What is Grey Market Investigation?

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Written by: Ms Devshree Dangi

To make the world grow, trade is a medium which is very important in strengthening the economy of any country. If the business is done properly it plays an important role in the development of the country, But if the same trade is done illegally, then it can become a very big problem for any country.

Currently, Illegal trade is spreading its wings in a big way in India as well as other countries or all over the world.

In general, business is dominated all over India as well as in the world, but many wrong ways are adopted in the world to increase business. Gray marketing or parallel marketing is a paradigm for the same.

Grey marketing or parallel marketing

When in a country, branded products imported through unauthorized and illegal means to the country where these products are not manufactured and companies sell them at a higher price even if that product is available at a very cheap price in the country it has exported, this entire process is called a grey market or parallel market.

It is also known as underground economy or hidden economy.

Nowadays grey marketing has become a very common business done by big companies to earn more profit through illegal means, Which gives them a profit, but many times due to grey marketing, that country suffers a huge loss and economic crisis. Every year, the Indian industries losses millions of rupees in the sale of such counterfeited products.

Exhaustion of Rights under various National and international laws and conventions

It is very apparent that if there is a practice of something illegal in any country then there is an infringement of the right of someone.

The manufacturer of any product or commodity, sale his product to a retailer and that retailer by illegal and unauthorized means exported the product in the country where that particular product does not manufactures and sale that product at a high price even if the product is available at a very cheap price in the country it has imported.

This practices violate the Right of the manufacturer under various laws:

  • Trademarks Act, 1999

In India, grey marketing or parallel marketing are convolutely linked to the principle of “Doctrine of Exhaustion” under the ” Trademarks Act, 1999.”

These parallel importation of products constitutes an infringement of Rights of the manufacturer under Section 29 and the principle of International exhaustion of Rights under Section 30 of Trademarks Act, 1999. Section 30 of the Trademarks Act 1999 deals with the boundaries on the effect of the registered trademark and the new sub-clause 3 deals with the prevention of Trademark owner from prohibiting the sale of goods in any geographical place on grounds of trademark rights and subsection 4 states that subsection 3 shall no longer follow while the circumstance of goods is modified or impaired after they have been put on the market. In the case “Samsung Electronics Co Ltd v Mr G Choudhary, 2006 (33) PTC 425” the Delhi High Court restricted the defendant from direct or indirect dealing of the product.

  • TRIPs Agreement 1995

The agreement on Trade-Related Aspects of Intellectual Properties in Article 6 of it states that ” Nothing in this Agreement shall be used to address the issue of exhaustion of intellectual property rights.”

So it’s the duty of every State to prohibit the parallel imports within it’s legal framework.

Grey market investigation

Though the countries have many laws to prevent themselves from grey marketing or parallel marketing the main problem is with the awareness among people regarding the source and quality of the products. Also, grey marketing has become the largest platform for trade in countries but it also causes a huge loss and economic crisis.

For the prevention of loss, there are many services and laws are provided in various countries which helps in the investigation on grey market products and the prevention of  IP Rights of the Trademark owner. AGMA is one of the biggest non-profit organization working for the prevention of IP Rights.

The Alliance for Grey Market and Counterfeit Abatement (AGMA) a California based corporation of IT agencies that work to teach and raise attention on counterfeiting; virtual IP protection; service and warranty abuse; and consequently the marketplace.

It’s a worldwide organization that works for the protection of IP Rights and prevention from the counterfeiting.

Indian trademark law provides that the trademark owners can take legal action only where the traders dealing in goods that compromise the goodwill, reputation or quality of trademark. Thus, grey marketing acts as a reasonable limitation to the trademark owner’s exhaustive rights to use the trademark relation to the goods and services it has been registered for.

It’s ultimately a choice to decide on whether to allow parallel importation between quality control and price control; economic rights of trademark owners and consumer access; trade monopolies and free trade.


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