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General
Who are the founding members of AGMA?
What are the goals of the organization?
Who should join AGMA?
Do member companies pay a fee to join
AGMA?
How often do members of AGMA meet?
Who do I contact to join AGMA?
What programs and initiatives has AGMA
accomplished to date?
Why is there a need for AGMA?
Gray Market
What is gray marketing or illegal
brokering?
What is the size of the gray market
for the technology industry?
How does gray marketing work?
How is this different from items that
are auctioned from defunct businesses like dot-com companies
or items on a website auction?
Isn't the gray market fueled by internal sales program and
policies at the manufacturers?
Where does the gray market happen in
the distribution cycle?
Counterfeit Product
What is counterfeiting?
How does counterfeit product get sold?
How do I know if I am at risk for
purchasing counterfeit product?
Where do counterfeit products occur
in the distribution cycle?
Impact of Gray Market and Counterfeit Product
Why is it important for customers to buy
from an authorized channel?
How does gray marketing increase the risk
of counterfeit product being sold to end customers?
What is the impact of the gray market on
authorized distribution partners?
What is the impact of counterfeit products on authorized distribution
partners?
What is the overall impact of the Gray
Market and counterfeit products on Manufacturers?
Importance of AGMA
What is the importance of fighting
gray market goods and counterfeit products?
What steps can be taken to address
the issue of gray marketing?
What steps can be taken to address
the issue of counterfeit goods?
Why is there a need for AGMA?
General
Q. Who are the founding members of AGMA?
The Alliance for Gray Market and Counterfeit Abatement (AGMA)
is a non-profit organization incorporated in 2001 and is comprised
of leading technology companies committed to addressing the
global impact of the gray marketing and counterfeiting of
technology products. Founding members of the group are 3Com,
Cisco Systems, Hewlett-Packard and Nortel.
AGMA is a 501(c)6 not-for-profit corporation.
Q. What are the goals of the organization?
The goals of AGMA are to protect the authorized distribution
channels and intellectual property of authorized goods in
order to improve customer satisfaction and preserve brand
integrity.
In order to achieve these goals, AGMA will engage in the following
activities:
• Promote channel compliance and risk assurance
• Develop and encourage industry best practices for brand
protection and related issues
• Investigate all legal avenues to deter criminal activities
that feed gray market and counterfeit goods
• Educate the industry, customers, investors and other
stakeholders
• Enlist domestic and foreign governments, state and
local law enforcement
Q. Who should join AGMA?
Alliance participants are executives and senior managers
involved in brand protection, quality assurance, customer
satisfaction, operations, finance, security, channel management,
sales, marketing, law and other fields.
Q. Do member companies pay a fee to join AGMA?
Yes, AGMA members fund the organization to insure that the
planned initiatives are fully attainable.
Q. How often do members of AGMA meet?
The members of AGMA meet on a quarterly basis in North America.
As appropriate, special guests and speakers of interest that
specialize in the area of anti-gray market fraud and anti-counterfeit
products, services and solutions are invited to present at
member meetings. Contact Lily Mei at lily.mei@agmaglobal.org
if you would like to make a proposal or presentation to the
alliance and its members.
Q: Who do I contact to join AGMA?
For more information on AGMA and necessary qualification requirements
to join the alliance, please contact Lily Mei at lily.mei@agmaglobal.org.
Q: What programs and initiatives has AGMA accomplished
to date?
The AGMA program consists of educational initiatives, a hotline
and email link for reporting gray market and counterfeit activities,
benchmark studies, formulation of non-binding best practices
and, as appropriate, public policy advocacy in areas such
as law enforcement and customs.
Q: Why is there a need for AGMA?
Reducing counterfeiting and improper gray marketing activity
is important for maintaining the highest possible standards
of product quality and reliability and ensuring that customers'
service and support requirements are met.
The financial impact and customer satisfaction issues resulting
from the gray and counterfeit market could be significant.
The inherent value of IT brands is strengthened when products
are delivered through approved distribution partners, ensuring
the highest quality product and the best possible service
and support for our customers.
In addition, by addressing unauthorized gray market activity,
a level playing field is created for authorized distribution
partners.
Once products become diverted, they are often misrepresented
and unsuspecting customers have no assurance that the products
they're buying are new, genuine and have not been tampered
with.
Gray Market FAQ:
Q: What is gray marketing or illegal brokering?
The Gray Market is the unauthorized sale of new, branded products
diverted from authorized distribution channels or imported
into a country for sale without the consent or knowledge of
the manufacturer. It is the unauthorized sale or improper
diversion of new products obtained under deceptive circumstances.
This would mean new, branded products being diverted from
authorized distribution channels or imported into another
country without permission of the original manufacturer.
Q. What is the size of the gray market for the technology
industry?
