Grey market
This article has multiple issues. Please help improve it or discuss these issues on the talk page. (Learn how and when to remove these template messages)
|
Grey market |
---|
A grey market or dark market (sometimes confused with the similar term "
Etymology
Manufacturers of computers, telecom, and technology equipment often sell these products through distributors. Most distribution agreements require the distributor to resell the products strictly to end users. However, some distributors choose to resell products to other resellers. In the late 1980s, manufacturers labelled the resold products as the "grey market".[citation needed]
The legality of selling "grey market" products depends on a number of factors. Courts in the United States and in the EU make a number of assessments, including an examination of the physical and non-physical differences between the "grey market" and authorized products to determine whether there are material differences. The legality of the products oftentimes turns on this examination.
In November 2016, the
It is worth mentioning that the goods sold in this case were, in fact, counterfeit and infringed on trademarks;[3] as such, people would consider these to be black market goods, rather than grey.[4] The simple fact is that selling or reselling any products one has bought is not generally considered a crime, and most traders rely on their right to resale and thus trade.[5]
Description
Grey market goods are goods sold outside the authorized distribution channels by entities which may have no relationship with the producer of the goods. This form of
International efforts to promote
The two main types of grey markets are those of imported manufactured goods that would normally be unavailable or more expensive in a certain country and unissued securities that are not yet traded in official markets. Sometimes the term dark market is used to describe secretive, unregulated trading in
The import of legally restricted or prohibited items such as prescription drugs or firearms, on the other hand, is considered black market, as is the smuggling of goods into a target country to avoid import duties. A related concept is bootlegging; the smuggling or transport of highly regulated goods, especially alcoholic beverages. The term "bootlegging" is also often applied to the production or distribution of counterfeit or otherwise infringing goods (also black market).
Grey markets sometimes develop for
Goods
Arcade games
Certain otherwise identical
One reason for these regional name variants is trademark issues. A company may not own the rights to a trademark in another country, where that trademark may be owned by an entirely different entity. Because of this, a different name must be used.
These regional name variations may also be used to prevent the sale of bootleg arcade games[citation needed], including those from Japanese versions.
Automobiles
Automobile manufacturers segment world markets by territory and price, thus creating a demand for
Although some grey imports are a bargain, some buyers have discovered that their vehicles do not meet local regulations, or that parts and services are difficult to obtain because these cars are different from the versions sold through the new car dealer network.[10]
Also, ensuring service history and mechanical condition for a vehicle purchased at a distance can be a problem. Cars also may have different corrosion protection standards between grey market vehicles and official exports.[citation needed]
Many used cars come from Singapore or Japan, and are sold in other countries around the world, including United Kingdom, Russia and New Zealand. Japan and Singapore both have strict laws against older cars. The Japanese Shaken road-worthiness testing regime, requires progressively more expensive maintenance, involving the replacement of entire vehicle systems, that are unnecessary for safety, year on year, to devalue older cars and promote new cars on their home market that were available for low prices. This makes these well running cars seem reasonably priced, even after transport expenses. There are very few cars in Japan more than five years old.[11]
New car arbitrage has become an issue in the US as well, especially when the US price is lower in the US than in countries like China.[12]
Beyond cost issues, grey market cars provide
In the UK, some
In Japan, due to strict and differing car classifications and emission regulations, or lack of main consumer demand, some international models or certain regional models are not sold in Japanese Domestic Market. Grey importers are trying to import some of these models into Japan but it is permitted due to lack of restrictions imposed on them, unlike in other countries. Among the grey-imported vehicles in Japan are pickup trucks like Toyota Tundra, Nissan Navara and Subaru BRAT, which are not officially sold in Japan.
Broadcasting
In television and radio broadcasting, grey markets primarily exist in relation to
In
Parallel importing of "
It is also becoming increasingly common in the UK for some
There have been two High Court judgements on this matter now. Mr. Justice Kitchin has ruled that QC Leisure and other suppliers of foreign satellite systems can carry on with their businesses if they can prevent copyright elements such as branding of football matches from being shown in a public place. The Premier League can pursue prosecutions of licensees who show branding of matches via foreign satellite systems. Karen Murphy has won her case in the High Court following the ruling from the European Court of Justice. The ruling from Justice Stanley Burnton allows Ms Murphy to shop for the cheapest foreign satellite provider. However the ruling from Justice Kitchin prevents Ms Murphy from showing matches in her pub via foreign satellite systems because branding are copyrighted. It is no longer illegal though for a customer to purchase a foreign viewing card from an EU country and use it outside the territory.
