Parallel imports/ Gray Market – Read the attached case that I took from another Int. Marketing textbook. Parallel imports are not illegal. They are products that are sold through unauthorized distribution channels. Here is the case from the book…
For more information on the latest news of this case, you can refer to Wikipedia (I don’t usually reference Wikipedia, but this is for you to know the background of the case)
https://en.wikipedia.org/wiki/Omega_S.A._v._Costco_Wholesale_Corp (Links to an external site.).
Use this rubric to briefly answer the following questions
- Summary (3pts) – Briefly write what you understood about the case and gray markets.
- Opinion (4pts) – Do you think Omega has a right to sue Costco for selling unauthorized watches in the US? Or do you think Costco has the right to sell the product at low prices? Briefly explain.
- Solution (3pts) – What should either company do to avoid such situations in future?
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Supreme Court Rules against Consumers in Costco versus Omega The U.S. Supreme Court has upheld a ban on gray- Omega has since fashioned a small globe logo market products sold legally in other countries but and copyrighted the device in the United States. not authorized by their maker for sale in the United By engraving the tiny logo on the back of the watch, States. This ruling means that any manufacturer that Omega could claim that it created a copyright on makes items overseas and uses a copyrighted logo the watch as a whole, one that would give the on them can go after importers who do not play by company more control over when and where the the manufacturer’s rules. watches are sold. Retailing giant Costco acquired Omega watches from gray-market sources and sold them cheaply- without Omega’s permission, which prompted Omega to sue for copyright infringement. Because the watches were not made in the United States, Omega claimed that they did not qualify for “first sale” rules. (An earlier Supreme Court case held that “first sale” protections do apply if the item was made in the United States, even if it is then sold overseas and reimported without permission.) In this case, Omega argued that all foreign-made, copyrighted products could only be sold in the United States with the manufacturer’s permission. Omega sells its watches for far less money in some countries than in others, a common enough practice known to economists as geographical price discrimination. The U.S. market will generally bear more than the market in a Latin American republic, and so Omega offers its goods to distributors in places such as Paraguay for less than it does to American distributors. Given the difference in prices, there is a tempting arbitrage opportunity in importing Omega watches from Paraguay the United States. They become watches like those that Costco bought from a stateside importer, allowing the warehouse store to offer an Omega Seamaster for $1.299 when the brand prefers them to sell in the United States for $1,999. Collision of copyright law and gray market goods OLEH
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Tags: international marketing Gray Market unauthorized distribution channels Costco vs Omega grey market sources