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U.S. Supreme Court Knocks Down Barrier To Cross-Border E-Tail

March 21st, 2013

Or will they be? Big U.S. chains generally don’t like to irritate the manufacturers they depend on. An exception is Costco, which was hauled into court by Swiss watchmaker Omega after Costco sold legally made Omega watches in its stores that weren’t authorized to be imported into the U.S.

But consider Walmart (NYSE:WMT), which offers different product selections in different countries or regions. Say there’s an unlocked mobile phone that could be used (but isn’t sold) in the U.S. That could be an extremely low-end phone or something from Apple (NASDAQ:AAPL) or Samsung that’s just not a U.S. product. Or maybe there’s a food product that’s only authorized to be imported to the U.S. by one supplier (at an inflated aficionado’s price)—but is easily available locally in one of Walmart’s countries.

Why couldn’t Walmart’s website offer those products and then have orders fulfilled by its own local stores around the world? Walmart wouldn’t have to import the items itself, but it could leverage its global footprint.

For U.S. chains without such big feet (and that’s most of them), why not partner with regional chains to do the same thing? That’s a business currently being handled almost entirely by eBay (NASDAQ:EBAY) and Amazon (NASDAQ:AMZN) third-party sellers and small local businesses. For chains that don’t want to hunt for a big local partner, why not create a small-seller marketplace specifically to offer products that aren’t authorized for U.S. import?

Still other global chains without a U.S. presence might decide their easiest way to get a foothold is to specialize in those legal-but-unauthorized products. As long as they have good supplies from local distributors, it’s not as if they have much to lose by annoying U.S. makers.

Ironically, what seems like the most obvious set of products for cross-border retail—digital goods—may not actually be such a good fit. Digital versions of movies, music and books are mainly limited by anti-piracy technology (which also serves to control what devices can display a movie or book). That makes crossing borders more complicated.

More important than any individual retail tactic, though, is the signal that the U.S. Supreme Court has sent with this ruling. In effect, the court said that manufacturers may want to divide up the world into geographic markets and control how products are priced and released. But the copyright law won’t help them do it.

That’s not just recognizing that a particular loophole should be closed. It’s a conclusion on the court’s part that carving up the world in such a way—and manipulating prices and product availability—doesn’t make sense.

Congress may decide to change the law (always a possibility—there’s no Constitutional right to buy a watch, phone, book or box of cookies that the maker would prefer not to sell in the U.S.). But at least the Supreme Court appears to understand that it’s no longer practical to pretend that every retailer in the world is more than a click away.


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