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Encyclopedia > Grey market

The grey market (or gray market) refers to the flow of new goods through distribution channels other than those authorized or intended by the manufacturer or producer. Used or pre-owned goods are just that: used. Only new products fall under the legal, accepted definition of grey market. Wikipedia does not have an article with this exact name. ... It has been suggested that grey market be merged into this article or section. ...


Unlike those on the black market, grey market goods are not illegal. Instead, they are being sold outside of normal distribution channels by companies which may have no relationship with the producer of the goods. Frequently this form of parallel import occurs when the price of an item is significantly higher in one country than another. This situation commonly occurs with cigarettes and electronic equipment such as cameras. Entrepreneurs buy the product where it is available cheaply, often at retail but sometimes at wholesale, import it legally to the target market and sell it at a price which provides a profit but which is below the normal market price there. This article or section does not cite its references or sources. ... It has been suggested that grey market be merged into this article or section. ... A lit filtered cigarette will burn to ash from one end. ... A camera is a device used to capture images, as still photographs or as sequences of moving images (movies or videos). ... Entrepreneurs created by Thomas Clarke in 2001. ...


The grey market is an example of the economic practice called arbitrage. In economics, arbitrage is the practice of taking advantage of a price differential between two or more markets: a combination of matching deals are struck that capitalize upon the imbalance, the profit being the difference between the market prices. ...


Importing certain legally restricted items such as prescription drugs or firearms would be categorized as black market, as would smuggling the goods into the 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 pirated goods. Rum-running is the business of smuggling or transporting of alcoholic beverages illegally, usually to circumvent taxation or prohibition. ... Bottles of cachaça, a Brazilian alcoholic beverage. ... For other uses, see Counterfeit (disambiguation). ... This article or section does not cite its references or sources. ...


Because of the nature of grey markets, it is difficult or impossible to track the precise numbers of grey market sales.


On securities markets, grey market has a different meaning. It refers to the buying and selling of securities to be issued in the future and, therefore not yet circulating. This typically occurs some days before an auction of government bonds or bills and that trading is subject to the effective issue of those securities. Sometimes this is taken as a forecast of the prices that markets expect for future issues.

Contents

Warranties and grey-market goods

Typically the manufacturer will 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. This is particularly evident in electronics goods. Manufacturers may give the same item different model numbers in different countries, even though the functions of the item are identical. When a manufacturer identifies a particular product as not destined for that particular country, the purchaser can then obtain warranty service only from the manufacturer's subsidiary in the intended country of import, not the diverted third country where the grey goods are ultimately sold by the distributor or retailer. As there is no privity of contract between the manufacturer and consumer neither the implied warranty of fitness nor the implied warranty of merchantability apply to grey market goods. The doctrine of privity in contract law provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the parties to it. ... An implied warranty of fitness for a particular purpose is defined by Article 2, Section 315 of the Uniform Commercial Code. ... An implied warranty is a common law term used in United States contract law to describe certain assurances that are presumed to be made with the sale of goods or realty because of the circumstances of the sale. ...


If the manufacturer sells to retailers, there's no privity of contract between the manufacturer and the purchaser either, but the warranty applies nonetheless. Warranty law is not crystal clear, and is highly dependent on local law.


Other responses to the grey market

The parties most concerned with the grey market of a good are usually the authorized 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, which is the local licensee of the manufacturer's trademarks. Vigorous prosecution of trademark laws to restrict advertisements for the product is a common tactic used to discourage the grey market, along with refusal to honour warranties and refusal to deal with distributors and retailers (and with commercial products, customers) that trade in grey-market 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. A trademark or trade mark[1] is a distinctive sign of some kind which is used by an individual, business organization or other legal entity to uniquely identify the source of its products and/or services to consumers, and to distinguish its products or services from those of other entities. ...


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. DVD Regions Each DVD-Video disc contains one or more region codes, denoting the area(s) of the world in which distribution and playback are intended. ... Regional lockout is the programming practice, code, chip, or physical barrier used to prevent the playing of media designed for a device from the country where it is marketed on the version of the same device marketed in another country. ...


Consumer advocacy groups argue that this discrimination against consumers - the charging of higher prices on the same object simply because of where they happen to live - is unjust and anti-competitive. Since it requires Governments to legislate to prevent their citizens from purchasing goods at cheaper prices from other markets, and since 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.


International efforts to promote free trade, including reduced tariffs and harmonized national standards, facilitate the grey market where manufacturers attempt to preserve highly disparate pricing. Free trade is an economic concept referring to the selling of products between countries without tariffs or other trade barriers. ... A tariff is a tax on foreign goods. ...


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. eBay, for example, will remove listings of such products even in countries where their purchase and use is not against the law. Google, Inc. ... eBay headquarters in San Jose eBay North First Street satellite office campus (home to PayPal) eBay Inc. ... eBay headquarters in San Jose eBay North First Street satellite office campus (home to PayPal) eBay Inc. ...


