Costco Watches Are So Cheap It's A Copyright Issue?

The Supreme Court is weighing a decision that will affect whether discounters can offer cheap goods from foreign manufacturers without violating U.S. Copyright law, says the AP.

Discounters like Costco, Target and Amazon buy goods abroad, then import them and resell them without the permission of the manufacturer. Customers benefit, because goods are generally priced cheaper abroad than in the US.

As you might imagine from all the region coding and other location based stuff that gets tacked on tot DVDs and software, this lawsuit is freaking out the entertainment industry. They don’t want a ruling that would encourage retailers to buy their products overseas and sell them to U.S. consumers for huge discounts.

The AP says the lawsuit stems from some Omega watches that were initially sold to an authorized distributor in Paraguay, but somehow ended up at Costco for about $700 cheaper than the suggested retail price.

High court reviews Costco sale of Swiss watches [Salon]

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  1. Thresher says:

    If they manufacturers can outsource manufacturing, shouldn’t consumers be allowed to outsource purchasing?

    • cynical_reincarnation says:

      A fantastic point!

    • Loias supports harsher punishments against corporations says:

      Companies sent jobs overseas – I expect to be able to reap those rewards by purchasing those manufactured goods at prices commensurate with the wages paid to produce them.

      • AnthonyC says:

        Prices are not set by costs- they are set my what the market will bear. Historically, different countries have constituted separate markets, capable of bearing different prices. Companies are fighting that part of globalization that unifies the consumer end of their market pricing scheme.

        • Firethorn says:

          Guess what, I’m not going to bear those prices if I can get it cheaper, perhaps by buying overseas and importing.

          There needs to be controls both ways.

    • FilthyHarry says:

      As soon as customers can purchase their own congresspeople.

      • dcarrington01 says:

        Thought that’s what all my tax dollars went to?

      • chaquesuivant says:

        Next, Omega – or rather the conglomerate that owns Omega, the Swatch group – and other watch makers will include a EULA with their watches (this is rumored actually) that bans the buyer from ever selling the watch for less than the price they paid. Good luck enforcing that, morons.

        Also, I’ve heard they’re lobbying eBay to ban sales of used, even Vintage and collector watches, using copyright and trademark reasons. Supposedly they will pay eBay at least some of the lost listing fees to accomplish this, but they’re also lobbying law makers for a better solution than simply bribing eBay.

        A friend of mine heard this from his boyhood pal Michael Medved – who of course thinks this is a wonderful idea.

        What is it with these so-called neo-cons? They claim to be against ‘big gubment’, yet they think shit like this is a great idea.

        Oh…another thing…the little bitch Gene Simmons of ‘Kiss’ is also a neo-con and is great friends with Medved. They are also in the same Fantasy Football team together and Medved even insists on calling his 16 year-old house-boy, Pablo, ‘Genezy’, in honor of Simmons. Yes – Medved has a houseboy named ‘Pablo.’ Think of Hank Azaria’s character in ‘The Birdcage.’ (The kid totally creeps my friend out.) Simmons in turn named his new Bentley ‘The H.M.S. Medved.’ Rich people are strange.

    • longdvsn says:

      It’s a global marketplace. Companies aren’t going to be able to get away with gouging US customers anymore. Watches, prescription drugs, DVDs, etc. If it’s genuine…it should be able to be purchased anywhere that’s offering the best price.

      Omega probably sells the watches to distributors for less in developing countries because people make less there, on average – and they want at least the wealthiest to still buy their product. If any wrong-doing took place, it was probably with the distributor in Paraguay who may have signed an agreement with Omega to sell only in certain areas (and presumably, the US is not on that list). If so, they could be sued by Omega.

      I hope they lose this and other manufacturers take note. Re-importation/Importation should not be illegal.

      • Loias supports harsher punishments against corporations says:

        If you read the article, re-importation is already sanctioned, and no copyright violation would exist if it was manufactured in the U.S., left, and was re-imported.

