Grey Market
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.
The grey 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
in marketing terms.
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.
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.
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.
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.
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.
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