would like show him that is doing something to stop me.


Cheers
bubu

Axwell

bubu777 wrote: »

Hi Rudolf,

Do you think that is a reasonable argument?

Well tell us how close the other shop is?

RUDOLF289

bubu777 wrote: »

Hi Rudolf,

Thanks for sending that on, another helpful link that I probably woldn't find bymyself

I am actually responding for the email from local distributor where he wants me to withdraw the products. One of the arguments he's grounding that my shop is too close to the other shop which he is supplying.

Do you think that is a reasonable argument?

Or is that rather anti-competetive play from his side?

I think that one of the main reason he wants to pull me down is the shop next to mine and the fact I am very competetive to it. The email he sent me was actually addresed to me and to the competitor's shop, like he would like show him that is doing something to stop me.


Cheers
bubu

Hello Bubu,

If that was a valid argument, you would never find a MacDonald's and a Burgerking on the same street or two shoes shops or two butchers etc.

Obviously you are putting your competition under pressure and they are trying to pressurise you into shutting up shop - so to speak. Based on what I know you are not doing anything illegal and therefore none of the arguments they are advancing has any validity.

Perhaps you need call his bluff and suggest that you jointly approach the Competition Authority and put the case to them ...... Just put it to him as an inncocent suggestion, on the basis that you want to make sure that everything you are doing is legal and above board. It would be interesting to see what his reaction to that suggestion is.

Cheers,
Rudolf289

RUDOLF289

Axwell wrote: »

Well tell us how close the other shop is?

Even if it was litteraly next door, how could that be a valid argument?

pedronomix

You can use registered trade and sign marks provided you are selling the genuine product. It happens all the time that brands appear in public photographs etc etc. Think of a Coke can or bottle or a picture of a bus with advertising, images of a city with neon signs etc!!

alanceltic

This situation could be a little more complex than you initially imagined and it is far from straight forward. Couple of point which I would like to put on your radar.

As has been stated if the goods are in free circulation within the EU there cant be any anti competitive restrictions placed on you selling goods, you are simply "parallel importing" which is a normal practice in some sectors but usually causes friction for reasons which I wont go into (some quite reasonable). However in your circumstances there are other mitigating factors to be considered.

You say that you are trading as not registered for VAT and this is your reason for importing the goods at a zero rate.
1) The goods can only be exported from Poland at a zero rate if they are supplied to a company that is VAT registered in Ireland, you don't have a VAT registration number in Ireland so the goods strictly speaking should be liable to VAT in Poland, there may be Irish VAT/TAX implications with your purchases.
2) The VAT threshold for trading unregistered is 70,000 per annum (1,346 per week). I find it difficult to understand how you are trading unregistered at this level of sales and even breaking even, be very careful as Revenue will be very heavy handed if you are not compliant.

If I was trading close to you I would be questioning your ability to undercut traditional supply channels and if it is common knowledge that you are sourcing elsewhere people may question your vat status. Competition is all well and fine but an uneven playing field due to not being tax compliant is an entirely different matter. I am not making any accusations but simply highlighting how it could appear to your competitor.

Regarding the goods themselves, is the packaging in English? If the ingredients and not detailed on the labelling in English you are in trouble.

What type of supplements are you selling? Somebody mentioned that if they are medicines there will be restrictions on them that will require a parallel import licence. This is partially true and partially false but the regulations are far more reaching than most people realise. The Irish Medicines Board are the statutory body responsible for enforcing the supply of goods which fall under the THMPD (Traditional Herbal Medicinal Products Directive) and it covers herbal/homeopathic and supplements (depending on their ingredients) also fall under this directive. If the supplements you are selling are under the remit of the IMB they need to be licensed by the IMB and if the goods being sold by the Irish distributor have a license it will not automatically put you in the clear as the packaging on your stock is likely to be different.

Make no mistake, if you are undercutting to a level which looks impossible it will raise questions if you are compliant in a number of areas and rightly so.

bubu777

Thanks for the replies guys,


Regarding the images, Im not gonna combine and if they don't let me to publish it I probably just sell the stuf I have in store. I'v already asked for a compromise saying that I am able to withdraw products from my retail channel if they let me to publish the pictures and sell online. I wouldn't be such a competitor to the nearby shop and the distributor could earn some money on my online sales.

