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Gray marketing and unfair competition


  • Hsiu-Li Chen


With the European Court of Justice's (ECJ) relaxation of the definitions of cartels, price controls, and market manipulation in July 1998, the Court effectively banned the import of gray goods into the EU. This judgment, restricting parallel importation, raises arguments amongst trademark owners, gray marketers, and consumers. First of all, has the ECJ's judgment connived a situation of unfair competition? Secondly, can the import of gray market goods with genuine trademarks be considered a trademark infringement? Thirdly, is a gray marketer a free rider? To provide the answers to these questions, there is need to investigate the relationships of parallel importation, trademarks and market competition. In this study, the author uses a price dominant model to determine the positions of the trademark owner and the gray marketer. This study finds that parallel importation does not contravene trademark law. In the spirit of free competition, gray marketing activities can develop a situation of fair competition in which social welfare increases. Given the existence of heterogeneous preference of consumers, authorized distributors should offer better levels of service to gain market share. Therefore, the author strongly supports a parallel importation policy. Copyright International Atlantic Economic Society 2002

Suggested Citation

  • Hsiu-Li Chen, 2002. "Gray marketing and unfair competition," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(2), pages 196-204, June.
  • Handle: RePEc:kap:atlecj:v:30:y:2002:i:2:p:196-204
    DOI: 10.1007/BF02299163

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    References listed on IDEAS

    1. Richard Harris, 1985. "Why Voluntary Export Restraints Are 'Voluntary.'," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 799-809, November.
    2. Landes, William M & Posner, Richard A, 1987. "Trademark Law: An Economic Perspective," Journal of Law and Economics, University of Chicago Press, vol. 30(2), pages 265-309, October.
    3. Patrick Bolton & Giacomo Bonanno, 1988. "Vertical Restraints in a Model of Vertical Differentiation," The Quarterly Journal of Economics, Oxford University Press, vol. 103(3), pages 555-570.
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    Cited by:

    1. Gabriel Donleavy & Kit-Chun Lam & Simon Ho, 2008. "Does East Meet West in Business Ethics: An Introduction to the Special Issue," Journal of Business Ethics, Springer, vol. 79(1), pages 1-8, April.
    2. 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.

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