Net tightens gray-market retail vise

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product malfunctions, the manufacturer is faced with two bad options: honoring a nonexistent warranty on a product sold at or below cost, or wrecking a customer relationship.

Because so many gray-market products are in fact reconditioned or used, they're more likely to fail, gray-market watchers say. To keep customers who stand to make more expensive purchases in the future, manufacturers often wind up providing full-year warranty service on products that would only have been warranted for 90 days, or not at all.

"The value of that consumer to a company like Pioneer (Electronics) is high," Loomis said. "What happens when that consumer goes out to buy a $3,000 TV? In reality, the manufacturer is still having to service and support the (gray-market) product even though they didn't factor that into the price. The value of the consumer is too high to say, 'Go fly a kite.'"

So what can manufacturers do to combat the problem? AGMA--which this year expanded its mandate to combat counterfeiting in addition to the gray market--establishes brand protection guidelines for members to follow. The goal, according to the group's Web site, is to "render the movement of unauthorized technology products difficult, undesirable and unprofitable."

"We're the plumbers, finding the leaks in the pipes through sophisticated methods of investigation."

--Joseph Loomis
Vice president, Net Enforcers

Two of the group's members, HP and 3Com, have attempted to achieve that goal by suing gray marketers.

Other AGMA members include Cisco Systems, Lexmark International, Western Digital, Nortel Networks, American Power Conversion, Maxtor, Hitachi Global Storage Technologies and Seagate Technology.

But the Internet, which has fueled the gray-market problem, also has offered up a crop of companies like Net Enforcers that promise to track and help eliminate illegitimate distribution of goods.

GenuOne, for example, sells software that monitors Net auctions for counterfeit or gray-market goods. Pretection International, based in the Hague of the Netherlands, offers an array of brand protection and law enforcement services to manufacturers battling the gray market.

Incorporated in 2002, Coral Springs, Fla.-based Net Enforcers and its 35 employees inspect auctions to make sure that unauthorized dealers aren't using a manufacturer's intellectual property to pass themselves off as authorized dealers.

"We're the plumbers, finding the leaks in the pipes through sophisticated methods of investigation," said Net Enforcers' Loomis. "It's a slowly progressing flood that we're maintaining control of. When we come on board with a manufacturer, we're slowly helping solve the problem and rebuilding their channel."

When the inspectors find auctions they suspect are illegitimate, they

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Simple Really

Once manufactured all serial #'s for a batch are sold specifically to a distributor. Once that distributor has sold the products, that distributor updates their list of the resellers it sold too. Then just before it hits the retail market you can work back up the chain to see where it made it to the gray market in the first place. Manage your product and retain control.

Business 101

[fhowden]

use existing law for 90+% of issues

1) A company that sells for less than cost overseas is "dumping" under the current trade laws. They get what they deserve.
2) Someone who orders things for a charitable or educational discount they don't deserve (legally) is committing fraud and should be prosecuted.
3) Persons who buy 'Rolexs' in Times Square @ $50/ea are stupid and maybe get what they deserve. [http://The real mentally retarded are the exception. They need a better social worker.|http://The real mentally retarded are the exception. They need a better social worker.]
4) Persons who sell 'reconditioned' items as new are committing fraud and should be prosecutted.
5) PERHAPS it would be wise for manufacturers who sell items without warrantee to labled [etched] items "NO MANUFACTURER's WARRANTEE." This might 'hurt' business; but if they fail to do so, they have only themselves to blame.
fhowden

[jachamp]

boo-hoo

let me understand this...i'm supposed to feel sorry for retailers and manufacturers because they want to inflate the price of their products and people sidestep that?

i don't feel sorry for them one bit.

they ship the manufacturing jobs overseas, they ship the tech support jobs overseas, they do everything possible to maximize profit and have government in their corner and the instant the consumer starts to get a foot in the door...the companies start looking for axes.

[Joelieb1234]

they deserve it

Why can the companies sell their electronics, film, inkjets, toners etc to China for cheap USA for a bit more and Europe for even more expensive. If they can sell in China for a price they should be able to sell in the whole world for that same price. Once the company legally sold it worldwide why shouldn't anyone be able to buy and resell wherever they want. (Is it also illegal for me to fly to China and purchase whatever I want for whatever price.) Can the company tell me what to do with things I legally bought. Do the goods remain in their possesion after I paid my hard earned money on them.

Don't tell me this nonesense about higher costs to cover warranties etc. I don't pay for the warranty when I buy something. I buy an item that is free of "manufacturers defects" (that's what it says on all the warranties) I don't get anything more than that. Why should I get less no matter where it was bought. Are the companies allowed to sell goods with more defects in China than/and in USA than Europe.

Why are the corrupt governments supporting these mighty companies arguments. Isn't it in their interest to lower prices not higher them, or are they getting $$$$$ from these mighty rich companies and we the peaple suffer.

[John Kuzak]

getting $$$$$

http://www.analogstereo.com/nakamichi/nakamichi_rx505_service_manual.htm

[UtahJed]

Gray is free trade vs Mfr Greed

What is going on with News.com? Towing the Corporate line for their advertisers? This reads like Trade Show stump speech.

The key concepts supported in the article are the phrases "Gray Market", "Manufacturer Control", Education" and "$5 Billion". The gray market is not illegal(or even immoral), not mis-represented, not stolen, not racketeering and not counterfeit. These things would be labeled Black Market, the manufacturers in cahoots with the Gray Market Alliance know it!! If its Black Market, theere are appropriate laws to address the issue. But this article isnt labeled '...Black Market Retial Vise'. We are speaking only about the Gray Market which is the Legal Free Trade market outside the "Manufacturers Control". These profit-mongers can only suggest illegal activity through their "education" efforts, but cannot ever actually say it.

Everyone in the industry knows the following as true - the manufacturers buy all their products from overseas contractors and sell the exact same products overseas for alot less than in the USA. A parallel to the Pharm Makers. Their left hand purposely dumps excess product into the Legal Free Trade Market at deep discounts before stock earnings reports come out, and then try to combat it with their right hand. They want the cash, but do not want that same product to impact their Full-Price-Market-Share. The problem manufacturers have is ordering too large of quantities from the Asian contractors to get a lower price, then they have excess product. If they would order only what their estimates show the market will bear, then this wouldnt be an issue. Their would be no elasticity problem. Or if they hold onto the excess product during quarterly revenue reports they will take a hit on their stock prices, but eliminate the excess Gray Market. But, instead they want it both ways - the build-order discount, the boosted earning reposrt and the tight market.

This is simple Business 101. Too much product lowers market price. The manufacturers want to have their cake and sell it too. Greed, Greed, Greed and it will cost them another $5 Billion.