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Gray Market

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The gray market is an economic concept used to designate the purchase and sale of goods and services through a distribution channel not allowed or authorized by the producer thereof.

One of the most common commercial practices that characterize the gray market is the purchase by companies in countries where an original product in question (illegal imitations aren't taken into account) is cheaper to later sell it on its own to obtain with the operation a profit margin, after the corresponding legal importation of the product.

The sale in the own country is regularly carried out at a lower price than the existing one in the authorized or official distribution channels. Its name comes from English (gray market), although it's also common to know this concept as a parallel market. From a formal point of view, activities in the gray market are often related to those of arbitration.

The original brands that put into production the products that can be bought and sold through these gray practices often disregard such operations preventing the final consumer's enjoyment of advantages or guarantees. In this way they invite them to access their products through authorized channels, favoring various companies that can enjoy exclusivity for these products or even their own official establishments.

The most significant sectors in this area are technology and telecommunications, driven by the fleeting advance and development of mobile devices and their expansion to all types of audiences. Alternatively, the proliferation of large online stores such as Ebay, Amazon or Aliexpress has favored the expansion of this type of operations internationally.

Difference between gray market and black market

While transactions within the black market are conceptually considered as illegal and not allowed in any country in the world, those carried out within the gray market are often criticized or qualified even as a source of unfair competition against third parties, even if they aren't commercially illegal.

In that case, we would be talking about trade with goods and services that are often current and of limited use. In the case of products harmful to health, prohibited or directly prohibited by the legislation of a territory we would find ourselves in the aforementioned black market.

Gray market in a financial environment

Another meaning of this economic concept is that applied in the financial field. It applies to those financial markets where operations of buying and selling financial products are carried out as shares (generally) outside official periods of supply. The most frequent is that the intermediaries in them are characteristic of financial institutions and that others from abroad can't access.

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