Grey marketing is worth billions of dollars per year. To those who have learnt the ropes well enough to work around local trademark and copyright laws, the problem is not even a problem: the goods imported from a cheaper market are genuine, and the margin made on them is significantly higher than that made on the goods sourced through legitimate' local distribution. For those who try to prevent it, finding economic or even legal grounds to back an action that effectively translates into quasi-monopolism is not easy.
Even though enforcing higher prices through local distribution is entirely justifiable, we live in an incredibly competitive world where global markets remain driven by (supposedly) free competition and consumer demand. In such an environment, self-interest - rather than concern for the trademark or copyright owner's credibility or bottom line - is king.
Blame it on ethical relativism or blame it on globalisation, but the issue is as old as global markets themselves. Parallel importing battles are fought in legislative chambers the world over. Last week, however, ARN and its readers witnessed a remarkable anti-grey-marketing tactic when the local subsidiary of printing vendor Epson opted for a public shame campaign in a bid to tackle what appears to be a one-off case of parallel importing by one of its Genuine Gold Seal distributors, Digiland.
In an advertisement on page 41 of our November 13 issue, Epson accused Digiland of selling Epson cartridges sourced from Malaysia to customers in Western Australia where it had no distribution rights. The vendor also used the space to announce it was revoking Digiland's status as a Genuine Gold Seal distributor due to breach of contract. For its part, Digiland admitted to importing the goods despite not being authorised to.
What is quite unusual about the situation is the decidedly heavy-handed way that Epson dealt with Digiland's misdemeanour. No-one is arguing that the vendor has every right to protect the viability of its local operation. On the other hand, it's not hard to see that Digiland was probably trying to do exactly the same, albeit breaching its contractual agreement with the vendor along the way. And that is the real issue in this saga.
While parallel importing is a problem, it occurs across industries and geographical divides due to the nature and competitiveness of the global market.
The economics of parallel importing (reportedly worth $10 billion a year just in North America) in the current climate make it infinitely harder for distribution channels to ignore the financial benefits derived from the practice. But using the bottom line to justify what is essentially unethical conduct and violating the trust of the vendor are probably even more serious issues.
In fact, I wouldn't be surprised if Epson's response to the case had more of a moral than fiscal motivation. A channels manager at an Epson competitor certainly thought so when the manager told ARN the distributor definitely deserves a good "talking to", but believed that a public shaming exercise definitely seems a bit over the top. After all, Digiland's participation in the scheme was voluntary and the distributor will continue to stock Epson product with or without the Genuine Gold Seal. To the reseller squeezed for every margin dollar, and with the end user always expecting more for less, the issue is probably not even worth a debate.
But discarding the obligation to honour a contract and violate the partner's trust definitely is. Do you agree?