Legal Considerations for Dealing with Grey Market Sellers
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The whole grey market is a grey area. The goods sold in these markets are the same products that are sold by authorized re-sellers and in brick-and-mortar stores. However, according to research [1], grey markets have a negative effect on both price and quality of customer experience as well as manufacturer or brand profits. And e-commerce is a big facilitator of the grey market through channels like Amazon, eBay and Lazada. It was estimated that the products distributed through the grey market are worth US$ 63 billion [2].
As businesses confront the complexities of this changing landscape, understanding the legal considerations surrounding grey market dealings becomes paramount. In this blog, we will look into the legal actions you can take to navigate grey market challenges, empowering your business to safeguard its interests and uphold regulatory compliance in an ever-evolving marketplace.
Some Legal Considerations to Keep in Mind
When faced with challenges from grey market sellers, know you can take action against them. It’s just a matter of knowing what steps you should take. To help you with this, here are some legal consideration you should note:
- Intellectual property rights: Protecting your intellectual property rights, such as trademarks and copyrights, is essential. Register your trademarks and take appropriate actions to enforce your rights against unauthorized sellers.
- Distribution agreements: Review your distribution agreements to ensure that they include provisions addressing grey market sales. These provisions can help you take legal actions against unauthorized sellers and protect your authorized distribution channels.
- Cease-and-desist letters: Consider sending cease-and-desist letters to identified grey market sellers. These letters formally demand that the sellers stop their unauthorized activities and can serve as an initial step in the legal process. You can also speak with the marketplace where grey sellers are selling your products to flag them and delist them from the platform.
- Legal complaints: If necessary, consult with legal counsel to file complaints against grey market sellers. This could involve claims of trademark infringement, unfair competition, or violation of distribution agreements. Seek legal advice to determine the most appropriate course of action based on your specific circumstances.
Now that you know what steps you can take to ease your challenges with grey market sellers, let’s look at what marketplaces are doing to assist brands on their platforms.
Amazon and the Grey Market – An example of how an e-commerce platform can resolve the challenge of grey market sellers
Historically renowned for its unwavering commitment to consumer-centric principles, Amazon originally prioritized providing unparalleled pricing, experience, and value to its vast customer base. But Amazon shifted its approach. In 2022, Amazon decreased bad actor attempts to create new selling accounts from 6 million to 800,000 [3].
Through their continued investment in advanced machine learning techniques, Amazon has improved their proactive controls, automating and scaling their intellectual property protection and counterfeit detection systems. These systems operate continuously throughout every step of the process—from the moment a seller attempts to register a new account, create a listing, and update a product listing. They incorporate the feedback received from customers, brands, and others to prevent foul play.
Moreover, Amazon’s enforcement of strict pricing policies, prohibiting sellers from offering products at lower prices outside of the Amazon marketplace, further complicates the grey market landscape. Sellers risk suspension if found violating these policies, underscoring Amazon’s increasingly assertive stance in shaping brand representation and pricing dynamics.
In conclusion, navigating the legal considerations associated with grey market sellers can be complex. However, marketplaces are making improvements to assist brands in this regard. At the same time, it is advisable to consult with legal professionals who specialize in intellectual property and brand protection to ensure you have a strong case against grey sellers.
But the best place to begin protecting your brand against grey sellers is by identifying your targets and implementing grey market seller monitoring. This will help you track pricing disparities and gather valuable data for informed decision-making.
Talk to our experts to learn more about Anchanto’s Technology to monitor Grey Market Sellers.
References –
[1] – ideas.repec.org – The Impact of Gray Markets on Product Quality and Profitability
[2] – researchgate.net – A review on the gray market business using a data-driven approach
[3] – aboutamazon.in – Amazon releases its 2022 Brand Protection Report