Anti Gray Market Alliance, Counterfeit Abatement vs. Computer Reuse?

In Democracy in America (1840), Alexis de Toqueville noted the rise of "planned obsolescence" in the United States:
"I accost an American sailor, and I inquire why the ships of his country are built so as to last but for a short time; he answers without hesitation that the art of navigation is every day making such rapid progress, that the finest vessel would become almost useless if it lasted beyond a certain number of years."
This is the most legitimate case for "planned obsolescence", and it definitely applies to a lot of electronics goods.  There is less gold in a Pentium 4 than there was in a 386 PC, because manufacturers no longer build the PC like a battleship meant to last 30 years.  Less gold = less gold mining.  GOOD!

There is also such a thing as theft, and a black market is the term for the economy of illegitimate and stolen goods.

There is definitely a black market.   Black markets include sales of stolen goods, sales of counterfeit goods, false warranty returns, fakes and faking.   Electronics companies and software companies, according to a recent AGMA story, lose $250 billion dollars per year in sales to the "Gray Market".

But wait.   I thought we were talking about Black Markets.  How about the term "gray market"? 
"A grey market or gray market also known as parallel market[1] unintended by the original manufacturer.Grey markets are the trade of a commodity through distribution channels which, while legal, are unofficial, unauthorized, or unregulated.
In wikipedia.en [English], the entire grey market is described as "legal" (now that I pointed that out, how quickly will wikipedia get edited by an OEM law geek?)  I doubt it is described the same way in Japanese wiki.  It's a grey area of the law.

Black can't be grey without a White to stick it in....   There are more civil law (contracts and agreements) than criminal laws at at issue.  To attack a gray market, you will need to display efforts to limit collateral damage on legitimate reuse.  {I visited the Nanhai printer cartridge market, after the jack-booted thugs with $6M shut down and burned black, white, and grey cartridges and printer repairs in the street... that left an indelible impression on this blogger}

A gray area of the law basically means you can try to sue someone, but you may not win.  It's alarming when countries enact laws to protect specific manufacturers against resale of their products in the secondary market.  If the goods are MADE in your country, and you get the jobs benefits (Fuji won against Jazz camera refurbishers in Japan, and Fuji contributes a lot to the Japanese economy), it makes sense in a protectionist way.   But when Kenya passes a law against the import of used computers, it's idiotic.   

National laws are not supposed to protect "manufacturer intent". If a manufacturer plans for obsolescence - e.g. selling a toner cartridge with a 3D killer chip - and a savvy repairman tricks the cartridge into being refillable, then the subsequent sale is indeed "unintended by" the OEM.  But it is not, in the USA, illegal, despite millions of legal bills aimed at making it so in court.

The legitimate resale and reuse of product, aka the "secondary market", is hugely important to our economy.  The secondary auto market is larger than the total new car market.   Legitimate used auto dealers and auto repair shops know they must keep their distance from "black market" chop shops and stolen cars.  If America has $250 billion in added value equipment, shredding that up so that Chinese can sell us more is uneconomical, anti-environmental, fiscally irresponsible, and stupid.  We are not in a position to say "keep the change" with added value.

To be fair to the Anti-Gray Market Alliance, Samsung, HP, Cisco and other AGMA members and founders don't have a sheriff to call.  They are forced to find the balance between protection, protection-ism, and vigilante-ism. If someone is removing "name brand" labels and sticking them onto inferior products, that's a crime against the consumer as well as the OEM.  It's more than adding insult to injury if the consumer brings the item back in for warranty repair at the cost of the BOEM.

But collateral damage to the legal repair and resale markets is also a cost to the consumer.  Repair and refurbishing shops are underdogs in this fight, and it would be good if AGMA made an effort to give grants and recognition to repairpeople and used goods dealers who do the right thing and DON'T commit fraud.   AGMA could actively support repair and refurbishment in places like Cairo and Accra.