Cell phones
The emergence of the GSM international standard for cell phones in 1990 prompted the beginning of the grey market in the cell phone industry. As global demand for mobile phones grew, so did the size of the parallel market. Today, it is estimated that over 30% of all mobile phones traded will pass through the grey market and that statistic continues to grow. It is impossible to quantify an exact figure, but sources[17] suggest that as many as 500,000 mobile phones are bought and sold outside official distribution channels through their trading platforms every day. Many smaller countries and markets (Croatia, for example) are still prone to grey imports of mobile phones, apparently due to very limited number of mobile phone models ever to be sold in that particular country.
The driving forces behind a heavily active mobile phone grey market include currency fluctuations, customers demands, manufacturers policies, market-specific features, and price variations. It is not uncommon for grey market traders to introduce a product into a market months in advance of the official launch. This was evident with the launch of the iPhone 4, where international grey market traders bought large quantities at Apple's retail price then shipped to countries where the product was not available, adding a substantial margin to the resale price. The launch of the iPhone 14, which lost the SIM card slot in the United States and was replaced with eSIM technology, but remains elsewhere, including Canada, also created a grey market for a version with a traditional SIM card slot.
Computer games
Purchasing some games from online content distribution systems, such as
Due to
PC code stripping is a process by which boxed PC product is bought in large quantities at cheap rates. Manual labor is then used to open the box, retrieve the activation code from the box and enter the code into a database. The activation code is then sold online as a download key and the physical product is discarded or sold as backup media. [20]
Electronics
There is a grey market in electronics in which retailers import merchandise from regions where the prices are cheaper or where regional design differences are more favourable to consumers, and subsequently sell merchandise in regions where the manufacturer's selling price is more expensive. Online retailers are often able to exploit pricing disparities in various countries by using grey-market imports from regions where the product is sold at lower costs and reselling them without regional buyer restrictions. Websites such as Taobao and eBay enable customers to buy products designed for foreign regions with different features or at cheaper costs, using parallel importation.
The grey market for photographic equipment and other such electronics is thriving in heavily taxed states like
Because of the nature of local warranties, importers of grey sets usually offer their own warranty schemes to compensate for the manufacturers' refusal of service. Grey sets do not differ particularly from official imports. They look and function identically. In the early days of camera sales during the 60s and 70s, when lenses had amber coating, the bargain basements for Japanese equipment were Hong Kong and Singapore, through which goods were channeled to European shop windows bypassing the often substantial levy of the official importers. World-market pricing and the Internet have largely eliminated this. Canon gives their hard-selling DSLR cameras names like "Rebel" in the US and "EOS xx0/xx00" outside it, aimed at preventing the competitively priced US-merchandise reaching Europe where sales are slower but achieve a higher profit.
Frequent-flyer miles
Trade or bartering of
Infant formula
Following the 2008 Chinese milk scandal, parents in China lost confidence in locally produced infant formula, creating a demand for European, Japanese and American produced formula. Import restrictions on formula from these sources has led to parents willing to pay a premium for foreign brands leading to the emergence of milk-powder runners, who buy formula at ticket price over the counter in Hong Kong, carry the tins over the border to Shenzhen before returning to Hong Kong to repeat the process. The effect of the runners led to a shortage of infant formula in Hong Kong forcing the government to impose an export restriction of two tins per person per trip.[22] The Chinese then turned to Australia, subsequently also caused shortages there[23] and for milk formula producers to ask retailers in the United Kingdom to restrict purchasers to two tins, as there was evidence that milk formula is being purchased for onward shipment to China.[24]
Pharmaceuticals
Some prescription medications, most notably popular and branded drugs, can have very high prices in comparison to their cost of transport. In addition, pharmaceutical prices can vary significantly between countries, particularly as a result of government intervention in prices. As a consequence, the grey market for pharmaceuticals flourishes, particularly in Europe and along the US–Canada border where Canadians often pay significantly lower prices for US-made pharmaceuticals than Americans do.
