DIVERSION HEARING SET

Byline: Joanna Ramey

WASHINGTON — The shampoo war, as it’s been called, is poised to heat up again, pitting the brand-name beauty industry against those who divert prestige goods for sale on the mass market.
Talks to strike a compromise on the Anti-Tampering Act have yet to produce results on the biggest controversy: When should removing a product identification code be illegal and what ID codes should be protected against removal?
On March 9, the measure is scheduled to go before the House Courts and Intellectual Property Subcommittee, the first step in the legislative process.
Subcommittee chairman Howard Coble (R., N.C.) took action last year, after a hearing on the bill. He asked both sides to try to compromise on the ID code issue, as well as other aspects.
His concern and that of others on the subcommittee is that the secondary market and its low prices could be harmed by the legislation, designed to help in product recalls.
The legislation covers an array of goods, including cosmetics, fragrances, sneakers and electronics.
Those in the secondary market consider the bill as threatening their livelihood. They want to be able to still remove codes that would identify the distributor, which they say is needed to protect against retaliation by manufacturers that don’t want their goods diverted.
The courts have upheld the legality of secondary distribution. However, brand-name manufacturers continually seek to enforce the exclusivity of distribution contracts, prohibiting the resale of their goods into the gray market.
Legislation that embraces codes other than strictly product ID codes like batch codes would give too much control over distribution, according to Gilbert Lee Sandler, an attorney representing the Miami-based American Free Grade Association, whose members include secondary market distributors.
“The bill is still too broad and it would devastate the secondary market,” Sandler said.
John Bliss, executive director of the Coalition Against Product Tampering, doubts that a consensus can ben reached.
For its part, the Cosmetic Toiletry and Fragrance Association is pressing for passage of the legislation, HR 2100.

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