Lessons in Parallel Importing (Part 2): The Crumbl Cookie Conundrum

You know it's bad when the cookies are so stale they could double as coasters - and at $17.50 a pop, that's one pricey coaster. Sydneysiders recently flocked to a ‘Crumbl Cookie pop-up’ in Bondi hoping for a taste of the viral US brand’s sugary goodness. Instead, they were served five-day-old cookies with a side of disappointment. The organisers had flown to Hawaii, stockpiled the cookies, and used Crumbl's branding and trade marks—including the TikTok handle “@crumblsydney”—to make it seem like an official Aussie debut. Spoiler alert: it wasn’t, and Crumbl had no involvement.

This incident raises many legal questions, particularly around parallel importing. In Part 1 of our series, we unpacked the legality of parallel importing and what legal risks arise when engaging in the practice. In Part 2, we’re looking at how businesses like Crumbl can leverage distribution agreements and other contractual protections to prevent the unauthorised resale of their products and curb parallel importing.

Role of distribution agreements

While parallel importing is legal, brands and manufacturers can (to some extent) control how their products are sold through distribution agreements. These agreements allow manufacturers and brand owners to place restrictions on the way their products are sold by distributors, both locally and internationally.

A manufacturer or brand owner may place the following contractual restrictions on distributors.

1. Territorial restrictions: These clauses can limit a distributor’s right to sell the products to a specific territory (eg Australia) and prohibit resale outside that territory. ?
2. E-commerce limitations: The agreement might restrict resale across certain marketplaces (eg eBay or Amazon). This ensures brand owners can retain control over their product’s online presence. ?
3. Resale restrictions: Distributors may be prohibited from wholesaling the product again to another seller. This means the distributor can only sell directly to consumers, not to other businesses.

These types of restrictions need to be carefully drafted by a lawyer to avoid breaching competition law. Overly restrictive clauses that substantially lessen market competition may be considered anti-competitive and, in some cases, illegal.

Protecting the rights of distributors

Distribution agreements also protect the rights of distributors. For instance, a distributor with exclusive rights to sell a brand’s products in Australia may negotiate the right to register the brand’s trade marks in Australia for the duration of the distribution agreement. Alternatively, they might secure an exclusive license to use the brand’s trade marks in Australia.

If the Bondi pop-up organisers had secured such a distribution agreement with Crumbl, any potential trade mark infringement issues would have been avoided, as they would have had the legal right to use Crumbl’s branding.

Distributors wanting to limit parallel importing into their market may negotiate the inclusion of clauses that place an obligation on the manufacturer or brand owner to:

1. avoid selling products to third parties likely to engage in parallel importing into the distributor’s market; and ?
2. minimise competition from parallel imports.

These clauses give the distributor a right to sue for breach of contract if the contracting brand owner or manufacturer is responsible for the leak in the supply chain that enables parallel imports.

Other protections

Finally, many brands, including Crumbl, have online terms and conditions that prohibit the commercial resale of their products. While Crumbl’s online terms and conditions do prohibit the commercial resale of their cookies, Crumbl might have a hard time enforcing the terms since the organisers purchased the cookies instore, not online. If it wasn’t made clear to the organisers upon purchase that the online terms applied, they could argue they weren’t bound by them.

The Crumbl Cookie saga highlights the challenges brands face in controlling the distribution of their products. While parallel importing may be legal, carefully drafted distribution agreements can help protect against unauthorised resales and maintain control over a brand’s market presence.

Questions? Give us a call.