Eli5: the grey market

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Eli5: the grey market

In: Economics

The grey market is the buying and selling of products through channels not allowed by the producer of said product.

One major example of this is with pharmaceuticals. Some medicines are cheaply or freely available in one country but extremely expensive in another. Legally acquiring them in one country and then reselling them in another would be considered grey market, assuming these medicines were legal to buy in both countries.

Sometimes the grey market is illegal, other times it isn’t.

It’s selling legal products, but without being authorized by the manufacturer to do so. Many brands select who they sell to, and hold those retailers to standards on how goods are displayed, perhaps pricing/sales, etc. because they want to uphold an image. But there are ways to buy closeout/surplus, etc. that may technically be sold in a grey market venue… maybe designer sunglasses are really cheap in Dubai due to exchage rate so somebody buys 100’s of pairs to sell on Amazon, or some AT&T store manager sold the previous generation but new in box iPhones at store cost to a friend who sold them on ebay, or some designer clothing brand normally found in high end department stores that is found in TJ Maxx.

I’m gonna give an example with iPhones.

Look at the apple website for [the UK](https://www.apple.com/uk/) compared to [the US](https://www.apple.com/). Below you’ll see a table for the price of an iPhone SE on each website. The UK website says £419, the US website says $399. The exchange rate as I write this is £1 : $1.29.

If you look at the table below, you’ll see that an iPhone SE in the UK is much more expensive than an iPhone SE in the UK.

||Price of UK iPhone SE|Price of US iPhone SE|
|:-|:-|:-|
|In Dollars ($)|$399|$542|
|In Pounds (£)|£308|£419|

If you wanted to, you could buy a bunch of iPhones in the US, go to the UK, and sell them new for less than £419. So long as you report the income, follow US and British customs laws (not more than a certain amount of wealth leaving the country at a time, ex). This is perfectly legal.

(Idk the UK’s laws, so take it with a grain of salt. A couple years ago, Chinese iPhones were a lot cheaper than US, and I know for a fact that people legally bought iPhones sold in China and sold them in the US for a profit without breaking any laws. I learned about it in econ class.)

But apple did not approve of you as a seller, so it breaks their policy. It’s not ‘black market’ because it’s not explicitly illegal, but it’s not approved by the people who made the product.

Edit:

Example 2: “Pirate Joe’s” is a company that buys Trader Joe’s goods from the U.S. and takes them across the border to Canada and resells them. Trader Joe’s is super protective of their brand and does not approve of this, but it’s legal and happens.

Edit 2: Trader Joe’s sued repeatedly, and lost. Finally Pirate Joe’s closed because it couldn’t afford the legal fees ([https://en.wikipedia.org/wiki/Pirate_Joe%27s](https://en.wikipedia.org/wiki/Pirate_Joe%27s))