Finally the matter has come before the consumer. Visitors to HMV or KPS cannot fail to have noticed the signs - the ones that say that cheap magazines are out of stock, CD prices are going up, or movie titles will take longer to arrive. For more than 10 years, this matter - with its turn-off words 'parallel imports' - has been a bone of contention in the Hong Kong cultural arena but only now is the person in the street having to come to terms with the issue. Parallel importation of copyright articles - the 'grey' market, or, to translate from Chinese, 'water products' - is not the same as selling counterfeit goods. For each magazine, book, piece of computer software, video, laserdisc and compact disc sold in Hong Kong, a local agent holds the licence from the copyright owner to import it. But book and music shops often prefer to deal with legitimate overseas distributors who can supply the goods more quickly and cheaply than the local agent. This means the customer has been able to see a film or read a book earlier and more cheaply than by using the local agent. But no longer: parallel importation of any product, incorporating what are known as intellectual property rights, within 18 months of its release is now a civil and criminal offence under the Copyright Ordinance. Even when products are more than 18 months old, they can be bought from overseas only under very restricted conditions. Although some of these rules were in place before, now they are easily actionable and violators of the ordinance could be jailed for a maximum of four years. So magazines previously brought in from overseas have disappeared from the shelves, while shops negotiate with the local agent. HMV estimates that, since the new bill gained Legco's approval on June 24, sales of magazines and T-shirts are down 30 per cent and CD singles 20 per cent. CD and video stock at both KPS and HMV are not being replaced after sale pending a resolution of the issue. Retailers say it could take six months before business is back to where it was. This was a bitterly fought battle in which the consumer was all but ignored while vested interests rode roughshod over the wishes of the public. Wild claims flew around Legco as the bill was lobbed backwards and forwards in the final days before becoming law on June 27. Legislators were warned that passage of the bill would raise the price of CDs by half (EMI added $8 to the price of its Cantonese releases within days of the law's enactment) and stocks would shrink by 60 per cent. Weighing in on the other side, Jackie Chan threatened to leave Hong Kong if parallel imports were decriminalised, although as a local artist he has not suffered from them. Retailers - backed by the Consumer Council - are understandably alarmed. Buyers and sellers alike have profited from parallel imports. Now that all transactions have to go through the Hong Kong copyright owner, opponents of the law fear that monopolies and cartels will emerge to fix prices and specialised products will become unavailable. If there is no Hong Kong licensee, vendors will be allowed to practise parallel importation but determining copyright ownership will be difficult, costing a great deal of time and money. One bookshop manager said: 'Most bookshops order from foreign suppliers. If we can order from the foreign supplier, we will have more new books. If we have to wait for the local supplier it takes longer. We only use the local supplier when we run out of stock.' But the film and music industries - especially the former, which has been hit by a dramatic slide in attendances at theatres and also recently at video stores - have their own concerns. Parallel imports are harmful for several reasons: they create a mountain of work for Customs, charged with enforcing copyright protection but also with seizing more dangerous counterfeit goods; they pre-empt movie release dates robbing the local distributor - who has to undertake the expensive process of 'breaking' a new movie - of his rightful reward, when it appears in the shops at the same time. Distributors say the new law obliges them to provide the product themselves, and deny any interest in price-fixing: they say they would lose customers and they cannot afford that outcome so it would not be in their interest to collude on prices. Golden Harvest, China Star and Era - which between them hold half the Hong Kong video and laserdisc market including titles from Warner, Columbia Tri-Star and MGM-UA Home Video - announced last week they had formed a company called Carnival Home Entertainment and would be embarking on a 50-50 revenue-sharing deal with retailers. Under this new scheme, they said, they would supply retailers with free copies of all their titles, monitor their flow - and share the profits evenly. This scheme has been successfully tried in the United States and Taiwan, but anti-monopoly laws in the US ensure no one company holds 50 per cent of the market: Hong Kong has no such guarantees. 'They have us by the neck,' said one retailer. 'We cannot afford not to have those titles available. Look at what they've got coming out over the next few months: Men in Black, Batman and Robin, My Best Friend's Wedding, Contact, Conspiracy Theory. 'No video store can be in business without those titles; we will have to go along with the terms these people are dictating to us. It's what we warned about all along.' Not at all, according to Cecil Yow, managing director of China Star, which distributes all Win's Entertainment titles: 'The video market in Hong Kong is shrinking, and consumers find it difficult to get the tape they want to watch. We'll be supplying a larger number of tapes to the shops at no cost to them: it will build traffic. The terms are reasonable.' Could Carnival not have waited until the market settled after the new law came into force? 'The timing is unfortunate, maybe it is a bit sensitive. But the idea is not to monopolise: it is to build the industry back up. We're putting our money where our mouths are.' Jeff Hardee, vice-president of the Motion Picture Association (MPA), dismissed talk of monopolies or cartels. 