Watch Out for Gray Market Goods
In between Walmart’s everyday low prices and the sketchy fellow in Walmart’s parking lot who’s selling brand-new, boxed iPads for $50 lies a vast gray area appropriately called the “gray market.” Here you’ll find prices lower than those of any mainstream merchant but not quite low enough to scream “stolen” or “counterfeit.” How do gray markets work, and are they legal?
What is the Gray Market?
Many gray market sellers represent themselves as “direct importers” or “independent dealers,” terms that consumers tend to interpret as more economical than “regular” importers or dealers. Gray market sellers often tout themselves as small, “family owned” businesses who are more honest and trustworthy than corporate America. Many are even perfectly up-front about how they beat the big boys’ prices.
Gray marketers buy goods outside of manufacturers’ authorized distribution channels, evading the contractual obligations of authorized resellers that manufacturers impose in order to maintain the quality of their brands. Gray marketers don’t provide warranty service or tech support. They don’t participate in the manufacturer's product training or co-op advertising programs.
They may not provide user manuals in English or power supplies compatible with American A/C outlets, because they “directly import” goods from overseas. Some don’t even answer their phones. The comments I found posted on one gray marketer’s profile are typical:
They took my money and sent the wrong item. They did not want to take any blame and shipped a totally different item and did not contact me to see if it was ok. STAY AWAY FROM THIS SELLER THEY WILL NOT GIVE YOU WHAT YOU ORDER.
Missing parts and no response from customer service. The camera battery charger cable that it came with was the international plug, but missing USA cable. Emailed them, but no one replied.
Is It Legal?
It’s not a crime to buy gray market goods, but it is unlawful to sell them. Trademark law, specifically the Lanham Act, gives manufacturers the right to control how their trademarked goods are sold and supported. OEMs can require resellers to spend money on training, advertising, providing tech support and warranty services, etc., as conditions of being permitted to resell the goods. The costs of meeting these conditions are added to the authorized resellers’ prices. Gray marketers avoid all of that expense and pass (some of) the savings on to buyers.
If you buy a product through a gray marketer, don’t expect the manufacturer to provide any free support or warranty. Some OEMs will repair gray market units for a (usually steep) fee. Most will not sell you parts for a gray market unit. If the product breaks down, you’re on your own to find parts and someone who is able and willing to fix it. Saving money on the initial purchase can be very expensive when you need service.
How can you tell if an online seller is offering gray market goods? An unusually low price would be the first tip-off. Some brands, notably Apple, almost never allow their products to be sold at a significant discount. If you see an iPad or MacBook at half price, put down the mouse and back away slowly. You don't want to take a chance on buying on the black market. I'm not a legal expert, but I can imagine a prosecutor saying "You should have known better" while charging you with possession of stolen or counterfeit goods.
Other tipoffs may come from reviews of the seller. Check for complaints about "open box" shipments, missing plugs or cables, power adapters designed for European or Asian countries, manuals printed only in a foreign language, or missing warranty cards.
Is It Ever Worth It?
That said, there are times when it makes sense to buy gray market goods. If the product is extremely reliable you may not need service during the time you expect to use it. Hard drives, for instance, generally have MTBFs (mean time between failures) of 50,000 hours or more; that’s 5 years and 8.5 months of constant disk activity, on average. And they don't plug into a wall socket, so you don't have to worry about plug compatibilty.
If you’re handy with a soldering iron or familiar with circuit boards, you may be able to make any necessary repairs yourself, if you can find parts. If the purchase price is low enough and you’re not going to keep any critical data on a device, it may be worthwhile to buy it and just throw it away when it breaks. You may also have to find and purchase missing parts or accessories, or replace power adapters that are not compatible.
The Bottom Line: It's the Bottom Line of Course
Gray market goods do save you money when you buy them. What they cost you is convenience when you need help and the peace-of-mind that comes with knowing you’re covered if something breaks. You also have to swallow hard, trust that the seller won't take your money and run, and accept the fact that they are violating the law.
In my opinion, it’s a trade-off that should be attempted only if you're a risk-taking power user, familiar with electronic components, handy with a soldering iron, and familiar with sources for any parts that may be needed. You should also have a credit card with excellent fraud protection.
Have you had experience with a gray market product or seller? Your thoughts on this topic are welcome. Post your comment or question below...
This article was posted by Bob Rankin on 5 Jan 2015
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Article information: AskBobRankin -- Watch Out for Gray Market Goods (Posted: 5 Jan 2015)
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