Industry research released in February 2003 from KPMG and
AGMA shows that gray market sales of IT products account for
over $40 billion in revenue each year, collectively costing
IT manufacturers up to $5 billion annually in lost profits.
Q. How does gray marketing work?
Products on the gray market are shopped globally and usually
move through multiple tiers before reaching an end user, often
supported by worldwide broker networks. Some elements include
abuse of discount programs, fraudulent or falsified contracts
or end user information, other gray market practices include
over-ordering on valid accounts with discounts, and selling
those products in a manner not permitted by contracts or program
terms and conditions. Inappropriate disposal of end of life/excess
or obsolete inventories may also feed the gray market.
Q. How is this different from items that are auctioned
from defunct businesses
like dot-com companies or items on a website auction?
AGMA companies are focused on articulating what it means to
buy "new" products from authorized distribution
channels. When you buy outside the authorized channel, there
is enormous downside potential. Products are often represented
as "new" when that is clearly not the case. AGMA
is not concerned with auctions or other sales of used product
that clearly represent the products as used, and not new,
or that do not make other misrepresentations about the products.
Q. Isn't the gray market fueled by internal sales program
and policies at the
manufacturers?
Gray market goods are shopped globally for best prices. They
can move from multiple tiers before they actually reach the
end-customers. Often times a shadow inventory will exist inside
and outside of authorized distribution channels making it
difficult to forecast true demand. Resellers may abuse discount
programs that are legitimately crafted by manufacturers to
compete in the global marketplace. These sales programs can
be exploited and targeted for weaknesses that exist inherently
in some of these programs.
Individual manufacturers need to look internally to understand
how products are moving through legitimate channels and if
possible to verify legitimate customers. Manufacturers can
look at the terms and condition of contracts with their channel
partners, put discipline around internal business practices
to close loopholes that may be exploited, and pursue litigation
against companies that willfully abuse practices, breach contracts
and provide fraudulent information.
Q. Where does the gray market happen in the distribution
cycle?
Gray marketing can occur anywhere in the distribution cycle.
It can occur when a broker poses as a reseller, when a reseller
who acts as both a broker and a value-added reseller acts
outside terms and conditions of distribution contracts or
special discount programs. It can occur in every touch point
in the distribution model.
Counterfeit Product FAQ:
Q. What is counterfeiting?
Counterfeit product is the making or selling of unauthorized
copies of merchandise. The counterfeit goods are marked with
a "counterfeit mark" made to appear like the genuine
trademark of the good. A counterfeit mark is a false mark
that is used in connection with the trafficking in goods or
services that is identical with or indistinguishable from
a genuine mark. In the case of high technology, counterfeit
products can be comprised of individual components, whole
parts, finished product, packaging, documentation, software
and even the cartons and boxes that finished goods are shipped
in.
Q. How does counterfeit product get sold?
Counterfeit product initially will be sold through tightly
held broker networks established by the counterfeiter. Beyond
those brokers, counterfeit product many times will then enter
the gray market infrastructure thus causing confusion and
a higher risk that the channel and end users may be subject
to purchasing and receiving non-genuine goods.
Q. How do I know if I am at risk for purchasing counterfeit
product?
By purchasing through authorized channels or other means of
distribution established by the original equipment manufacturer
or directly from the manufacturer you greatly increase your
assurance that you are receiving genuine, new and factory
warranted product. Most manufacturers have listing of authorized
dealers available on their websites.
Q. Where do counterfeit products occur in the distribution
cycle?
The entrance of counterfeit goods can occur anywhere in the
distribution cycle. For example, it can occur when a broker
selling counterfeit goods claims they are legitimate goods
and sells them to another broker or even directly to a distributor
or reseller. It can occur in every touch point in the distribution
model. Thus, eventually counterfeit products can become co-mingled
with genuine products and sold through the gray market thus
making distinguishing between genuine and counterfeit extremely
difficult.
This illustrates the importance of manufacturers controlling
the flow of products through strict contract compliance. As
long as resellers and distributors follow the guidelines agreed
to with manufacturers, no counterfeit product would enter
the distribution system.
Impact of Gray Market and Counterfeit Product
FAQ:
Q: Why is it important for customers to buy from an authorized
channel?
It is important for customers to purchase from legitimate
distribution channels as authorized by the manufacturer in
order to maintain the highest possible standards of product
quality and reliability and to ensure that customers' service
and support requirements are met.
Also, anytime products are purchased outside the authorized
distribution channel, there is risk that the customer is buying
counterfeit or substandard products, including products that
may have been altered in some way, or used products represented
as new.
Further, gray market products can be mishandled or damaged
during multiple shipments all around the world, which would
cause additional customer satisfaction issues. Manufacturers
cannot protect against mishandling when the product leaves
the authorized channel.
In certain instances, this may also void the manufacturer’s
warranty, thus disappointing consumers and hurting the manufacturer's
reputation.