      • Duke_Newcombe-Making children and adults as fat as pigs says:

        “It’s a global marketplace. Companies aren’t going to be able to get away with gouging US customers anymore. Watches, prescription drugs, DVDs, etc. If it’s genuine…it should be able to be purchased anywhere that’s offering the best price.”

        The last election and Citizens United say you’re wrong about that.

      • BBBB says:

        This is often referred to as Gray Market goods – legal goods that go through unauthorized distribution. The person/entity that broke the distribution agreement with the manufacturer can have their contract canceled and possibly face penalties, but the rest of the supply chain has no contract with the manufacturer.

        One problem when buying gray market goods is that the guarantee for the product is only valid in the country the product was packaged for. On the other hand, with Costco, that is not a problem since they will honor the guarantee themselves.

    • areaman says:

      +1!

    • DewBerry says:

      Well I know what other product is ripe for re-importation:

      If China Gets Microsoft Office for $29, Why Don’t We?

      http://www.pcworld.com/businesscenter/article/168746/if_china_gets_microsoft_office_for_29_why_dont_we.html

    • magus_melchior says:

      The entire point of outsourcing/globalization is that the people with the money (big multinationals) get a bigger ROI due to lower cost (cheap labor), while they get to deceive the consumers into thinking they’re getting a better deal.

      That Pandora’s Box was already opened, they’re just doing everything they can to continue the gravy train.

    • kobresia says:

      Yes, most definitely!

      I wonder when it became the norm to have ludicrous markups based on branding, rather than the costs that went into producing an item. Yes, I can understand there are soft costs such as marketing, R&D/engineering, and the like, but $700 “off” on a wristwatch simply based on geographic location? Really?

      What that tells me is that the watches are probably made for about $30 like any other halfway decent quality mass-produced watch, but the branding adds a 2,000% markup. Anyone who pays that MSRP, then, is getting royally ripped-off, because it’s a cheap-ass watch.

      Anyway, I’m not a luxury watch aficionado, so I don’t know exactly why they’re expensive. I kind of figured that being jewel-encrusted was one (rather self-explanatory) source of cost. With a manufacturer like Rolex, I would also assume that a big chunk of the cost is precision machining and assembly by highly-skilled watchmakers in Switzerland, whose time and skills are worth substantially more than an unskilled laborer on a Chinese mass-assembly line.

      I could be wrong about all that, but I just expect more inherent value from expensive stuff, whether it’s labor or materials, and if I pay more than, say, $1,000 for a watch, ever, nothing less than having been licked by a unicorn will suffice in terms of the labor component. Seriously.

  2. Cheap Sniveler: Sponsored by JustAnswer.comâ„¢ says:

    These are not counterfeit goods, so I fail to see the logic.

    • satoru says:

      It’s a bit of a stretch but you could think of it this way. It’s a copyright suit. Thus you can say that a product intended for a specific region has an entirely separate copyright from a product intended for another region. As a copyright holder I can specify which ‘version’ of a product is available in each region. By selling version B, you are violating the copyright, since I only allow you to sell version A where I as a copyright holder am allowing you to sell.

      Here’s an example of how the grey market works. I went to grad school in Electrical Engineering. Those books were easily $100 a pop or more per book! And I needed 10-15 of them each year. However there are ‘international’ versions of the book. They’re usually soft cover, instead of hard cover, but other than that are identical. Oh and the small issue that they’re 50%-75% less. If I were to advertise these cheapo books, the publisher could come down on me saying that those books, though content wise are basically the same, are a copyright infringement and thus I would be in trouble.

      • kc2idf says:

        EE might be a bit of a special case as standards vary by nation, starting with standard voltages and frequencies and then ranging into what might be considered best practices . . .

        . . . but the basics are the same, and the overall fact of identical content tells me that these standards are not part of the text, and, of course, an EE isn’t an electrician, so it’s quite a bit more theory and less practice.

