Business Economics

, Volume 49, Issue 4, pp 263–270 | Cite as

Confronting the Gray Market Problem

  • Peggy E Chaudhry
Original Article


Gray markets involve the sales of legitimate products by way of channels of distribution that are not authorized by the brand owners. Gray markets may benefit consumers and even brand owners under certain circumstances. On balance, however, gray markets are detrimental to brand owners because gray market traders access genuine product in both physical and virtual markets and reap profits stemming from the resale of goods owing to price differentiation between markets, thus depriving brand owners of those profits. In this study, we discuss the principal factors that encourage a gray market and the legal underpinnings that permit gray markets in the United States. We then summarize managerial tactics—both reactive and proactive—to combat gray markets.


gray market parallel trade trade diversion 


  1. AGMA, 2014. Gray Market: Leading the High-Tech Industry in Best Practices for Preventing Gray Market Fraud, (accessed May 3, 2014).
  2. AGMA and Deloitte, 2011. When Channel Incentives Backfire: Strategies to Help Reduce Gray Market Risks and Improve Profitability, (accessed April 14, 2014).
  3. Anita, Kersi D., Mark Bergen and Shantanu Dutta . 2004. “Competing with Gray Markets.” Sloan Management Review, 46 (1): 63–69.Google Scholar
  4. Assmus, G. and C. Wiese . 1995. “How to Address the Gray Market Threat Using Price Coordination.” Sloan Management Review, 36 (3): 31–41.Google Scholar
  5. Bird, Robert C. and Peggy E. Chaudhry . 2010. “Pharmaceuticals and the European Union: Managing Gray Markets in an Uncertain Legal Environment.” Virginia Journal of International Law, 50 (3): 719–756.Google Scholar
  6. Brooks, Samuel . 2010. “Battling Gray Markets through Copyright Law: Omega, S.A. v. Costco Wholesale Corporation.” Brigham Young University Law Review, 2010 (1): 19–33.Google Scholar
  7. Cavusgil, S. Tamer and Ed Sikora . 1988. “How Multinationals Can Counter Gray Market Imports.” Columbia Journal of World Business, 23 (4): 75–85.Google Scholar
  8. Chang, Tung-Zong . 1993. “Parallel Importation in Taiwan: A View from a Newly Emerged Country and a Comparative Analysis.” International Marketing Review, 10 (6): 30–41.CrossRefGoogle Scholar
  9. Chaudhry, Peggy and Michael Walsh . 1995. “Managing the Gray Market in the European Union: The Case of the Pharmaceutical Industry.” Journal of International Marketing, 3 (3): 11–33.Google Scholar
  10. Chiu, Joanne and Kathy Chu . 2014. Gray-Market Vendors: Who Are They? Wall Street Journal (August 10), (accessed September 17, 2014).
  11. Conroy, Amy E. 2011. “The Gray (Goods) Elephant in the Room: China’s Troubling Attitude toward IP Protection of Gray Market Goods.” Brooklyn Journal of International Law, 36 (3): 1075–1109.Google Scholar
  12. Dembosky, April . 2013. Publishers Challenge Book Resale Ruling. Financial Times (March 20), (accessed April 20, 2014).
  13. Duhan, Dale F. and M.J. Sheffet . 1988. “Gray Markets and the Legal Status of Parallel Importation.” Journal of Marketing, 52 (2): 75–83.CrossRefGoogle Scholar
  14. Elmer-DeWitt, Phillip . 2012. Tasers, Taxes and the Launch of the iPhone 5 in China. CNNMoney (December 15), (accessed May 3, 2014).
  15. European Federation of Pharmaceutical Industries and Associations, 2013. The Pharmaceutical Industry in Figures, (accessed July 4, 2014).
  16. Goldstein, Matthew . 2014. U.S. Ordered to Return Assets Held in Crackdown of Luxury Cars Exported to China. The New York Times (April 3), (accessed September 15, 2014).
