Difference between Black Market and Grey Market

Key Difference:  Black market deals with the banned, counterfeit or stolen items which are sold in the market illegally. Grey market usually deals with the genuine goods that are sold and bought through the unauthorized channel of distribution.

Black Market and Grey Market are related to the illegal facet of the market. Black Market and Grey market are different from each other. Black market is all about trading in items and services which are considered to be illegal by laws. These transactions are generally made on fake or counterfeit products in a black market.

It deals with the trade of stolen items, lawfully banned or counterfeit items. Therefore, these goods or services are also traded in an illegal manner. For example, weapons and drugs are two most commonly traded black market items.  Black market is closely related to brand abuse.

Grey market lies somewhere between the black and white markets. It generally deals with the genuine commodities. However, they lack the proper authorization or controlling factors.

A simple example of a grey market is the one which is developed by people who trade in goods at lower rates than the official rates.  The goods of grey market are not like counterfeit goods of black market. It typically involves those services which are not registered legally in order to save taxes from the government. Thus, most often the distribution channel used is unauthorized or unofficial in the grey market.

For example – an unauthorized dealer, who owns a store of a brand of watch, would be considered as a part of grey market. On the other hand, if the same person sells fake watches under the same brand name, then that would be included in a black market.

Therefore, the two markets are different from each other. However, due to involvement of illegal activities, both tend to overlap each other many times. It is important to mention that black market is totally illegal. However, a grey market good may only be considered illegal if it violates either product regulation or a licensing number for the use of trademark in a particular country, even if the product is being sourced by the legal manufacturer. This scenario often arises in overseas markets.

Black market brings a lot of disadvantages. The fake products can bring a lot of dangers with them. For example, a fake drug can be extremely harmful for a patient. Illegal products like weapons, etc. can be used in serious crimes. Grey market also brings a loss to competitors. Generally, the products of grey market cannot claim their guarantee. The resale value of the product may also suffer in the case of grey market.

Comparison between Black Market and Grey Market:

 

Black Market

Grey Market

Definition

Deals with selling and buying  of counterfeit, banned or stolen goods

Grey market usually deals with the genuine goods that are sold and bought through the unauthorized channel of distribution.

Characteristics

  • They are clearly illegal
  • Generally involves transaction outside the boundaries of the official economy
  • Often rise where demand is greater than the supply
  • Tries to avoid price control feature and taxes
  • Often takes the advantage of difference in costing of products in countries
  • Tend to compete with the authorized dealers
  • Can often lead to black markets
  • The products are usually deprived of normal warranty

Key words

Counterfeit, stolen or fake product and unauthorized channel

Unauthorized source or unauthorized channel or both

Second hand sales

Not legal

Generally legal

Attached Risks

Higher

Comparatively lesser

Image Courtesy: nytimes.com, pcauthority.com.au

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