Grey market by industry

Wine

The grey market in wine flourishes, particularly in the case of champagne. Many large champagne producers do their own importing, and desire to maintain independent price points in different markets. Thus a bottle of Champagne might cost US$35 in the United States while the same bottle might be only 20 Euros in France. It is often profitable to buy the wine in Europe from an authorized distributor, and resell it in the US. In the case of enormous pricing disparity, it is not uncommon to find a grey marketed wine selling for less at retail than the wholesale price of the authorized distributor. In the case of a large availability disparity between the US and Europe, the grey market price may be the same or higher than the authorized price. Champagne is often consumed as part of a celebration Champagne is a sparkling wine produced by inducing the in-bottle secondary fermentation of wine to effect carbonation. ...


Typically the importer of a wine is the one most concerned about grey market sources. The winemaker may or may not care what happens to the wine after it is sold, although he or she might complain to appease an importer.


Automobiles

Automobile manufacturers segment world markets by territory and price, thus creating a demand for grey import vehicles. In England the term applies to vehicles imported either new from cheaper European countries or to Japanese domestic models imported secondhand from Japan. This importation of secondhand models from Japan tends to involve sports models that were never released in England, or models that fetch a high price in England due to their performance or status. Although some grey imports are a bargain, some buyers have discovered that their vehicles do not meet British regulations or that parts and service are hard to come by because these cars are different from the versions sold new in England. The term grey import refers to an item that has been imported into a country, legally, but without the agreement of the manufacturer. ...


In New Zealand, grey market vehicles comprise a majority of cars in the national fleet. These secondhand imports have achieved 'normal' status and are used and serviced without comment throughout society. A huge industry servicing and supplying parts for these vehicles has sprung up. After years of trying to stop grey imports (called simply 'Jap imports' in New Zealand) the car companies themselves have become involved, importing in competition with their own new models.


Russia and South Africa are two other countries with massive fleets imported secondhand from Japan.


Pianos

The term "grey market piano" refers to a typically Asian (usually Japanese) used piano that, for reasons of culture, are highly undesirable in those regions. Therefore, enterprising brokers are taking these pianos to other countries and selling them. Piano manufacturers' distributors for their market (USA, Australia, Canada, etc.) actively discourage the purchase of these pianos, claiming that they are inferior due to having been moved to such a far-away region (Yamaha Corporation of America cites climate specificity in this regard). Because the term grey market can only be correctly applied to the flow of new goods outside their authorized channel of distribution (see the definition of grey market above) the use of this term in reference to a used or pre-owned piano (or any other product) is incorrect and misleading.


The reason that authorized distributors of pianos in a given market are using this misnomer is as a 'scare tactic' to steer buyers away from good "used" instruments. It is obvious that they are losing sales of new pianos to these 'low mileage' used instruments.[citation needed]


Photographic equipment

Generally regarded as legal in most countries, parallel imports make expensive photographic equipment attractive to savvy users. The grey market in photographic equipment is thriving in highly developed and heavily taxed states like Singapore, with dealers importing directly from lower taxed states and selling at a lower price, creating competition against a local authorised distributor. The process of deciding if device X is allowed to have access to service Y. This is where the concept of trusted exists. ... Distributor cap. ...


Grey sets, as colloquially called, are often comparable to authorised imports. lenses or flash units of parallel imports often only differ by the warranty provided, and since the grey sets were manufactured for another state, photographic equipment manufacturers often offer local warranty, instead of international warranty, which will render grey sets eligible for warranty claims with the manufacturer. Photographic lens One of Canons most popular wide angle lenses - 17-40 f/4 L The zoom lens of the Canon Elph A photographic lens (or more correctly, objective) is an optical lens or assembly of lenses used in conjunction with a camera body and mechanism to make images... Running water frozen by flash. ... In commercial and consumer transactions, a warranty is an obligation that an article or service sold is as factually stated or legally implied by the seller, and that often provides for a specific remedy such as repair or replacement in the event the article or service fails to meet the... Manufacturing is the transformation of raw materials into finished goods for sale, or intermediate processes involving the production or finishing of semi-manufactures. ...


Due to the nature of local warranty, importers of grey sets usually mask the flaw in warranty with their own warranty schemes. These are often warranties with reduced benefits or lasting a shorter period of time. Professional lenses like the Canon EF L series are requirements for one to be admitted into the Canon Professional Service, and grey sets are usually disqualified. The electronic (gold-plated) contacts of an EF mount lens. ...


Grey sets do not differ particularly from an authorised import. They look and function identically, apart from the manufacturer's warranties having been voided.


