Going cheap: a genuine Rolex
This column was first published in ITWeb Brainstorm, 1 April 2007, in South Africa. It’s best read in print, of course, so head here to subscribe.
How the law caught up with reality a mere twelve years later. Or, in defence of the grey market.
A long, long time ago, I can still remember, how that bunfight used to make me smile.
In the early 1990s, there was a kind of lone ranger (though short of stature and totally bald) in the IT industry. He was a useful fellow to know, not only because he could always be relied upon to supply sensational last-minute copy if you needed a blank space to fill, but also because he imported and sold cheap US Robotics modems.
There was a price on his head, of course, because he had the gall to buy them cheap from a distributor in the Far East somewhere. The exact source usually remained a closely-guarded secret, known only to the corrupt customs officials he claimed were bribed by the official agents for the products he brought in.
The practice of “parallel imports”, or buying from sources other than channels authorised by the manufacturer, became known as “grey marketeering”. The reason was that it wasn’t illegal, so it couldn’t be termed a black-market. The insinuation was clear: our lone ranger must be doing something nefarious, underhanded and wrong.
(Not that there’s really anything really wrong with a black market either, of course. It can only emerge when unnatural restrictions are placed on the sale of a product by the state, and people find ways to bypass unjust taxes, quotas or bans.)
To this day, distributors such as Leo Baxter (quoted on ITWeb recently), talks of “genuine products”, as if parallel imports are fake or of inferior quality. Never believe it when someone calls grey goods “fake”; turn your bulldust detector right up and beware of concealed conmen ahead.
The only thing our lone ranger was doing that official agents said was wrong was to sell products for less than the official agents would do. Implicitly, he was profiting while doing customers a great big favour.
The explanation given by official agents for their higher prices was always that they include the cost of providing after-sales service, warranty coverage and support skills. The grey marketeer, they said, was either immorally exploiting this investment, or would leave customers high and dry when they needed technical support, thus damaging “the brand”.
Of course, this isn’t necessarily true, and even when it is, doesn’t necessarily explain the entire price difference. When an official agent has a monopoly on a particular brand or product, it can happily exploit this market power to profiteer, and many do exactly that. Sometimes the official distribution channel is simply inefficient, by failing to exploit economies of scale in logistics. All the grey importer is guilty of is exposing where such profiteering or inefficiency occurs.
Some grey importers built large businesses, and addressed the concerns over service by taking it upon themselves to provide the technical support and warranty coverage that the official channels withheld for goods that, though they carried their brand, were not purchased from them.
Clearly, any distributor – official or otherwise – has the right not to accept financial liability for products that weren’t bought through them. But likewise, anyone else should have the right to sell such products, provided that customers know the terms of the purchase. These terms may exclude the usual warranty coverage and after-sales service, or include alternative support services. Perhaps a customer doesn’t need such service, and wants the choice of not having to pay for it.
Granted, there were – and still are – parallel importers who are not reputable, and sell goods as if they were supported by official channels. But by the same token, there are official distributors that take customers for granted and are uncooperative or underskilled when it comes to repairs or service.
Whenever a grey or parallel import channel arises, the official agent has a simple defence: compete on price. If necessary, offer two price levels: one with and one without after-sales support, so the customer can decide what he does and doesn’t want to pay for.
For decades, the market has worked this way. It’s heartening to see that the law has finally caught up, and the Department of Trade and Industry now requires goods not supported through official channels to be labelled accordingly. You might quibble with the rather prejudicial wording prescribed for the label, but there’s no denying the basic principle in contract law that a seller should not misrepresent a product to a potential buyer.
So here’s to you, Steve M. I guess when they say the law is an ass, they mean it is as slow as a donkey.
