Grey market buyers not often protected

January 6, 2009 12:00:00 AM PST
With the economy like it is, everyone is looking for a bargain.

To find them, many people are turning to the "grey market" and buying products not authorized for sale in the U.S.

7 on Your Side is warning you to watch out.

There are two major ways items end up in the grey market. First, there are the products that are only to be sold by authorized dealer, but instead end up in the open market. Wrist watches come to mind.

Then, there are items, electronics usually, that are manufactured outside the U.S. and end up being sold domestically.

It is the second type that has 7 on Your Side's attention.

Stan Chaban thought he was getting a good deal when he bought a cell phone from a local dealer.

"There's the phone and it's dead in the water," he showed ABC7 laughingly.

Chaban says after a little more than a month of use it would not take a charge. The store told him to take it up with the manufacturer, Samsung.

But, Samsung of America told him, "no dice."

"It wasn't a genuine Samsung phone and they could do nothing about it," Chaban said.

7 on Your Side called Samsung and the company said Stan had purchased a "grey market phone" that was made for sale only in the Middle East.

The company said an international arm of Samsung made Stan's phone and that Samsung of America would not stand behind it.

7 on Your Side then contacted the U.S. Department of Customs and Border Protection.

"It can be a problem from a safety point of view. The goods that are sold as grey market articles may not meet all U.S. safety standards," warned Chief Officer Ed Low.

U.S. Customs routinely inspects packages entering the United States from overseas.

It has the authority to confiscate grey market products only if a company has applied for and been approved for grey market protection status.

Samsung of America is not among those companies.

Low says, "There are very, very few companies that are absolutely protected from having grey market goods imported into the United States."

Without that status any retailer can legally sell a grey market product as long as it meets U.S. safety requirements.

However, there is a little-known law that can protect consumers.

The California Civil Code requires full disclosure that the grey market product may not come with a full manufacturer's warranty or other items.

"If somebody asked me to recommend it, I would never do it," said Chaban.

In general product warranties are not honored on grey market products. Consumers who buy them are also ineligible for the manufacturer's rebate.

Stan purchased his phone from Free Communications in San Francisco. He and the company disagree on whether the company adequately disclosed that Stan was buying a grey market phone.

Free Communications did, however, refund Stan his money after being contacted by 7 on Your Side.

To read the Civil Code 1797.81 on Grey Market Goods click here