Alanceltic

I am not VAT registered since the shop is running only for 2 months now, and I am really far away of reching the 70.000 VAT threeshold, for now my profits are just to cover the rent and other charges but I think to double or even tripple my turnover when I start with the online sales and the season for the supplements begins. I will certainly switch on the VAT when necessary.

I didn't say that I'm buing at 0% VAT, as you said I would need VAT number for doing that. I said that Im buing there on lower VAT rate since in Poland VAT on supplements is 8%, here is 23%.

Regarding the goods almost all products having descriptions in multiple languages including english and looks the same like from local distributor. Only a couple of small products hadn't english decription but I withdrawed it already from my shop.

All the products I have are available in different stores so it shouldn't be a concern

BnB

I worked previously in the Drinks Industry where this was a problem. The company I worked for had the rights to manufacture and market a particular brand of American beer in Ireland, (North & South). They pumped a lot of money into building up the brand over a few years. But when they got it off the ground, some of the Supermarkets as well as some of the big Off-Licence Multiples would just buy it cheaper by the container load from other manufacturers in Europe.

And while it peeved the sales & marketing people off no end where I worked, there was very little they could do about it. Legally, there was nothing at all they could do. Their only route was to talk to the brand owner in the US to put pressure on the Manufacturers in the other countries, but it was a constant battle. There was always some other manufacturer or distributor willing to do a deal.

In your case, how willing the Polish manufacturer is to deal with you, is probably related to how good of a customer the current Irish distributor is and what kind of a deal they have with them.

In all honesty, I can't see the Manufacturer dealing with you directly if they already have a distributor. You are probably limited to dealing with distributors in other countries.

RE the current Irish distributor... I would be tempted to tell him to fup off.... But, satisfying and all as that might be, you might be better off keeping your cool for now and not burning your bridges. You may need him in the future for this or other products.

jimmii

You will probably be best offer registering for VAT now unless you have good reason to believe you won't meet the threshold over the next 12 months. I would have thought you would have quite a few expenses in starting up that you are due that VAT back on I know when we opened our shop we get a huge amount of VAT back due to all the expenses we had fitting the place out. Better to get it all sorted and up and running now than leave until you get really busy €1346 a week is a very, very low amount and hopefully you will be trading well above that very quickly. From what I can tell the 75k is over any 12 month period so I think that means if you do reach in the next 12 months right now becomes subject to VAT (I may be wrong in my understanding of the wording i'm not 100% sure) but that is how it reads on the Revenue site to me which I why I registered straight away.

bubu777

Hello Jimmii

You are right that 75k is over any concecutive months. But I am not sure how's it really works. Lets say I am reaching 65k after 7 months and deciding to register for VAT. Will I get any VAT back from invoices I already have? How the procedure of switching on VAT looks like?

According the tax specialist I spoke with before I started with the business, it is better for me to stay unregistered as long as I can.

jimmii

Yeh you can claim back expenses previously incurred not sure if there is a window on this probably worth checking. What reasons did they give you for staying unregistered? If they knew you were buying at 8% VAT then I guess it would make a small difference but not a massive one really.

Work out how much money you paid in VAT on your opening expenses and see how much it comes to you might be surprised just how much it is! For us in a very small shop (100sqm) it worked out at about €4k which helped massively with cash flow at the time.

bubu777

Well considering cost of my stock and other costs i suffered. The stock cost me i about 75% of all investment and there is 15% difference between the VAT rate I think it is quite a massive difference. Let me give you a simplified example;

buing something for 100 quid + 8% = 108 euro
seling it later for 200 euro quid gives me 92 euro profit

When I would be on VAT

buing for 100 quid + 0% = 100 euro
seling it later for 200 quid - 23% = 154 euro = 54 euro profit


But in other case if I buy something for 100 and seling for 150

When I'm unregistered

buing 108
seling 150
42 euro profit

on VAT

buing 100
seling 150 - 23%
only 15,5 euro profit


I know that I could compensate it a bit due other expenses but I doubt that this VAT is able to cover a half of that differenceand I think It is better to reach the threeshold staying unregistered