Dubai: J. Singh, a visiting business executive from Muscat, was determined to get himself an IPad 2 in Dubai last week. He did the rounds of five electronics stores before he could get the 32GB 3G model he wanted.
Three of the five outlets told him the device, priced at Dh3,099, was out of stock. At the fourth, it was available for Dh3,700 with a display rider saying: "Best price not guaranteed". At the fifth store, where he eventually made the purchase, he paid Dh3,949. The machine came with a magnetic cover costing Dh349.
Ironically, only the first three outlets were authorised sellers of the product. The other two, both established electronic chains, were unauthorised channels.
Not all products bought from such unauthorised channels are fake but there's no guarantee they're original. Should there be any discrepancy, authorised service centres may not support the warranty or after-sales service.
"I wish I had known earlier. Now it is too late," rued Singh, who later found a list of the official channels for Apple products on the website of Arab Business Machine (ABM), their authorised distributor in the UAE.
Like him, thousands of consumers in the UAE could also be taken for a ride as they unknowingly buy from unauthorised channels, thanks to a booming grey market fuelled by free parallel imports.
"From being denied product warranties, after sales-services and inbuilt market specifications to risking manipulation of parts and accessories, even counterfeiting, there are many concerns that such customers grapple with," said Taj Kunwar Paul, Consultant at Cedar White Bradley, an intellectual property and information technology law firm in Dubai.
Yet, few consumers complain or even exercise their right to warranty (see box). "If something goes wrong with my mobile phone, I get it fixed at a local repair shop at Satwa, which in any case takes less time than an authorised service centre," said one customer, oblivious to the possibility that a machine bought at an unauthorised outlet could just be refurbished or even fake.
Onus on manufacturers
The onus of initiating action invariably lies with the manufacturer but as Paul said, international brands cannot move against grey market operators unless their authorised distributors are registered under the local agency law - Federal Law No 18 of 1981 concerning Organising Trade Agencies as amended by Federal Law No 14 of 1988.
She said many brands are reluctant to register agents because of perceived difficulties in rescinding on the agreement.
Peter Harradine, President, Swiss Business Council, said, "The agreement binds the manufacturer to the agents for a long time. We have seen some Swiss firms engaged in long legal battles to change their agents."
Manufacturers say it is an uphill task to gather evidence against the wrongdoing, file complaints and follow up the cases. The evidence often disappears from the shelves when there is a hint of action, said a senior executive of a popular electronics brand. "Moreover, the process of seeking redressal can be cumbersome and cost thousands of dollars."
The owner of Canadian company Vahn-Tech International which makes valves for water pipes alleged its trademark and brand were grossly violated when direct imports by another party resulted in blatant counterfeiting. Following a complaint, he alerted the authorities who conducted raids and seized 5,240 fake valves from Sharjah and Ajman.
The errant company was fined Dh7,000. "This is hardly a deterrent," said the Canadian brand owner who has also moved court.
Ram Buxani, Vice-President of The Electronics Group (TEG), estimates that the grey market is eating into 30 per cent of the sales of authorised distributors.
"Despite the best efforts of the authorities, grey goods could slip in because of Dubai's open borders," he said.
Until recently, TEG members were provided tags for every product to establish its genuineness. But the practice has been discontinued with a steep rise in quantities.
"The more popular the product and the brand, the greater are the chances of it going grey," said Buxani, who is also President of ITL Cosmos, the official distributor for several top electronics brands.
"Grey operators take advantage of the period before the official launch of a product in a given region. Their sales typically peak during this time," said Elias Abou Rustom, Vice President, Middle East, ABM.
Sources said by the time Apple released the IPad 1 in the Middle East in January this year, the grey market had already recorded sales of 5,000 pieces monthly.
"It all comes down to demand," said Mohan Jashanmal, Chairman Jashanmal, authorised distributors of several leading electronics and luxury brands.
Giving an example, he said the high demand for perfumes has created a huge grey market. "We have reported this to the Economic Department on several occasions," he said, adding that the Ministry of Economy has clear-cut laws to deal with such matters.
Closely linked with demand is the price of the products. "The grey market is driven by price differences," said Omar Shteiwi, former chairman of Brand Protection Group, noting that in a free trade economy like the UAE, there should be no exclusivity or monopoly in imports or exports as long as products comply with standards, norms and local regulations.
The so-called grey operators who source products from their own networks bring them in by paying the required customs duties. Many of them also procure international warranty and pass it on to consumers.
"The problem with grey is the inflated prices. Contrary to an authorised channel, they lack the expertise, certification or framework to provide after-sales support matching Apple products," said Abou Rustom.
The real danger, said Paul, lies in the scope for the product to be manipulated. Also, grey market items may not be stored appropriately or come without inbuilt market specifications or accessories. She said many products meant for the region have an inbuilt Arabic script which could well be missing in a product that is not brought in by an authorised agent. But there are cases when machines are tampered with as parallel importers engrave the scripts on their own.
"The best way to counter grey for an authorised channel is to keep prices competitive, continuously enhancing after-sales support, and ensuring high customer satisfaction at all times," said Abou Rustom.
A fine of not less than Dh10,000 will apply if a product does not have a warning of the risks associated with using it. The court may direct that the product be confiscated or destroyed along with the equipment and raw materials used in its manufacture. Trading by any business that does not comply with the law can also be suspended for up to a week or even be permanently closed.
Consumer Rights
Before buying a product, consumers must educate themselves on who the authorised sellers are and insist on getting product warantees. The Department of Economic Development (DED) ensures consumer protection in Dubai under the Consumer Protection Law of 2006.
The law identifies three key consumer rights responsibilities:
* Understand product warrantees, guarantees, origin, storage, expiry and the method of use prior to making a purchase
* Request a receipt from seller and ensure the details on it are correct. Keep it for your records
* For products with extended lifespan, ensure that you understand the details of after-sale services and warrantees
In addition, the Trade Practices Law requires that suppliers display sale prices of goods, label them in Arabic, honour warranties, impose liability for damages and replace defective goods
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