What Is The Gray Market & Is It Safe Or Legal To Buy From Unauthorized Resellers?

What Is The Gray Market & Is It Safe Or Legal To Buy From Unauthorized Resellers?

Jason Yang
Apr 16, 2012

You might have heard of the term gray market (or alternatively grey market, we can never tell which is which) and wondered what it meant. You'd often times notice the prices are slightly cheaper than full retail or heard horror stories of manufacturers not honoring the warranty. So what exactly is the gray market and what makes someone an unauthorized reseller? Find out and protect yourself on your next tech purchase.

A grey market or gray market, also known as parallel market, is the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unintended by the original manufacturer. - Wikipedia

Generally speaking, the item you're purchasing is new as advertised and sold legally by a vendor. The difference is that the product is not being sold through an authorized reseller. An authorized reseller has a formal agreement with a manufacturer to sell their product, usually at preset prices. In return the reseller might gain access to quantities and discounts. This practice allows the manufacturer to control the market pricing of their product where otherwise vendors might set pricing as they so desire (free market and all), as well as ensure the quality/validity of the vendors and distribution chain/channels.

Unauthorized resellers engage in the practice of a parallel market to make money off the difference in regional pricing. If a given product is cheaper in one market, someone could buy quantities of the product in that one market and sell it for a higher margin in a region where that market's pricing is higher.

So are gray market products legal to buy? Is it safe to purchase that shiny new tech at a discounted cost? The answer to that is predictably quite different shades of gray. Generally speaking, it's completely legal to purchase said gray market products. The question is whether or not that product carries the full backing and warranty of the manufacturer. After all, if your new flat screen TV suddenly stopped working a week after you bought it, one might expect the manufacturer to fix the problem free of charge. However, with gray market purchases that's not always the case. Here's an example of the California statute on gray market items from USLegal:

Cal Civ Code § 1797.8 defines grey market goods as consumer goods bearing a trademark and normally accompanied by an express written warranty valid in the United States of America which are imported into the United States through channels other than the manufacturer's authorized United States distributor and which are not accompanied by the manufacturer's express written warranty valid in the U.S. - USLegal

So does the manufacturer have to honor the warranty on your new purchase? Depending on the laws where you live, that answer may just be no, and that's a scary proposition for buyers of big ticket items. Ourselves, we bought a brand new Pioneer Kuro flat screen TV several years ago from an unnamed company representing themselves as authorized resellers and when the TV had a problem Pioneer originally refused to service the product under warranty. After providing Pioneer with evidence that we were misled and had no idea that we were buying a gray market product, the fine folks at Pioneer (after lengthy and healthy "debate") finally agreed to repair my television free of charge under warranty on a one-time basis.

Your mileage will definitely vary, so we'd suggest erring on the side of caution. We'd caution against gray market purchases of larger more expensive items that can be expensive to fix. Some simpler and cheaper tech items you might not get as big of a price break on with gray market purchases but it's also not as big of a deal if you have to repair it on your own dime, so it might be worth it to you. Just watch your rear, and know that you might not have the manufacturer behind your back on this one.

(Images: Nicholas852/Shutterstock, Oleksiy Mark/Shutterstock, Flickr member Micky.! licensed for use under Creative Commons)

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