Are grey market goods illegal and what can you do about it ?

Grey market goods are a complex issue affecting both businesses and consumers across the EU. While these products are genuine, their sale through unauthorised channels often creates significant confusion around their legality and potential risks.

In this article, we’ll answer the question ‘Are grey market goods illegal?’ along with the relevant European legislation that affects them. We’ll also cover the steps you can take to protect your brand from the challenges grey market goods present.

What are grey market goods?

Grey market goods are authentic products that are being sold outside of the original manufacturer’s authorised distribution channels. This separates them from counterfeit goods which are copies of products and infringes upon intellectual property laws.

The issue is that grey market goods are often purchased in one market and then resold to another at a differing price. While the product is genuine, this means it will lack the warranty, support, and quality assurance practices that are embedded into authorised supply chains and distribution channels. 

Are grey market goods illegal?

Grey market goods are not technically illegal, however they are heavily restricted. The specific legality varies from region to region, but in the EU grey market goods are subject to specific regulations governing their distribution. This is because the EU has an extensive regulatory framework designed to protect consumers and businesses from the potential harm of these goods.

So, are grey market goods illegal In the EU? Essentially yes, laws such as “Exhaustion Doctrine” under the EU Trademark Directive restricts the resale of products that have reached the market without consent from the brand's owner. That means that while they aren’t intrinsically illegal, companies can take legal action against grey market resellers. This legal action hinges on proving that the unauthorised sales damage their brand and business.

What can you do about grey market goods?

There are a few ways in which both manufacturers and resellers can protect themselves from the consequences of grey market goods. Here are three strategies you can explore.

Verification before purchase 

Always ensure that the supplier is an authorised distributor of the goods. This is important during any procurement but especially when buying goods in bulk online with the aim to resell in your market. 

You can verify this by requesting documentation from them, checking the manufacturer’s website for authorised resellers, or contacting the manufacturer directly. 

It’s also a good idea to educate your own consumers on how to identify authorised resellers. This fosters increased trust in your own business and shows your commitment to ethical business practices.

Digital Product Passports

Digital Product Passports (DPPs) present a cutting-edge solution to the grey market problem. These digital platforms track the full lifecycle of a product from raw material sourcing and manufacturing right through to distribution and sale to consumers. 

This provides inbuilt transparency and authenticity to ensure that products are only sold through authorised channels.

DPPs are also set to become mandatory in the EU across a wide variety of sectors over the coming years. This doubles their benefit as companies can protect against grey market goods while also getting ready for mandatory compliance ahead of time.

Legal action

If you do identify grey market goods within your supply chain, you can take legal action against unauthorised resellers.

This will normally involve pursuing claims based on EU non-compliance, trademark infringement, unfair competition, or breaching of distribution agreements.

It’s worth noting that a preventative approach is best as these actions can be both costly and time-consuming. Also, until a verdict is reached and enforceable action is taken, businesses selling grey market goods can still operate.

How Digital Product Passports can help you:  

Digital product passports (DPPs) are becoming an essential tool in the arsenal against grey market goods. By holding in-depth information around origin, authenticity, and authorised distribution, DPPs offer a streamlined and hand-off solution to prevent unauthorised sales once implemented.

When choosing a DPP solution, it’s important to choose a platform that is designed from the ground up to be EU-compliant. It also needs to work well with existing Industry 3.0 systems, preferably leveraging technology like blockchain to ensure high security.

DPPs also provide a unique way to communicate with customers, so a platform that focuses on enhancing consumer trust and driving engagement is essential.

Authentify It provides a comprehensive free platform that enhances supply transparency and builds consumer trust. Get in touch with us today to learn more.