I can remember way too many years ago being an account executive at an ad agency and working with a small consumer electronics retailer. Month after month I'd walk into one of the stores to meet with the owner who would voice his frustration. Even though he was the only official retailer of a given manufacturer's line of audio products, a competitor that ran commercials (touting its "insanity") was selling gray market items — products obtained outside of normal distribution channels — at about the same as it cost my client to purchase it wholesale. Consumers would come in and his staff would point out that the manufacturer would not honor the warranty if the product needed repair, but the vast majority didn't care. They went to the "crazy" chain and spent their money there.
I can't remember if the manufacturer took any steps back then in an attempt to curtail the practice, but in more recent years we have seen companies take retailers to court claiming that the sale of gray market items violates copyright law.
Back in 2010, a case pitting Omega and Costco made it all the way to the Supreme Court where the justices split 4-4 on the question. Justice Elena Kagan recused herself because of her involvement in a case in which she wrote a supporting position for Omega while a member of the Obama administration. In the end, most watchers of the nation's highest court saw the decision as a victory for Omega since it is widely assumed that Justice Kagan would have voted in the company's favor had she participated in the case.
Earlier this week, the Supreme Court announced that it would take up the gray market/copyright issue again.
According to a Bloomberg News report citing a 2009 Deloitte analysis, gray market imports cost manufacturers $63 billion a year in sales. On the other hand, as the Retail Industry Leaders Association points out, it also saves American consumers billions.
The point of law in question is the so-called first-sale doctrine, which maintains a copyright holder can only profit from the original sale of the first product. If manufacturers are able to profit from sales following the original purchase, it is argued, than services such as Netflix would be totally at the mercy of movie studios, for example.
On the other hand, manufacturers argue that it is well established that market pricing holds where a product manufactured overseas would be sold there at a lower price while a higher price would be applicable to the U.S. market.