  17. Gudigantala, Naveen and Pelin Bicen . 2011. “Gray Market for Information Technology (IT) Products: Status, Implications, and Strategies to Address the IT Gray Market Threat.” Communications of the Association for Information Systems, 29 (10): 185–202.Google Scholar
  18. Howell, Roy D., R.R. Britney, P.J Kuzdrall and J.B. Wilcox . 1986. “Unauthorized Channels of Distribution: Gray Markets.” Industrial Marketing Management, 15 (4): 257–263.CrossRefGoogle Scholar
  19. Inman, James . 1993. “Gray Marketing of Imported Trademark Goods: Tariffs and Trademark Issues.” American Business Law Journal, 31 (1): 59–116.CrossRefGoogle Scholar
  20. International Trademark Association, 2014. Cross-Border Topics, 1, (accessed September 17, 2014).
  21. Jeong, Sarah . 2013. Supreme Court Holds the First Sale Doctrine Applicable to Parallel Importation. Jolt Digest (March 30), (accessed May 7, 2014).
  22. KPMG, 2008. Effective Channel Management is Critical in Combating the Gray Market and Increasing Technology Companies’ Bottom Line, 1–36.Google Scholar
  23. Ladas, and Parry . 2013. Exhaustion Finally Exhausted: International Exhaustion Now Applies to Copyrighted Works, (March 19), (accessed June 5, 2014).Google Scholar
  24. Lansing, Paul and Joseph Gabriella . 1993. “Clarifying Gray Market Gray Areas.” American Business Law Journal, 31 (2): 313–337.CrossRefGoogle Scholar
  25. Luk, Lorraine . 2013. iPhone’s China Launch Pinches Gray Market. Wall Street Journal (September 18), (accessed April 15, 2014).
  26. Mahajan, Vijay . 2012. The Arab World Unbound: Tapping into the Power of 350 Million Consumers. Jossey-Bass.Google Scholar
  27. Marion, Joseph . 2013. The BIG Lie about the Gray Market, (accessed May 5, 2014).
  28. Nakra, Prema . 2006. Gray Marketing: Taming the Beast. International Trade Blog, (accessed September 20, 2014).
  29. Nolan-Haley, Jacqueline . 1983. “Competitive Process and Gray Market Goods.” New York Law School Journal of International and Comparative Law, 6: 231–251.Google Scholar
  30. Palia, Aspy P. and C.F. Keown . 1991. “Combating Parallel Importing: Views of U.S. Exporters to the Asia-Pacific Region.” International Marketing Review, 8 (1): 47–56.CrossRefGoogle Scholar
  31. Shining Light on the “Gray Market:” An Examination of Why Hospitals are Forced to Pay Exorbitant Prices for Prescription Drugs Facing Critical Shortages, 2012. A staff report prepared for Senator John D. Rockefeller IV, Senator Tom Harkin, and Representative Elijah E. Cummings. (accessed September 22, 2014).
  32. Simpson, Campbell . 2012. Nikon Fights Grey Imports with “Peace of Mind” Campaign. (accessed May 6, 2014).
  33. Stohr, Greg . 2013. EBay Wins as Top Court Backs “Gray Market” Discount Goods. Bloomberg (March 19), (accessed April 20, 2013).
  34. Stohr, Greg and Laurie Asseo . 2012. U.S. Supreme Court Debates Copyright “Gray Market” Case. BloombergBusinessweek (October 29), (accessed May 3, 2014).
  35. Sugden, David R. 2009. Gray Markets: Prevention, Detection and Litigation. Oxford University Press.Google Scholar
  36. Weigand, Robert E. 1991. “Parallel Import Channels—Options for Preserving Territorial Integrity.” Columbia Journal of World Business, 26 (1): 53–60.Google Scholar
  37. Xiao, Ying, Udatta Palckar and Yunchuan Liu . 2011. “Shades of Gray—the Impact of Gray Markets on Authorized Distribution Channels.” Quantitative Marketing and Economics, 9 (2): 155–178.CrossRefGoogle Scholar

Copyright information

© National Association for Business Economics 2014

Authors and Affiliations

  • Peggy E Chaudhry

There are no affiliations available

Personalised recommendations