What is the Grey Market

The grey market refers to goods which have been manufactured by or with the consent of the brand owner, but are sold outside of the brand owner's approved distribution channels – which can be perfectly legal. In the securities markets, the grey market is a market where a company's shares are traded, usually before they are issued in an initial public offering (IPO).


A grey market in the securities markets, is an over-the-counter market where dealers execute orders for stocks and bonds for preferred customers before they have been issued. These sales are contingent upon the issuance actually taking place, and allows underwriters and the issuer to determine demand and price the securities accordingly before the initial public offering (IPO) or bond issue. In grey market trading, while the trade is binding, it cannot be settled until official trading begins.

Grey Market Goods

Grey market goods are products sold by a manufacturer or their authorized agent outside the terms of the agreement between the reseller/distributor and the manufacturer. These are legal non-counterfeit goods manufactured abroad and imported into the U.S. without the consent of the trademark holder, and sold through unauthorized dealers. Though manufacturers labeled these resold products as the "grey market" to associate them with illegal “black market” products, the U.S. Supreme Court has upheld the idea that grey market products are legal for resale in the U.S., regardless of where they were produced or originally sold. The one exception is where the trademark owner has a contractual agreement with the manufacturer not to import the goods into the U.S.

They may be original equipment manufacturer (OEM) goods sold more cheaply elsewhere, or cheaper — though not necessarily lower quality — aftermarket goods. And they may lack a U.S. manufacturer’s warranty because the goods were originally intended for sale outside the U.S., or the specifications may fail to comply with U.S. regulatory requirements.

The U.S. Grey Market in Pharmaceuticals

The high cost of popular and branded prescription medications in the U.S. has created a large grey market. Pharmaceutical prices can vary significantly between countries, which is why some consumers are prepared to travel to other countries to buy their medicines. In the U.S., Pfizer and the pharmaceutical industry have been waging a legal battle against the re-importation of drugs from Canada, where pharmaceuticals are significantly cheaper in than in America. In the 2016 presidential election, many candidates proposed legalizing online pharmacies, which millions of Americans already use.

Levis Strauss Jeans and the E.U. Grey Market

U.K.-based supermarket giant Tesco began to sell discounted Levi's jeans in the late 1990s, which it had bought on the E.U. grey market. By buying them from countries with lower wholesale prices, it was able to undercut Levi’s approved outlets by nearly half. Levi Strauss went to court and claimed this trade violated European trademark laws and damaged its brand.

In 2001, the European Court of Justice ruled that grey market products are legal for resale in the E.U., provided that the equipment was originally sold by the manufacturer inside the E.U. Levi Strauss could, therefore, not restrict how Tesco acquires jeans within the E.U., though acquiring goods from outside the E.U. was prohibited. However, in November 2016, the U.K. Supreme Court ruled that the distribution of grey market goods without the consent of the brand owner is a criminal offense.