      • salviati says:

        First Sale doctrine does not allow a content creator to restrict the resale of their content, so long as it was done lawfully (i.e. a book publisher can’t tell you not to sell a book you purchased from them later on Amazon). Once you are the owner, you can do what you like with your purchase – read it, loan it, sell it, destroy it, etc.

        There have been court cases regarding leased material (such as software licenses) which have not been afforded this protection. There are also DCMA restrictions on certain types of hacking (such as modding an XBOX) which have not been fully resolved in the courts.

        • Merricat says:

          The real scary thing here is that the loophole Omega is attempting to use here is that the currently held belief in the courts is that First Sale Doctrine only applies to items legally made under the Copyright act (i.e. manufactured in the US) and therefore you have no first sale rights related to anything manufactured outside of the US and imported.

          Next time you are home, do an inventory, and ask yourself, how many things do you own can you prove have been made in the US and thus have the right to resell somewhere without asking permission.

        • Rena says:

          “Once you are the owner, you can do what you like with your purchase – read it, loan it, sell it, destroy it, etc.”
          Tell that to just about every consumer electronics manufacturer in the world.

        • shadypeeks says:

          Tell that to the RIAA

      • The Marionette says:

        I’m not exactly sure about that. I’ve seen a lot of colleges have their “buy back” season where they’ll buy your books from you and depending on the college will buy back any of your books, exception being are books that the college itself happens to print. They’ll even buy back books you’ve got on amazon, etc.

    • QrazyQat says:

      The logic is this: the manufacturers want to be able to screw some people more than others, and they want the law to help them do it.

      For anyone who actually thinks these “anti-grey market” rules make sense, why don’t you line up and have the sales clerk make you pay more than the guy in front and the guy in back of you. Fair? Just as fair as these manufacturers’ attempts to do it on a country by country basis.

      • cape1232 says:

        I think QrazyQat’s description is 100% correct.

        I don’t have a problem with the company trying to charge more in one place than in another. Companies have any number of strategies to “segment” the market so that some people pay more for the exact same thing than others (e.g. coupons, sales, loyalty programs, and less obvious things). They can *try*.

        But they certainly shouldn’t be able to use the law to make it hard/impossible for me to find a way to pay as little as possible. Let’s hope the Supreme Court doesn’t lose their heads (again, like they did with the recent campaign finance decision).

      • Griking says:

        Isn’t this how gas is priced throughout the nation as well? Gas is generally is priced differently based on what part of town you’re in and the stations have no control over it.

        • Firethorn says:

          The problem with the gas comparison is that you’re generally NOT getting an order of magnitude difference in price you’re looking more like a 30% spread.

          Then consider that gasoline is quite heavy for it’s price; different stores are different distances from the refineries, there are different wage levels, premises costs, taxes, etc…

          Generally you see a bigger range of price differences from gasoline taxes than you do from ‘regionalization’.

  3. pecan 3.14159265 says:

    It looks like the authorized distributor in Paraguay distributed them to a company in New York, which then offered them to Costco for a price that Omega did not like. I think it’s partially probably that Omega wants to control the cost of their watches across the board, and isn’t too happy that there are so many hands in the cookie jar. If companies take in less money because Costco needs to offer the watches for less, Omega will make less money because their share from the sale will be smaller.

    • Sanspants says:

      Wouldn’t Omega have already received their share from the first sale to Paraguay? It seems that Omega doesn’t like it because Costco isn’t buying from a more expensive distributor in North America.

      • satoru says:

        It’s an issue for the company on several levels. Firstly it’s a dilution of their brand since they want their watches to sell for a specific price.

        Also you have to think of the problems for other countries as well. If this lawsuit was to be successful, then essentially you’d be demolishing the economies of many 2nd/3rd world countries. If retailers can just buy stuff from authorized sellers in cheaper countries, then why buy from the manufacturer? Omega and other companies will simply stop selling to these countries, which will be pretty harmful to their economies.

