IT titans form anti-gray market group

Tired of seeing millions of dollars spent on "gray market" or diverted merchandise every year, a group of IT heavyweights decided to make an attempt to regain control of their reseller channel Wednesday, by forming the Anti-Gray Market Alliance (AGMA).

3Com Corp., Apple Computer Inc., Compaq Computer Corp., Hewlett-Packard Co., Nortel Networks Corp. and Xerox Corp. announced the formation of the alliance, but said that membership is open to all technology companies, both in the U.S. and abroad. The companies plan to educate the IT marketplace about illegal or deceptive brokering or diversion of products, and address the flow of products into the gray market, the companies said in a statement.

The gray market, which the companies estimate accounts for more than US$20 billion in revenue each year, involves the transfer of brand name hardware and software outside of authorized channels, the group said. For example, software or hardware customized for a specific market may find its way to being sold in a different market, and may also lack proper support or warranties.

From the vendors' point of view, this could also lead to the sale of damaged or obsolete products rebuilt with counterfeit parts, and in turn to poor customer satisfaction, the companies said.

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