Russia is legalizing the country’s bootleg economy to keep foreign goods on its shelves after Western brands exit

March 31, 2022, 8:37 AM UTC

Russia is hoping the gray market of quasi-legal imports can keep foreign products on shelves even as Western brands flee the country, following its invasion of Ukraine.

On Wednesday, Russia Prime Minister Mikhail Mishustin said that the country will allow retailers to import goods without the permission of the trademark holder. That would mean a Russian importer could buy branded clothing in another country and bring it into Russia—without talking to the company that actually owns the brand.

It’s a practice known as “parallel importing”—and it exists in a legal gray area.

“This approach will guarantee the shipment of goods to our country…in spite of the unfriendly actions of foreign politicians,” Mishustin said at a televised government meeting, adding that the Ministry of Industry and Trade would draw up a list of accepted parallel imports in the coming days.

Russia’s anti-monopoly agency suggested that allowing parallel imports might help to increase competition, “through an increase in the number of businesses that import goods to Russia, which will lead to a decrease in retail prices for these goods.” Annual inflation in Russia reached 15.7% in March as the falling ruble increased the cost of imported goods.

Unlike other instances of intellectual property violation—such as bootlegging a film by recording it at the cinema, or producing knockoff designer goods with brand names that sound similar to the original—parallel imports are genuine products, as opposed to counterfeits.

Parallel imports often happen when a company does not sell its goods in a given country or simply sells them cheaper somewhere else. For example, a parallel importer might buy a textbook at a lower cost from an official overseas retailer and then resell it in the U.S., undercutting the more expensive domestic price set by the publisher.

For brands, the primary issue with parallel imports is that the company loses control over how their products are presented and sold overseas. Parallel imports can also lose a brand money, if consumers are choosing to buy cheaper imports rather than the more expensive version sold in their home market.

Countries have varying attitudes toward parallel imports, with some allowing the practice while others require all imports to have authorization from the original manufacturer. Russia originally took a tough stance on parallel imports, prohibiting the imports of foreign goods into Russia without authorization from the trademark holder.

While the country has debated allowing parallel imports before because of competition concerns, Wednesday’s decision was likely accelerated by the exodus of Western companies as a result of the war in Ukraine. Brands like Apple, H&M, LVMH and Uniqlo—among many others—have pulled out of the country, leaving Russians with products either made locally or by companies based in countries more friendly to Russia.

Russian retailers, which now find it difficult to get foreign goods, have expressed support for legalizing parallel imports.

Parallel imports would be “especially important for socially significant goods like medicines, foodstuffs, and children’s products,” said Tatyana Bakalchuk, founder of Russian online retailer Wildberries, in a statement last week. 

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