        First sale doctrine does not apply here, since the watches are manufactured outside of the USA. Thus, whether they got money from the Paraguay retailer is not relevant from a first sale perspective, since the original buyer was not American. This is why, as said in the article, products made in the USA, sent overseas, then brought back are legal since first sale doctrine has already been applied.

        • Kevin says:

          That makes no sense unless the manufacturer is engaging in a predatory behavior and selling below cost to wipe out the competition.

          If they are selling watches for $15 in Paraguay and the the same watch is $700 in the U.S. then the manufacturer probably is simply making gobs of profit in the U.S. and the watch probably only cost $3 to make in China.

          Luxury goods my heiney.

        • Erik Hughes says:

          How does first sale even matter in this case? They legally bought the genuine watches in another country and sold them in the US. I don’t even see how a copyright claim could be involved.

    • SonarTech52 says:

      But wasn’t Omega already paid for the watches by the distributor in Paraguay?

      “Customers benefit, because goods are generally priced cheaper abroad than in the US.”

      To me, it’s looking like they just want to charge Americans more money..

    • SBR249 says:

      That’s not entirely correct, it’s more like one of the following reasons:

      1) Omega doesn’t want to cheapen the brand. For the same reason that you’ll never find a Rolex Outlet or a Hermes handbag at Kohl’s, some brands do not want discounters to tarnish their image. Otherwise, luxury good consumerists will balk at paying top dollar for their products.

      In this case, when compared to the standard of living in a developing country, $50 might be an appropriate price point for luxury brands like Omega, but here in the US, $50 would be the price of a crap brand from KMart. That’s why these companies charge vastly different MSRP for the same stuff based on geographical region.

      2) Many of these brands have established sales channels and retail networks. That’s how they control price, availability, brand image, and advertising campaigns. By skirting these channels, discounters flout efforts by these companies to control how, where, and when their products are sold.

      On the flip side, many luxury goods companies will only honor warranties from authorized dealers and distributors. By selling products without prior approval or knowledge of the manufacturers, these discounters potentially deprive consumers of warranty protection without their knowledge.

      • Damocles57 says:

        Except for some electronics products, Costco’s cash back/return policy on products they sell far exceeds anything the original manufacturer offers.

      • Merricat says:

        Regardless, I know of no law in any sanely governed country that requires us to to price a companies merchandise in a manner pleasing to them after the goods have already been purchased from them. They MAY have distribution agreements with companies which govern who those companies sell to and for how much, but they do NOT have any similar agreements or protection to anyone past that point.

        They used to try this with trademarks, it’s sad that they’ve decided to try to subvert copyrights as well.

      • quail says:

        That’s a good point. When K-Mart bought Sears, Nike left Sears. They didn’t want to be part of the K-Mart image.

  4. ubermex says:

    It’s a physical object sold legitimately to a distributor. You don’t get to be picky about where your product goes once you sell it.

    • madmallard says:

      Unless there is a purchasing agreement in place already with another distributor in the country of interest.

      then it becomes grey market bootleg.

      • ubermex says:

        Yeah, that’s the only way I can see it being valid, if the distributor is paraguay agreed to a minimum price, but then that still doesn’t apply to costco and target, since they have agreed to no such thing. This would be between omega and the distributor that sold them too cheap, since costco very likely isn’t a party to any kind of distribution contract.

    • ludwigk says:

      Unless it’s a copyrighted good, in which case the sales and importation rights are statutorily protected under 17 U.S.C. § 101 et seq.

      The controversy in the case is whether Omega can assert these copy protection rights when the copyright is incidental to the goods being sold.

  5. Underpants Gnome says:

    How is this a copyright issue? No copying took place. If anything it’s a import tariff issue, but if no import restrictions exist, then it sounds like a pretty clear cut case of the First Sale Doctrine. (IANAL)

    • cyberpenguin says:

      Maybe the watches were license and not sold.

      Then, like software, First Sale Doctrine doesn’t apply (http://www.groklaw.net/articlebasic.php?story=201009101658045).

