The Gray Blog

The parallel market, also known as the gray market, is the name given to the market that develops in goods sold outside of their authorized channels of trade. For example, if a manufacturer of fragrances sells a perfume in the United States and in France, and a third party purchases a large quantity of the fragrance in France and imports it for resale in the United States, this is a parallel market transaction. The reason that the parallel market exists is because there are generally price differentials in how the goods are sold in different markets. This price differential allows the goods to be resold in the more expensive market at a profit.

On the positive side the parallel market forms an arbitrage which forces prices down and provides name brand goods at a lower price to the consumer. On the negative side, the manufacturer’s distribution arrangements and its ability to control quality in the distribution process are undermined. Opinions on the impact of the parallel market vary by region and industry.

As a result of these issues, legal warfare has raged around the sale of parallel market goods for over a hundred years. This warfare sometimes takes the form of litigation and sometimes efforts at legislation. At one time or another trademarks, copyrights, patents, coding and trade secret have all been used. Although the legal landscape for the parallel market has become more difficult in the last few years, the business is likely to continue for the foreseeable future.

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