When the added value is "punted" into a market with little "new" sales potential, the jobs developed there grow an economy which creates a future market, both for contract assembly jobs and new product sales.  That is how Guangdong province did it.  You want Africa to develop, get online, and become a market.

Trying to criminalize the lighter shades of gray market will backfire in the long run.  The Peoples Republic of China has lavishly tried to protect manufacturers which the Chinese Communist Party always owns shares in with "planned obsolescence in hindsight" regulations.   

China outlawed all "second-hand" electronics goods, working or no, simplifying "grey".  A week old, tested working, warranty laptop is considered "e-waste" in China if it wasn't sold in China.   China probably has too many poor people to make repair and resale laws enforceable.  I was told by a Chinese regulator, in confidence, that the cat was not just out of the bag, but had several generations of kittens in the trees.   In the long term, China's efforts to suppress natural reuse and refurbishment will come at a cost either to the People deprived of "good enough" used equipment, or to the Environment, if they are all supplied with mined new product.

This is the intermingling of "intellectual property" crimes and innocent resale transactions.   Outside the OEM's "intended distribution channel", yes.  Market cannibalization?  Perhaps in the short term.   Selling a barely used camera in China is by definition "a crime".  But it is NOT an environmental crime!   NGO's have repeatedly conflated "illegal sales" with "environmental harm", and it's simply not that simple.

Japanese music... Dir En Grey... UnpluggedJapan treats gray markets a lot like China does.

What is the effect of curtailing used product sales on the USA economy?  $250 billion here, $250 billion there, pretty soon you are talking about real money.  Used car sales are bigger in both units and dollars than new car sales.   We have a "right to repair" in the USA, a right to resell, a right to refurbish. Retained value is as real as added value.  Turning Goodwill Industries into an anti-reuse tool is bizarre.  If poor people are denied the choice of used goods, they are screwed.  

I tell myself I'm doing AGMA a favor, the same service I'm doing for BAN... bringing unintended injuries to the attention of the injurer.  Look at the way Hitachi was embraced by NESDA, the National Electronics Service Dealers Association.  In the 1990s, Hitachi went out of its way to make TVs easier to repair.   Will Sony and Samsung and Panasonic's efforts to increase recycling be remembered ten years from now, or will they be remembered like Hitachi, by a few people who were very very close to the issue?

OEMs should not fight reuse when the exports are to emerging markets.  They should embrace WR3A's efforts to get refurbished goods to the United Nations schools program (UNGAID) - which is "punting" the product far away from their defended goalposts.  They should support used goods going into developing markets which can't afford new, not sacrifice 100 used sales to protect a single rich purchase.  The Big OEMs need not belittle the ambitions of small refurbishers.  The really great make you feel that you, too, can be Great.

Used and resale goods are tilling the soil, creating future buyers and future markets for electronics.  They are getting working used goods into the hands of poor people who will one day aspire to buy new products.

Oh.. about the musical reference.  The Japanese heavy-metal band "Dir En Grey" is performing in Japan this month.   The music clip I posted above is the softest acoustic tune I could find.  If your ears are not squeamish and you want a better taste of what the soda-pop looking DirEnGrey market really listens to, here a link to their ballad "Agitated Screams of Maggots", with a rather impressive charcoal animated video that recalls Eraserhead.  Actually, even the "unplugged acoustic" version of Agitated Screams of Maggots makes Ozzie Osborne sound like Sinatra.

Music like this gives me hope that American yankee reuse values, and the nutbrown bowl, will prove the strongest man at last, even in Japan and China.  I don't like to listen to it very much, but I like to know it is out there and that other people are listening to it.  I feel safer living in a society where gays, Jews, women and punk rockers are safe... even if I'm more of a Grateful Dead, Touch of Grey man myself.


Parag said...
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Anonymous said...

You have a dense writing style, with a depth that runs very counter to "twitter" and bullet points. What you are saying is very important, and I wish you the best. It's too bad my industry is judged on instant returns in the stock market... some of us agree with you.