Securities
Public company securities that are not listed, traded or quoted on any U.S. stock exchange or the OTC markets are sometimes purchased or sold over the counter (OTC) via the grey market. Grey market securities have no market makers quoting the stock. Since grey market securities are not traded or quoted on an exchange or interdealer quotation system, investors' bids and offers are not collected in a central spot so market transparency is diminished and effective execution of orders is difficult.[25]
In India, the unofficial grey market trades are very common for the initial public offering (IPOs). The people put their money in the unregulated and unofficial grey market before the listing of the IPOs. Company promoters along with the Market Operators buy and sell the shares before the listing. This is the easiest way to manipulate the share price before IPO listing.
Textbooks
College level
These books typically contain a disclaimer stating that importation is not permitted. However, the
Swiss watches
The
Sneakers
One of the biggest Grey Market marketplaces for sneakers is StockX. Since November 2020, it has also opened up to electronic products[34][35][36][37][38] with a valuation of almost four billion.[39][40]
StockX has planned to go public since October 2019.[41] As of January 2022, they have not yet done so.[42]
Corporate action
The parties most opposed to the grey market are usually the authorised agents or importers, or the retailers of the item in the target market. Often this is the national subsidiary of the manufacturer, or a related company. In response to the resultant damage to their profits and reputation, manufacturers and their official distribution chain will often seek to restrict the grey market. Such responses can breach
When grey-market products are advertised on Google, eBay or other legitimate web sites, it is possible to petition for removal of any advertisements that violate trademark or copyright laws. This can be done directly, without the involvement of legal professionals. For example, eBay will remove listings of such products even in countries where their purchase and use is not against the law. Manufacturers may refuse to supply distributors and retailers (and with commercial products, customers) that trade in grey market goods. They may also more broadly limit supplies in markets where prices are low. Manufacturers may refuse to honor the warranty of an item purchased from grey market sources, on the grounds that the higher price on the non-grey market reflects a higher level of service even though the manufacturer does of course control their own prices to distributors. Alternatively, they may provide the warranty service only from the manufacturer's subsidiary in the intended country of import, not the diverted third country where the grey-market goods are ultimately sold by the distributor or retailer. This response to the grey market is especially evident in electronics goods. Local laws (or customer demand) concerning distribution and packaging (for example, the language on labels, units of measurement, and nutritional disclosure on foodstuffs) can be brought into play, as can national standards certifications for certain goods.
Manufacturers may give the same item different model numbers in different countries, even though the functions of the item are identical, so that they can identify grey imports. Manufacturers can also use supplier codes to enable similar tracing of grey imports. Parallel market importers often decode the product in order to avoid the identification of the supplier. In the United States, courts have ruled decoding is legal, however manufacturers and brand owners may have rights if they can prove that the decoding has materially altered the product where certain trademarks have been defaced or the decoding has removed the ability of the manufacturer from enforcing quality-control measures. For example, if the decoding defaces the logo of the product or brand or if the batch code is removed preventing the manufacturer from re-calling defective batches.
The development of DVD region codes, and equivalent regional-lockout techniques in other media, are examples of technological features designed to limit the flow of goods between national markets, effectively fighting the grey market that would otherwise develop. This enables movie studios and other content creators to charge more for the same product in one market than in another, or alternatively withhold the product from some markets for a particular time.
Canon
This section needs to be updated.(April 2018) |
The lawsuits started by Canon U.S.A. Inc. v. a number of retailers on 25 October 2015 in the New York Eastern District Court (Case No. 2:15-cv-6019[45] and No. 2:15-cv-6015)[46] will not be tried until 2016 at the earliest, but are based on a Trademark violation. The Plaintiff alleges that the Defendant retailers applied counterfeit serial numbers to Canon digital SLR cameras and sold kits with inferior (non-Canon) warranties as well as counterfeit batteries and chargers that did not comply with U.S. certification regulations.[47] Canon U.S.A. Inc. also reserves the right to claim damages for "further violations of CUSA's intellectual property and other rights [that] will come to light as this litigation progresses".
Alliance for Gray Market and Counterfeit Abatement
The Alliance for Gray Market and Counterfeit Abatement (AGMA) is a California-based non-profit organisation of information technology (IT) companies that works to educate and raise awareness on counterfeiting; digital IP protection; service and warranty abuse; and the grey market.
