What are Gray-Market Imports?

Gray market is the trade of a commodity that is unintended by the original manufacturer - even though they are legal. Gray market products, on the other hand, are goods sold by authorized parties without following the agreed terms between manufacturer and reseller.

How do Gray Market Imports Work?

Most manufacturers of telecom, computer, and various other technological products prefer selling their products through suppliers. Even though most distributor agreements require distributors to sell these products to the user directly, most distributors breach this agreement by selling these products to the resellers. Even though the purchase of the grey product may look illegal, the United States Supreme Court found no offense in buying these products. The EU Supreme Court made a similar ruling. In their ruling, The EU Supreme Court added the manufacturer of the grey products should be from the EU. The term grey products originated from the manufacturers to discourage customers from buying the products. They created a perception that purchasing such products was illegal. The term grey market was borrowed from the famous black market, a term that was used to describe illegal or stolen products. The court of appeal of Wales and England in their ruling on November 2016 passed that selling grey products was an unlawful act with a possible jail term of 10 years. Grey products are counterfeit goods sold to the public through abnormal distribution channels by distributors. Notwithstanding the process of distribution, grey products are legal. These products are every day when prices of goods vary significantly in different countries. Sellers buy grey products from countries that retail them at relatively low prices often as wholesalers; they will then import these products to their target market. They will then retail these products at a lower price compared to the market price. Efforts to promote free trade like harmonized national standards and reduced tariffs have been to prevent manufacturers from dictating the market price of the good. This has made it difficult to trace the distribution and sale of grey goods in the world market. New products and used products are the most common products in the grey market. The term dark was used since these goods are seen to be unregulated and secretive. Even though the black market is related to the grey market, the two are different. The black market represents those products that are legally restricted. Examples of such products include firearms, prescriptive drugs, and alcoholic beverages. During peak seasons for certain products, demand exceeds supply forcing the development of grey markets. In such situations retailers will hike the prices of these goods, such a practice is referred to as scalping. 

Support for Grey Marketing 

Groups associated with the rights of consumers argue that discrimination against consumers such hiking of prices of products of similar value just because of the geographical differences is unfair. This is infringing the rights of consumers by corporations. It requires the government to create legislation or laws to restrict citizens from buying goods at lower prices. For this reason, many democratic governments have decided not to protect its citizens from ant competition technologies such as DVD region coding. Grey market does not participate in giving out any illegal products, unlike the black market. Most ideological ways have supported the Grey market. Radical liberal opponents of class discrimination contend that private property generally leads to the oppression of members of the society and therefore are not for the idea of intellectual property. This forms the basis of arguments against the Grey Markets. However, in agreement, proponents of the corporate financial system affirm that the bringing into force of the intellectual property can cause a lessening of composing effort. The Grey Market for a long time has been a source of litigation and appeals to courts in the United States. The questions as to whether or not a good sold legally is still protected by the United States Intellectual Property Law, for resale arises under patent and copyright law. The purchaser may resell a copyrighted good under the first sale doctrine contained at 17 U.S.C. 109(c), when domestically purchased. In the same way, a patented good may be sold under the patent extortion doctrine. The United States Supreme Court in 2013 asserted the legality of the Grey Market, where it held that a sale abroad of copyrighted good triggers the first sale doctrine. This was the decision in the case of Kirtsaeng vs John Wiley and sons; Inc. this decision largely applies to patented goods as well.