As part of our Anti-Counterfeiting practice, we provide illegal gray market goods enforcement services.

What Are Gray Market Goods?

Gray market goods refer to product that is legally manufactured for sale in one region, but sold in another region for excess profit. Unauthorized resellers take advantage of price in one country and resell for profit in another, undercutting the brand owner’s MSRP. Often, companies with worldwide sales manufacture and sell product in different countries for specific sale into their respective markets. Usually, the price point differs considering exchange rates as well as buying power within a certain market compared to another. Companies enter into distribution agreements with manufacturers to help avoid this issue of sales into parallel markets. However, third parties find ways to purchase bulk low cost product and profit significantly through resale in higher cost markets. Therefore, brand owners often seek protection through gray market goods enforcement programs.

Brand Owner Protection Against Gray Market Goods Sales

Luxury goods brands companies selling product worldwide often have manufacturing facilities in various countries. Product from one manufacturing facility may be specifically created for special price point sales in that geographic region only. This attracts unrelated third parties seeking to profit unfairly into dealing in gray market goods. Therefore, companies seek solutions to gray market goods enforcement against infringers “stealing” sales from the brand owner and authorized resellers.

Gray market goods enforcement programs include the following, for example:

Unauthorized Reseller Monitoring, Online and Offline (Brick & Mortar)
Special Manufacturer Agreements
Employee Agreements, Independent Contractor Agreements, and Reseller Agreements
Customization of Vigilence Programs to Minimize Need for Reactive Measures

Importance of Gray Market Good Enforcement Efforts

Brand owners invest significant effort, money, and R&D in creating high quality, unique products. So, gray market goods enforcement against unauthorized resellers is important for maintaining expected revenue and preserving high-end luxury product pricing.

The purchase of gray market goods may not be considered illegal. However, the price point of typical gray market sales undercutting brand owner pricing is harmful in many ways. If consumers come to expect “flash sales” or special deep-discount offers of brand goods, they may wait associate the lower price as true value. The brand owner and its resellers not only lose sales, but the brand value diminishes.

The following are examples for brand owners to help protect against gray market sales:

Create custom manufacturing agreements specific to each manufacturer
Enter into strict reseller agreements
Create reseller monitoring and enforcement programs
Register marks with the U.S. Customs and Border Patrol
Monitor for unauthorized resellers and send cease & desist letters

Unauthorized product sales have steadily increased with easy to use online seller platforms such as Amazon, Overstock, eBay, etc. Therefore, the need for gray market goods enforcement programs have grown in important to businesses.