Support
Consumer advocacy groups argue that discrimination against consumers—the charging of higher prices on the same object simply because of where they happen to live—is unjust and monopolistic behaviour on the part of corporations towards the public. Since it requires governments to legislate to prevent their citizens from purchasing goods at cheaper prices from other markets, and because this is clearly not in their citizens' interests, many governments in democratic countries have chosen not to protect anti-competitive technologies such as DVD region-coding.
Correspondingly, the grey market has found support from most ideological tendencies.
The grey market has been a constant source of litigation and appeals in the United States. The same fundamental question arises under patent law and copyright law, namely whether or not a good sold abroad lawfully is still protected by United States intellectual property law for the purposes of resale. When purchased domestically, a copyrighted good may be resold by the purchaser under the
See also
- Agorism
- Pirate politics
- Counter-economics
- Cryptocurrency
- Hawala
- Regional lockout
- The Misfit Economy – a 2015 book
- Black market
- Red Market (organ trade)
- Parallel import
- Silk Road (marketplace)
References
- ^ "What is the Parallel Market? | The Gray Blog". Archived from the original on 11 March 2012. Retrieved 30 January 2016.
- ^ "Definitions of parallel market - OneLook Dictionary Search". Retrieved 4 March 2015.
- ^ a b R v C & Others [2016] EWCA Crim 1617 (01 November 2016), accessed 21 February 2018
- ^ "Are grey goods the real deal?". The Guardian. 9 July 2016.
- ^ "The Right to Resell - Bill of Rights Institute". billofrightsinstitute.org. Archived from the original on 1 August 2020.
- ^ "Supreme Court OKs Discounted Resale Of 'Gray Market' Goods". NPR. Retrieved 4 March 2017.
- ^ "Victory: "Close the ENRON Loophole" Bill is Small Step In Right Direction". NEON: NEFI Energy Online News. 3 (19). 2008. Archived from the original on 7 January 2009.
- ISBN 363821043X. Retrieved 28 February 2017.
- ^ "China has finally lifted its 14-year ban on video games". Business Insider. 27 July 2015. Retrieved 1 March 2017.
- ^ "NADA - Glossary". Archived from the original on 10 August 2017. Retrieved 4 March 2015.
- ^ Pollack, Andrew (12 September 1993). "Why the Cars In Japan Look Just Like New". The New York Times. Retrieved 4 March 2015.
- ^ "Exporting new luxury cars is lucrative legally questionable - Autoweek". 22 July 2014. Retrieved 4 March 2015.
- ^ "How To: Win the Car-Importing Game". Archived from the original on 3 February 2015. Retrieved 4 March 2015.
- ^ "C-403/08 - Football Association Premier League and Others". Curia.europa.eu. Archived from the original on 7 November 2011. Retrieved 30 January 2016.
- ^ "C-429/08 - Murphy". Curia.europa.eu. Archived from the original on 24 July 2009. Retrieved 30 January 2016.
- ^ "C-403/08 - Football Association Premier League and Others". Curia.europa.eu. Archived from the original on 30 November 2011. Retrieved 30 January 2016.
- ^ "gsmExchange". GsmExchange.com. Retrieved 30 January 2016.
- ^ "Steam Error: Game not available in your territory". Valve. 23 October 2007. Retrieved 24 March 2008.
- ^ Caron, Frank (25 October 2007). "Valve locking out user accounts for "incorrect territory"". Ars Technica. Retrieved 25 October 2007.
- ^ "What is Code Stripping?". Savemi. 10 November 2015. Archived from the original on 2 February 2016. Retrieved 28 January 2016.
- ^ "Points.com". Points International Ltd. Retrieved 23 July 2012.
- ^ "Hong Kong Customs and Excise Department - Import and Export (General)(Amendment) Regulation 2013 ( with effect from 1 March 2013 ) - Quantity of Powdered Formula for Persons Departing from Hong Kong". 3 June 2010. Retrieved 4 March 2015.
- ^ "Chinese buyers trigger Australian baby milk run". South China Morning Post. 13 January 2013. Retrieved 4 April 2013.
- ^ Hui, Sylvia (3 April 2013). "Chinese demand for baby milk causes 'ration' in UK". Associated Press. Retrieved 4 April 2013.
