NEW YORK -- The door to the gray market was opened wider last month by the Supreme Court.
March 9, the high court ruled in favor of Quality King Distributors, based here, which had been accused by L'anza Research International, Azusa, Calif., of infringing on L'anza's copyright by selling its professional hair care products to unauthorized retailers.
In the view of industry executives, the court's unanimous ruling sends a strong signal that free-trade issues take precedence over copyright protection laws. It probably will be interpreted by hungry entrepreneurs as a green light to deal in gray-market goods, they said.
Manufacturers insist they will continue to fight diversion in any way they can, and last month's development merely eliminates one of the options previously open to them.
"This has the potential for gray-market product to be more prominently displayed on unauthorized retail shelves because it will have emboldened the Quality Kings of the world," said Aaron Graham, director of assets protection at Matrix, a professional hair care manufacturer in Solon, Ohio.
Diversion already costs the professional hair care industry more than $80 million in sales yearly, according to estimates by industry sources, and it will probably become even more costly as a result of the decision.
The ruling may give mass-market retailers, always looking to offer their consumers value and the products they want, easier access to items that already make up a small but vibrant category.
