Gray market refers to trade conducted through unauthorized channels. However, this should not be confused with the black market, especially since the gray market, although unofficial, is not illegal.
The gray market is often used for expensive imported products and securities which have not yet been traded in legitimate markets.
Items traded through the gray market are usually not illegal, but are distributed outside the regular channels. This is quite common for electronic goods such as mobile phones, laptops, or digital cameras. Businesspeople buy the product in territories where these products cost much less than the regular market price. Then, these products are resold to the target market at profit, but still considerably cheaper than the regular market price.
Gray market prices can go higher than the regular market prices when shops run out of stock of a particular item, especially during certain seasons. Online auction sites often facilitate the transfer of goods in the gray market.
Authorized agents or distributors are the parties most affected by the existence of the gray market. As such, manufacturers and distributors have tried pushing for gray market restrictions. It is often still possible to go around these restrictions legally, though. Another response could be blocking advertisements of gray market goods. Manufacturers can also refuse to honor warranties of goods distributed through the gray market.
Products sold through the gray market are usually brand new, but there are instances in which used goods are also distributed. The market for used goods is sometimes referred to as the green market.
The gray market does not include the import of smuggled goods, whether or not they are legal.
