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A contractual approach to the gray market

Author

Listed:
  • Gallini, Nancy T.
  • Hollis, Aidan

Abstract

Parallel imports are genuine products imported without the authorization of the trademark or copyright owner in a country. Authorized dealers have employed trademark and copyright law to exclude parallel imports using claims of infringement. Our assertion is that trademark and copyright laws are inappropriate for enforcing restrictions against parallel imports for two reasons. First, trademark exclusion of parallel imports indiscriminately eliminates intrabrand competition and should be scrutinized from an antitrust perspective. Second, trademark laws inefficiently constrain the feasible set of distribution systems. We propose a policy combining contract, tort, and antitrust law to regulate parallel imports.
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Suggested Citation

  • Gallini, Nancy T. & Hollis, Aidan, 1999. "A contractual approach to the gray market," International Review of Law and Economics, Elsevier, vol. 19(1), pages 1-21, March.
  • Handle: RePEc:eee:irlaec:v:19:y:1999:i:1:p:1-21
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    References listed on IDEAS

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    1. Mathewson, Frank & Winter, Ralph, 1994. "Territorial Restrictions in Franchise Contracts," Economic Inquiry, Western Economic Association International, vol. 32(2), pages 181-192, April.
    2. G.F. Mathewson & R.A. Winter, 1984. "An Economic Theory of Vertical Restraints," RAND Journal of Economics, The RAND Corporation, vol. 15(1), pages 27-38, Spring.
    3. Rey, Patrick & Tirole, Jean, 1986. "The Logic of Vertical Restraints," American Economic Review, American Economic Association, vol. 76(5), pages 921-939, December.
    4. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
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    Citations

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    Cited by:

    1. Bennato, Anna Rita & Valletti, Tommaso, 2014. "Pharmaceutical innovation and parallel trade," International Journal of Industrial Organization, Elsevier, vol. 33(C), pages 83-92.
    2. Richardson, Martin, 2002. "An elementary proposition concerning parallel imports," Journal of International Economics, Elsevier, vol. 56(1), pages 233-245, January.
    3. Braouezec, Yann, 2012. "Customer-class pricing, parallel trade and the optimal number of market segments," International Journal of Industrial Organization, Elsevier, vol. 30(6), pages 605-614.
    4. Frank Mueller-Langer, 2014. "Copyright and parallel trade," Chapters,in: Handbook on the Economics of Copyright, chapter 16, pages 287-310 Edward Elgar Publishing.
    5. Raff, Horst & Schmitt, Nicolas, 2007. "Why parallel trade may raise producers' profits," Journal of International Economics, Elsevier, vol. 71(2), pages 434-447, April.
    6. Yeh-ning Chen & Ivan Png, 2004. "Parallel Imports and Music CD Prices," International Trade 0402001, University Library of Munich, Germany.
    7. Mueller-Langer, Frank, 2009. "Does parallel trade freedom harm consumers in small markets?," MPRA Paper 40194, University Library of Munich, Germany.
    8. Knox, Daniel & Richardson, Martin, 2003. "Trade policy and parallel imports," European Journal of Political Economy, Elsevier, vol. 19(1), pages 133-151, March.
    9. Raff, Horst & Schmitt, Nicolas, 2005. "Endogenous vertical restraints in international trade," European Economic Review, Elsevier, vol. 49(7), pages 1877-1889, October.
    10. Nikolaos Zevgolis & Panagiotis Fotis, 2014. "Prohibition of parallel imports as a vertical restraint: per se approach or a misunderstanding?," European Journal of Law and Economics, Springer, vol. 38(2), pages 317-342, October.
    11. Soomro, Yasir & Hameed, Irfan & Hameed, Imran, 2012. "A Functional Approach to Understand Consumer Behavior while Selecting Coffee Parlor," MPRA Paper 57241, University Library of Munich, Germany.
    12. Mueller-Langer, Frank, 2010. "An analysis of the ambiguous welfare effects of parallel trade freedom," MPRA Paper 35704, University Library of Munich, Germany.
    13. Hsiu-Li Chen, 2009. "Gray Marketing: Does It Hurt the Manufacturers?," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 37(1), pages 23-35, March.
    14. Iravani, Foad & Dasu, Sriram & Ahmadi, Reza, 2016. "Beyond price mechanisms: How much can service help manage the competition from gray markets?," European Journal of Operational Research, Elsevier, vol. 252(3), pages 789-800.
    15. Valletti, Tommaso M., 2006. "Differential pricing, parallel trade, and the incentive to invest," Journal of International Economics, Elsevier, vol. 70(1), pages 314-324, September.
    16. repec:iez:survey:ces-v11_1-2009_muller-langer is not listed on IDEAS
    17. Teodora Cosac, 2004. "Vertical Restraints and Parallel Imports with Differentiated Products," Industrial Organization 0401006, University Library of Munich, Germany.

    More about this item

    JEL classification:

    • K12 - Law and Economics - - Basic Areas of Law - - - Contract Law
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law

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