Broadcasting

Main article: Pirate decryption

In television and radio broadcasting, grey markets primarily exist in relation to satellite radio and satellite television delivery. Pirate decryption most often refers to the reception of compromised Pay TV or pay radio signals without authorisation from the original broadcaster. ... A satellite radio or subscription radio (SR) is a digital radio signal that is broadcast by a communications satellite, which covers a much wider geographical range than terrestrial radio signals. ... Direct broadcast satellite (DBS) is a term used to refer to satellite television broadcasts intended for home reception, also referred to as direct-to-home signals. ...


The most common form is companies reselling the equipment and services of a provider not licensed to operate in the market. For instance, a Canadian consumer who wants access to American television and radio services that are not available in Canada may approach a grey market reseller of Dish Network or DirecTV. There is also a grey market in the United States for Canadian satellite services such as Bell ExpressVu or StarChoice. DISH Network is a direct broadcast satellite (DBS) service that provides satellite television and audio programming to households and businesses in the United States, owned by parent company EchoStar Communications Corporation (NASDAQ: DISH). ... A standard DIRECTV satellite dish with 1 LNB on a roof DIRECTV (trademarked as DIRECTV) is a direct broadcast satellite (DBS) service based in El Segundo, California, USA, that transmits digital satellite television and audio to households in the United States, the Caribbean and Latin America except for Mexico. ... Bell ExpressVu is the division of Bell Canada that provides satellite television service across Canada. ... StarChoice is Canadas second direct broadcast satellite television distributor (the other being Bell ExpressVu), and is majority-owned by cable TV operator Shaw Communications Inc. ...


In Europe satellite TV services are encrypted for rights reasons, as they are only entitled to broadcast films, sporting events and US entertainment programming in a certain country or countries, hence only residents of the UK and Ireland may subscribe to Sky Digital. In other European countries with large British expatriate populations, such as Spain, Sky is widely available. Although Sky does not condone the use of its viewing cards outside the UK or Ireland, and has the technology to render them invalid, many people continue to use them. This article is 150 kilobytes or more in size. ... Sky Digital is the brand name for British Sky Broadcastings digital satellite television service, transmitted from SES Astra satellites located at 28. ... This article or section does not adequately cite its references or sources. ...


Illegitimate importing of "free-to-view" Sky cards from the UK to Ireland is often done so that Irish Sky customers can receive Five and some of the other channels not generally available via Sky in the Republic due to rights issues. Irish Sky viewing cards, which allow viewing of Irish terrestrial channels, are imported into the UK. Northern Ireland residents subscribing to Sky can watch RTÉ One and Two and TG4, although not TV3, which carries many of the same programmes as ITV. The title given to this article is incorrect due to technical limitations. ... Anthem: UK: God Save the Queen Regional: (de facto) Londonderry Air Capital Belfast Largest city Belfast Official languages English (de facto), Irish, Ulster Scots 3, Northern Ireland Sign Language, Irish Sign Language Government Constitutional monarchy  - Queen Queen Elizabeth II  - Prime Minister of the UK Tony Blair MP  - First Minister Office... Radio Telefís Éireann (RTÉ; Irish for Radio and Television of Ireland) is the national publicly-funded broadcaster of Ireland. ... RTÉ One is the Republic of Irelands oldest and most popular television channel, operated by Irish state broadcaster Radio Telefís Éireann. ... RTÉ Two (known from 1988 to 2004 as Network 2 or RTÉ Network Two or N2) is Irelands fifth-oldest television channel, operated by Irish state broadcaster Radio Telefís Éireann. ... TG4 is an Irish television channel aimed at Irish language speakers and established as a wholly owned subsidiary by Radio Telefís Éireann in 31 October 1996; it was known as Teilifís na Gaeilge or TnaG before a rebranding campaign in 1999. ... TV3 Ireland is the sole commercial television channel in the Republic of Ireland. ... It has been suggested that Channel 3 (UK) be merged into this article or section. ...


In the UK some pubs have obtained viewing cards to receive satellite TV from Norway, which broadcasts live English football matches only available on pay-per-view on Sky, although they face legal action from rights holders and broadcasters.


A reseller may offer the licensed product at lower prices using pirate decryption of scrambled signals, although unlike grey market cards used outside a particular country, this may result in civil or criminal prosecution (if locally illegal). Pirate decryption most often refers to the reception of compromised Pay TV or pay radio signals without authorisation from the original broadcaster. ...


References

Further reading on the grey market and how it impacts our lives:

  • Nissanoff, Daniel (2006). FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We Really Want. The Penguin Press. ISBN 1-59420-077-7.  (Hardcover, 246 pages)

External links

  • The Satellite Legal-Rights Organization (Canada)

  Results from FactBites:
 
The grey market: Let battle commence (791 words)
Grey marketing - or the practice of bypassing established distribution channel structures - was previously rife in the software market, but now it is moving into the hardware arena as well.
This seems to have had a long-term influence on the market as evidenced by the high levels of grey market activities still prevailing today.
Previously, grey marketers were divided into two camps: those that obeyed the law, and those who didn't.
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