What is the Black Market?

The Black Market vs Grey Market

What is the black market? For that matter, what is a grey market, or even a white market? In terms of commerce, ‘black market’ often suggests illegal transactions, or a dodgy underground movement. However, what exactly is the black market, and how does it differ from a grey or white market? To understand them, let’s explore each one by definition, and implications.

What Does White Market Mean?

While a ‘white market’ might seem obvious to some, for the sake of completion, let’s briefly describe it. In many respects, it’s what we are used to in most societies. The white market refers to legitimate, or legal economic activities undertaken within an established and regulated framework. Goods and services are traded openly and transparently, or should be, but often aren’t.

Therefore, all transactions conducted within a white market comply with applicable laws and regulations. We are told that this is in order to protect the consumer, and preserve market integrity. In short, it is controlled by the few, and then forced on the masses — for their own good.

What is a Grey Market?

The grey market resides in a grey area — literally. Are grey markets illegal? They are not illegal, but they are not sanctioned either. Brands generally employ scare tactics through warnings and admonitions to discourage people from entering the grey market in search of cheaper goods. Sometimes, a grey market is also referred to as a dark market.

Does grey market mean fake? Grey market goods are usually authentic products, but distributed through unauthorised channels that breach contractual agreements. These products come from surplus inventory, international sources, or just from areas with lower pricing. The products are genuine, but not the distribution itself.

What is the Black Market?

The black market is usually portrayed as representing illegal trade and all things undesirable, or prohibited. So this economy is said to encourage the sale of drugs, guns, counterfeit products, and stolen merchandise. Another negative aspect of the black market is human trafficking.

It’s important to pay close attention to the language used as we discuss these markets further. How does the black market work? The simplest description of a black market is where goods and services are exchanged outside the control of government regulation and the powers that should not be.

It’s less about legalities, and more of a case of, “If we can’t control and manipulate it, we will prevent you from engaging in it.” Accordingly, the same people decide what is punishable by their own laws, and you must go along with it … or else.

How is Grey Market Different From Black Market?

Both the grey and black markets operate outside conventional channels, but they differ significantly in terms of legality and the type of goods or services exchanged. A grey market sees the exchange of genuine products, but distributed through unauthorised channels. It’s important to note that the distributors can be legitimate, but only authorised to operate within their particular economic zone.

By definition, the black market focuses on illegal activities and exchange of goods. Therefore, individuals participating in a black market economy do so knowingly, and are disregarding the laws and regulations.

Why Does the Grey Market Exist?

The existence of the grey market is rather controversial, but for reasons many do not consider, or prefer to ignore. The drive for grey goods stems from prices differences and local supply. So why do these factors exist?

Individual economies around the world are deliberately either boosted or suppressed. It’s an ugly truth that most shy away from. Deliberately devaluing certain economies makes labour costs attractive in that region. It’s a form of slave labour since it keeps entire nations in perpetual poverty.

With the cost of living being so low in those areas when compared to prosperous zones, the prices of goods are equally low. It is in this discrepancy in pricing that the grey market is born. Consumers seeking lower prices source products in the grey market at a discounted rate, and forgo manufacturer warranties or after-sales support.

Another reason to acquire grey goods is that they may simply not be available in every region. Certain products are deemed not profitable in an area, and are thus not available. Some luxury goods are produced solely for the consumption of a particular zone. A more common factor is that the demand exceeds the supply. The only way to get the product is across borders.

What is the Difference Between Counterfeit and Black Markets?

On the surface, the counterfeit markets and black markets appear to be similar, there are some distinct differences. Black markets operate outside of the legal system. Counterfeit goods are sold through all the markets. This is part of the concern with purchasing products on the grey market: they could be counterfeit.

Counterfeit products are simply unauthorised reproductions of genuine items that are sold as genuine. They are often of inferior quality, and cheaply manufactured. However, they can be made alongside genuine products in the same factory as the official items, but then diverted into the grey market.

Many people do not realise that almost everything is made in an anonymous factory under licence. The days where every company had their own production lines are long gone. Goods that might be rejected due to cosmetic flaws are not always destroyed, but redirected and sold unofficially.

While counterfeit products infiltrate both legal and illegal markets, not all black market transactions involve counterfeiting. It’s illegal to sell counterfeit goods, but everyone has seen or even bought them in the regular market place.

What Problems Can Grey or Counterfeit Markets Pose for Companies?

Ethically speaking, grey and counterfeit markets reduce quality, and thereby affect the corporation’s reputation. Inferior goods can pose a danger too. They can cause harm, or property damage to unsuspecting consumers.

To be forthright, the main concern is generally profit. Most products are excessively priced well above actual value and a reasonable mark-up. When the market is regulated, the consumer is unaware of the true cost of production.

A grey market exposes these socio inequalities between countries, and also show the individual just how much they are being ripped off. Companies are more concerned with their reputations than anything else.

Free Market Economy

The summary of all this is that a true free market economy is actually a black market. Freedom of trade is truly incompatible with our current economic model, and it’s becoming ever more restricted. The definition of a black market has been deliberately shaped to confuse the individual. Righteousness and legality has been intentionally interwoven where convenient.

Many despicable practices are legal, and freedom has been outlawed. I am not suggesting that some of the activities undertaken on the black market are desirous, but regulation does not seek to prevent them. If this were the case, they would have ended. Instead, this is about who is allowed to profit, morally or otherwise.

Ultimately, the difference between a black market vs white market has little to do with morality, but rather an incessant desire for control. One only has to look at all the injustice in the world that is perfectly legal. If it’s regulated, it’s legal. If you defy the powers that should not be, it’s illegal, but who has the right to judge these things? Clearly, not the man on the street.