- ^ "Explanation of grey market securities". OTCMarkets. Archived from the original on 9 February 2012. Retrieved 27 January 2012.
- ^ Lewin, Tamar (21 October 2003). "Students Find $100 Textbooks Cost $50, Purchased Overseas". The New York Times. Retrieved 4 May 2010.
- ^ Shannon, Sarah (2 September 2017). "The billion-dollar grey market in watches upsets big brands". Financial Times. Archived from the original on 10 December 2022.
- ^ "Swiss Watches Are Getting More Affordable". Fortune.
- ^ "How to Buy Luxury Watches for 40% off".
- ^ "Gray market has become a necessary evil for luxury watchmakers". Reuters. 12 April 2017.
- ^ Koltrowitz, Silke (7 April 2021). "Swiss luxury watchmakers learn to love the pre-owned market". Reuters.
- ^ Williams, Alex (3 May 2016). "The Rolex Daytona is the Hottest Watch That Money Can't Buy". The New York Times.
- ^ "The absolute best luxury watches and jewelry". Los Angeles Times. 4 December 2020.
- ^ "StockX : le marché boursier de la sneaker s'ouvre à l'électronique". Begeek.fr (in French). 31 March 2021. Retrieved 6 April 2021.
- ^ Hyman, Dan (6 July 2018). "A Nasdaq for Sneakerheads". The New York Times. Retrieved 28 June 2019.
- ^ Griffith, Erin (26 June 2019). "Buy Low-Tops, Sell High-Tops: StockX Sneaker Exchange Is Worth $1.8 Billion". The New York Times. Retrieved 28 June 2019.
- ^ Wade, Reggie (26 June 2019). "StockX is now valued at over $1 billion". Yahoo Finance. Retrieved 28 June 2019.
- ^ Reindi, JC. "Detroit startup StockX now worth $1B: How it got rare status". Detroit Free Press. Retrieved 28 June 2019.
- ^ "Sneaker reseller StockX's valuation jumps to $3.8 billion". CNBC. 8 April 2021.
- ^ "mens sneakers". Retrieved 15 April 2023.
- ^ "StockX's new CEO tells Jim Cramer going public is 'certainly our objective as a company'". CNBC. 21 October 2019.
- ^ "StockX Reportedly Tags Morgan Stanley, Goldman Sachs for IPO". Front Office Sports. 13 January 2022. Retrieved 24 January 2022.
- ^ http://news.bbc.co.uk/1/hi/business/2163561.stm Tesco defeated in cheap jeans battle; Case T-415/99 Levi Strauss v Tesco Stores
- ^ "InfoCuria". Curia.europa.eu. 20 November 2001. Archived from the original on 24 July 2009. Retrieved 27 January 2012.
- ^ "Dockets and Filings". Justia. October 2015. Retrieved 27 November 2015.
- ^ "Dockets and Filings". Justia. October 2015. Retrieved 27 November 2015.
- ^ Reagan, Eric (22 November 2015). "Canon is Suing "Get It Digital" and Others to Stop Gray Market DSLR Sales". Photography Bay. Retrieved 27 November 2015.
- ^ Scherer, F.M. (2004), Quarter Notes and Bank Notes. The Economics of Music Composition in the Eighteenth and Nineteenth Centuries, Princeton University Press
Further reading
- McCauley, Dana (27 September 2016). "Chinese grey market a '$1 billion tax hole'". Daily Telegraph. Retrieved 1 February 2017.
- Hays, Thomas (2003). Parallel Importation Under European Union Law (hardcover). Sweet & Maxwell. p. 488. ISBN 0-421-86300-5.
- Nissanoff, Daniel (2006). FutureShop : How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want (hardcover). The Penguin Press. p. 246. ISBN 1-59420-077-7.
- Stothers, Christopher (2007). Parallel Trade in Europe : Intellectual Property, Competition and Regulatory Law (hardcover). Hart Publishing. p. 526. ISBN 978-1-84113-437-6.
- Michael Levy, Barton A. Weitz (1995). Retailing Management Second Edition (hardcover). IRWIN. p. 700. ISBN 0-256-13661-0.
- David Sugden (2009). Gray Markets: Prevention, Detection & Litigation (paperback). Oxford Press. p. 360. ISBN 978-0195371291.