'The studios act independently and competitively across the world, nobody can dictate a price,' said the man whose association, as the representative of the big seven Hollywood studios' overseas interests, petitioned Legco in favour of the bill. 'Anyway, what's a cartel? KPS controls 60 per cent of the video industry in Hong Kong. What does that say?' The issue of parallel imports is, obviously, still a heated one. It is the consumer, though, who will feel the hot air blast. Off the record, retailers claim local licensees will put prices up. Also off the record, the licensees wonder aloud whether the retailers are exaggerating their fears so they can raise prices and pass the blame on to them. On the record, everyone is delighted at how co-operative all the parties are being, working with one another to sort the issue out. But after the cheesy smiles comes the hard part: working together. These are the facts that will be of most concern to customers. When the magazines return to the shelves they will be more expensive. As CD and video titles are bought, there will be a delay of three to six months in replacing some more specialised titles as retailers and licensees try to fulfil their lawful duties to the copyright holder and at the same time fulfil orders. The music companies are committed to supplying all orders, said Sonya Ho-Asjoe, the head of market leader Sony Music. 'We will have to service every retailer; we will get as many products as possible; we will do more on the CD market; it will be more expensive but we will have to try,' she said. 'We have to talk about professionalism, and stop pointing fingers. Whatever retailers have been getting before, they will get from us, if we have the rights - not on the day, but maybe a week later.' One musical product that will become difficult to obtain is the compilation CD, with its tangle of rights and restrictions. 'The law controls parallel imports where someone is making a business of it,' said Stephen Selby, director of the Government's Intellectual Property Department. 'There's nothing to stop you or me from bringing in titles for our own use, from ordering them from catalogues or off the Internet. There is no provision for price control but, if the prices start going high, it will just encourage people to go to the [mainland] border or to order their own. 'It's no argument, but if prices do go too high it will encourage piracy all over again.' As regards movies, customers can be assured that never again will they go to the video store and find a movie they could find currently playing at the UA Queensway. When the bill went before Legco, local distributors tried to have aired what they consider to be several misconceptions surrounding the theatrical film business in Hong Kong. The first of these was the belief that, because cinema audiences are in freefall and the market is depressed (Columbia Classics in Wan Chai being the latest to close its doors), distributors are finding it tough going to secure bookings: a two-to-three-month wait for mid-range titles is the norm, while smaller distributors who do not own or operate their own theatres often have to wait up to six months. The theatre owners have the right to turn down a film on the ground that they do not think it will make money. Amid such tortuous proceedings - which involve Asia's most expensive ad campaigns, with even a small art film costing some $4 million - the movie will have been released in the US. In the US, the public normally has to wait six months after a movie hits the big screen before it can rent the film on video, though this drops to two or three months for the 'hottest' titles. Before distributors have had time to put up posters outside the Cine Art House, legitimate American copies are on the shelves of Hong Kong video stores - and, most depressingly, local distributors have a different 'window' (industry jargon for the time between the big-screen and small-screen release dates) before they can release their own video in Hong Kong. All this means that, when the subtitled copy comes out six months down the line, viewers will no longer be interested. Rigo Jesu - the head of Intercontinental Films which handles Disney theatrical releases in Hong Kong and until recently looked after Disney and Fox on video - put what was happening in graphic language: 'Retailers were breaking the windows. Had they observed the windows I don't think there would have been a problem.' This raises the question of whether the entire rumpus could have been avoided if the parties had thrashed out a deal before the legislative juggernaut started rolling. MPA's Hardee said: 'The author should have the right to determine when and where their creation is released. It was disrupting the distribution process and becoming a problem in Hong Kong.' Legco understood the extent of the problem when the combined weight of the film, record and computer software industries was brought to bear, and the retailers followed suit. Originally the Law Reform Commission intended to do away with criminal sanctions for parallel imports. The outcry was tremendous. 'Legco realised what a contentious issue this was,' said Selby. 'We had to sit down with the parties and find a middle ground.' That consisted of making it a civil and criminal offence to import articles within 18 months. Now the rules have been made, the customer has to live with the results. 'Our position is simple,' said the Consumer Council's chief legal affairs officer, Agnes Yang. 'We look at it from the consumer's point of view, and parallel imports are to be supported. 'We made our views known. We knew the Government was trying to balance all interests, and we said we'd like to see checks and balances. 'We saw the ordinance enacted and note there have been defences on the civil and criminal side. But we have no idea whether it will work. We wait with interest.' As do CD buyers, movie buffs, computer software fans and magazine addicts across Hong Kong.
