Grey market
A grey market or dark market is the trade of a commodity through distribution channels that are not authorised by the original manufacturer or trademark proprietor. Grey market products are products traded outside the manufacturer's authorised channel.
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".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 parallel import frequently occurs when the price of an item is significantly higher in one country than another. This commonly takes place with electronic equipment such as cameras. Entrepreneurs buy the product where it is available cheaply, often at retail but sometimes at wholesale, and import it to the target market. They then sell it at a price high enough to provide a profit but below the normal market price.International efforts to promote free trade, including reduced tariffs and harmonised national standards, facilitate this form of arbitrage whenever 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. Grey market goods are often new, but some grey market goods are used goods. A market in used goods is sometimes nicknamed a green market.
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 commodity futures, notably crude oil in 2008. This can be considered a third type of "grey market" not intended or explicitly authorised by oil producers.
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.
Grey markets sometimes develop for video game consoles and titles whose demand temporarily exceeds their supply causing authorised local suppliers to run out of stock. This happens especially during the Christmas and holiday season. Other popular items, such as dolls, magnets and contraception, can also be affected. In such situations, the grey market price may be considerably higher than the manufacturer's suggested retail price, with unscrupulous sellers buying items in bulk for the express purpose of inflating the prices during resale, a practice called scalping. Online auction sites such as eBay have contributed to the emergence of the video-game grey market.
Goods
Arcade games
Certain otherwise identical arcade games are marketed under different titles, such as Carrier Air Wing/''U.S. Navy, Mega Man/Rockman, and Police 911/Police 24/7''.When certain arcade games are first powered on, a warning message is shown such as "his game is intended only for sale and use in " and often, such a message is occasionally displayed while the machine is in an attract mode.
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, including those from Japanese versions.
Automobiles
Automobile manufacturers segment world markets by territory and price, thus creating a demand for grey import vehicles.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.
Many used cars come from Singapore or Japan, and are sold in other countries around the world, including the United Kingdom, Russia and New Zealand. Japan and Singapore both have strict laws against older cars. The Japanese Shaken 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.
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.
Beyond cost issues, grey market cars provide consumer access to models never officially released. Before 1987, the Range Rover, Mercedes-Benz G-Class, and Lamborghini Countach, all revolutionary designs, were grey import vehicles in the United States. The grey market provided a clear signal to these manufacturers that the United States had significant demand for these cars, and their present-day US model descendants remain popular. Years later, Nissan similarly decided to sell the GT-R in North America after seeing how many people were importing older Skylines. Although Mercedes-Benz was also a beneficiary of the signals to US consumer demand that the grey market provided, their lobbying in Washington succeeded in virtually ending the US grey market in 1988.
In the UK, some Japanese domestic market models fetch a high price because of their performance, novelty or status, assisted by the fact that the Japanese drive on the left, in common with the UK, so vehicles are right hand drive. Popular types include off-road vehicles, people carriers, affordable sports cars like the Mazda MX-5 / Roadster, very high performance sports cars including the rally homologation based cars like the Subaru Impreza and Mitsubishi Lancer Evolution, ultra-compact kei cars, and limited edition Japanese market designer cars like the Nissan Figaro.
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 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 Satellite TV or Shaw Direct.VPN services also market access to programming restricted by broadcasting deals through spoofing an IP address within a different territory. This is commonly used to access a television series otherwise stuck on an unpopular streaming service and instead access it easier through a service such as Netflix, which may have it in their library within another territory.
In Europe, some satellite TV services are encrypted since they have only been authorised by content suppliers to broadcast films, sporting events and US entertainment programming in a certain country or countries. For example, 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 through the grey market. Although Sky discourages 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.
Parallel importing of "free-to-view" Sky cards from the UK to Ireland is often done so that Irish Sky customers can receive Channel 5 and some of the other channels not generally available via Sky in Ireland because of trademark and other licensing issues. Conversely, Sky viewing cards from Ireland, 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, a lot of the programmes airing before ITV can show them.
It is also becoming increasingly common in the UK for some pubs to use satellite decoder cards from Greece, Norway, Poland or the Arab world to receive satellite TV broadcasting live English football matches from those countries. Alternatively, they may use cards which allow pirate decryption of scrambled signals. Such cards are typically much cheaper than the cards available in the UK from Sky. However, Sky has taken civil and criminal action against some who do this. Two cases involving grey cards, originating in 2008 were referred to the European Court of Justice. The suppliers of grey cards and Karen Murphy, the landlady of a pub which showed Premier League matches using a Greek decoder card, won their cases at the European Court of Justice. The judges ruled that right holders cannot license their content on an exclusive territorial basis, as this breaches EU law on competition and free movement of goods and services. However, whilst this ruling allows domestic viewers to subscribe to foreign satellite services, pubs may still need permission from rights holders such as the Premier League to broadcast content. This is because certain elements of the broadcast such as branding are copyrighted.
There followed two High Court judgements on this matter. Mr Justice Kitchin ruled that QC Leisure and other suppliers of foreign satellite systems could carry on with their businesses if they could prevent copyright elements such as branding of football matches from being shown in a public place. The Premier League could pursue prosecutions of licensees who showed branding of matches via foreign satellite systems. Karen Murphy won her case in the High Court following the ruling from the European Court of Justice. The ruling from Justice Stanley Burnton allowed Ms Murphy to shop for the cheapest foreign satellite provider. However, the ruling from Justice Kitchin prevented Ms Murphy from showing matches in her pub via foreign satellite systems because branding is subject to trade mark law. 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.