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The grey market (or '''gray market''') usually refers to the flow of new goods through distribution channels other than those authorized or intended by the manufacturer or producer. The grey market may also refer to the 50-and-over age group (a.k.a the silver streakers) in marketing terms. Grey market goods are not generally 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 Cigarette s and electronic equipment such as Camera s. 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 practice is also known as Arbitrage . International efforts to promote Free Trade , including reduced Tariff s and harmonized national standards, facilitate the grey market where manufacturers attempt to preserve highly disparate pricing. 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. RELATED CONCEPTS Grey market goods are normally new and should be distinguished from Used or second-hand goods. Grey market goods should also be distinguished from Black Market goods, which are typically illegal. 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 Bootleg ging, the smuggling or transport of highly regulated goods, especially Alcoholic Beverage s. The term "bootlegging" is also often applied to the production or distribution of Counterfeit or Pirated goods. 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. As a result of 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 Competition Law , particularly in the European Union. Enforcement of intellectual property rights Manufacturers or their licensees often seek to enforce Trademark or other Intellectual Property rights against the grey market. Such rights may be exercised against the import, sale and/or advertisement of grey imports. However, the possibility of relying upon such rights can be limited. Examples of such limitations include the First-sale Doctrine in the United States and the doctrine of the Exhaustion Of Rights in the European Union. 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. Refusal to supply 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. Refusal to honor warranties 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. Alternatively, they may only provide the warranty service 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. This response to the grey market is particularly evident in electronics goods. Reliance on regulation 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. Tracing grey-market goods Manufacturers may give the same item different model numbers in different countries, even though the functions of the item are identical, in order that they can identify grey imports. Manufacturers can also use batch codes to enable similar tracing of grey imports. Parallel market importers often de-code the product in order to avoid the identification of the supplier. However, in the United States, courts have decided that decoding which blemishes the product is a material alteration which renders the product infringing. Parallel market importers have worked around this limitation by developing new removal techniques. Technological measures The development of DVD Region Code s, 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. 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. 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. 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 the United Kingdom 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 the UK, or models that fetch a high price in the UK 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 the UK. 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. 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. 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. There are many people who believe the idea of grey-market pianos to be a scare tactic, and many people who agree with the manufacturer's claims that pianos brought overseas are likely to under-perform expectations for the brand and may develop serious problems as a result of the wood in the pianos not being properly seasoned for the climate to which they are exported. The Yamaha corporation has been active in educating the public about these risks. Because of their extremely strong brand in the United States, grey-market dealers are able to get a premium for these pianos. Yamaha addresses warranty and safety issues on their website: Yamaha will not provide re-builders or technicians parts or support for grey-market pianos. Yamaha provides a free serial# search [http://www.yamaha.com/pianoserials/index.asp on their website to determine whether a used Yamaha piano was designed and built for the North American climate. 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 . 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 . 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. 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 See Also: Pirate decryption In television and radio broadcasting, grey markets primarily exist in relation to Satellite Radio and Satellite Television delivery. 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 . 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. 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 . In the UK some Pub s 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). REFERENCES
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