Is Brexit going to kill Hungarian second-hand shops?

The remaining EU states’ relationship will drastically change from 2021, as the UK leaves the Union, although not all the details about Brexit have been agreed upon yet. Experts have now revealed how the transitional period’s end will affect second-hand stores in terms of legal changes.

After the transitional period, the harmonised trademark rules of the EU will no longer apply to the United Kingdom, which will have a huge impact on retailers who import goods from the UK with the purpose of reselling them domestically, Taylor Wessing Budapest Law Firm explained, according to Napi.

A trademark grants an exclusive right to its proprietor, meaning one can only use the protected mark with the proprietor’s consent, which applies to the sale of goods as well, meaning that the proprietor of a brand can determine where and how someone can market their goods as they have control over the trade.

Within the European Economic Area (EEA), their control is limited as, if a trademark-protected product is marketed in any of the EU countries with the proprietor’s permission, the trademark will be considered “exhausted” and no longer applies to further resale of the goods. Therefore, the proprietor cannot oversee the trade and resale of the trademarked goods between EEA countries.

This is how a Hungarian retailer can stock up on branded products in another EU state where prices are lower and then resell those products at a lower price than other Hungarian retailers without having to ask the owner of the trademark for permission. This is called “parallel trade.”

This does not apply to products which were initially placed on the market outside of the EEA, meaning that as the transitional period comes to an end, the parallel trade of goods which were first placed on the market in the UK will no longer be possible. The permission of the trademark owner will be required for the reselling of those goods within the EEA.

Trademark rights and their exhaustion are the same for both new and second-hand products, and seeing as Hungary imports large amounts of second-hand clothes from the UK, they will be impacted by the change as well. They will only be able to sell second-hand clothing without the trademark proprietor’s consent if the product had previously been marketed in the EEA with the permission of the trademark owner.

The reselling of clothes in the EU, including Hungary, will require the explicit permission of the trademark proprietors after the transitional period comes to an end.

Although it may not be likely or realistic that major fashion brands will file infringement lawsuits against all the “English Used Clothes” second-hand stores in Hungary reselling their branded products without authorisation, Taylor Wessing Budapest experts point out that more prestigious brands may take action against secondary sales to protect their brand’s marketing position.

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Source: napi.hu