Q. How does gray marketing increase the risk of counterfeit
product being sold to end customers?
When product leaves the authorized channel, manufacturers
lose the ability to ensure through its contracts with channel
partners that the highest possible standards of product quality
and reliability are maintained. Thus, products moving through
the gray market are at risk for modification use in counterfeit
products. Also, there is a risk that the product may be tampered
with. For example, component parts are removed and sold separately,
then replaced with counterfeit parts that could fail.
Q. What is the impact of the gray market on authorized
distribution partners?
The illegal brokering of products represents a competitive
drain on both the manufacturer and authorized distribution
channel. This practice threatens to undermine the integrity
of the legitimate sales channels, leads to customer satisfaction
issues, and violates the contractual agreements between IT
companies and their distribution partners.
Q. What is the impact of counterfeit products on authorized
distribution partners?
When counterfeit products enter the market place, they compete
with legitimate product and could result in a competitive
drain on authorized distribution partners. Furthermore, those
who choose to purchase from unauthorized sources could unknowingly
resell counterfeit products, which would
result in negative customer experiences and question of the
manufacturer's integrity by their resellers and end customers.
By sharing information about counterfeiting issues, AGMA's
members can increase customer confidence in branded product
and protect valued channel partners.
Q: What is the overall impact of the Gray Market and counterfeit
products on Manufacturers?
First, there are the multiple customer satisfaction issues
resulting from counterfeit products and gray marketing. Anytime
products are purchased outside the authorized distribution
channel, there is risk that the customer is buying counterfeit
or substandard products, including products that may have
been altered in some way, or used products represented as
new. Further, gray market products can be mishandled or damaged
during multiple shipments all around the world, which would
cause additional customer satisfaction issues. Manufacturers
cannot protect against mishandling when the product leaves
the authorized channel.
Second, gray market and counterfeit products entering the
market place result in shadow inventory that is not visible
to manufacturers, thus making it difficult to forecast accurately.
Third, the existence of counterfeit products can cause a decrease
in the demand for your genuine product as customers and the
channel are unsure of ways to guarantee they are purchasing
quality authentic goods.
Fourth, when products move through multiple tiers there can
be a drain on overall revenues for the manufacturers and their
channel partners.
Fifth, in certain instances, this may also void the manufacturer’s
warranty, thus disappointing consumers and hurting the manufacturer's
reputation.
Importance of AGMA and the Mitigation of
Gray Market and Counterfeit Product FAQ:
Q. What is the importance of fighting gray market goods
and counterfeit products?
Overall losses to manufacturers, channel partners and consumers
are immense. It is estimated that over $40 billion in legitimate
products move through the gray market each year, resulting
in $5 billion in lost profits annually to manufacturers. However,
more important is the impact to channel partners and consumers.
When counterfeit and gray market goods enter the market place,
channel partners not only compete with heavily discounted
products, they are also dealing with the associated customer
satisfaction issues that arise.
These are large issues and lost productivity as much as revenue
loss and customer satisfaction require AGMA members to address
these issues and support our channel partners and end customers.
Q: What steps can be taken to address the issue of gray
marketing?
Individually, companies can take several actions:
• Implement controls to prevent products from leaking
to the gray market
• Educate sales personnel to look for red flags when
making initial sales
• Educate personnel on what to look for in substandard
products
• Educate distribution channels about the impact of gray
market practices
Working together, we can analyze the global gray market network,
educate the industry about the impact of gray marketing on
the industry's financials, develop best practices and improve
customer satisfaction.
Q: What steps can be taken to address the issue of counterfeit
goods?
Individually companies can take several actions:
• Implement controls to prevent excess components from
entering the gray market
• Implement rigorous disposition and destruction of excess
components and inventory
• Ensure adequate inventory controls of all materials,
components and proprietary information
• Educate personnel on what to look for in substandard
products and packaging
• Educate your channel about the impact of counterfeit
goods
Q: Why is there a need for AGMA?
Reducing the counterfeiting of product and improper gray marketing
activity is important for maintaining the highest possible
standards of product quality and reliability and ensuring
that customers' service and support requirements are met.
By working in cooperation, member companies create, recommend
and can choose to implement practical and effective deterrents
to both the gray marketing and counterfeiting of high technology
products in order to protect intellectual property, trademarks
and copyrights and preserve brand equity.
The financial impact and customer satisfaction issues are
significant. The inherent value of the brand is strengthened
when products are delivered through approved distribution
partners, ensuring the highest quality product and the best
possible service and support for our customers. Also, by addressing
unauthorized gray market activity, a level playing field is
created for authorized distribution partners.
Once products become diverted, they are often misrepresented
and unsuspecting customers have no assurance that the products
they're buying are new, genuine and have not been tampered
with. Contact lily.mei@antigraymarket.org
for more information.
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