    • ludwigk says:

      The fact that you would say “clear cut case of the first sale doctrine” makes it evident that you are not familiar with intellectual property law. The first sale doctrine is notoriously ambiguous and unpredictable in application. Scholars and judges struggle with the concept.

      If a case has appealed all the way to the supreme court, and the Court grants cert, and you still don’t see the controversy, it is safe to assume that you don’t understand the controversy. I don’t mean this in a derogatory way. SCOTUS cases are often not about the events that happened in a particular case, but the application of some principle of law that has received inconsistent treatment from the various federal circuit courts. The Court intervenes in order to (theoretically) provide guidance in order to make cases of this type easier to adjudicate in the future.

    • Billy says:

      Copyright Act covers a lot more than just copying. It gives the authors of copyrighted works the exclusive right to reproduce, distribute, perform, display, license and prepare their work. Some of those exclusive rights are cut short after “first sale”. This case is about exclusive rights to distribute. After reading about this case, it seems like the issue is whether a first sale in a foreign country counts as a first sale.

      http://topics.law.cornell.edu/supct/cert/08-1423

    • ludwigk says:

      [IANAL] To be a bit more germane, Copyright law includes importation rights, and the ability to have some control over how your goods are sold in a particular market.

      So two cases that I think are instructive:

      QualityKing – QK sold shampoo manufactured in the U.S. in both the U.S. and Europe. In Europe it was much cheaper, so a lady bought a bunch of it and sold it in the US. QK claimed the copyright on the bottle allowed them to control distribution, and therefore selling it in the US violated copyright. The Court held that people aren’t buying the bottle design, they are buying shampoo, and that the goods were mfr’ed in the U.S. so there was no legitimate reason to differentiate sales prices in this way. First Sale had occurred.

      Pearson – Publisher of textbooks charges significantly more for books in U.S. Poor students go buy them in Europe and use them here. Company asserts that books in EU are of lesser print quality and intended for markets with lower average income, and that books are not made in the U.S. Court agrees and prohibits their importation. First sale does not apply to goods made outside the US.

      So some of the factors here are:

      Buying goods for copyrighted portion, or some other aspect?

      Omega slaps a copyrighted logo on the watch. Are we buying a watch, or a logo on a watch? Do consumers want both?

      Legitimate reasons to separate markets? Quality? Income?

      Goods made in US? Made elsewhere? Omege watches are made outside the U.S.

  6. Michaela says:

    Woah! All I can think of now is how much I want a discounted Omega watch…

    I don’t really get how this is a copywright issue though. It seems like an attack against price discrimination.

    • Awesome McAwesomeness says:

      Or just plain old price fixing.

      • Michaela says:

        Price fixing = everyone agrees to sell at the same price
        Price discrimination = company sells identical item at different prices to different groups to maximize profits

        I think it is more discrimination that fixing.

  7. MMD says:

    If I buy a book from a retailer and then resell that book through eBay or a yard sale, no one can stop me because once I’ve made the purchased, it’s my property to keep or sell. Aside from the volume of items being purchased and resold, how is this different?

    • cyberpenguin says:

      Maybe for books, but don’t do it for software.

      http://www.groklaw.net/articlebasic.php?story=201009101658045

      • satoru says:

        Software is a bit different since they tried to make the first sale doctrine meaningless by saying software wasn’t an actual product, but a license.

        For books though, a publisher of a book can come after your ass in a heart beat and be successful in suing you if necessary.

        • MMD says:

          For reselling the physical book?
          Thousands of brick-and-mortar used book stores and online resellers prove you wrong…

      • MMD says:

        I didn’t use software as an example for a reason…

    • Billy says:

      The facts are a little different here. From http://topics.law.cornell.edu/supct/cert/08-1423:

      Omega appealed the District Court’s decision. See Omega v. Costco, 541 F.3d at 984. Omega based its argument on the fact that Section 109(a) of the Copyright Act, also known as the “first sale doctrine,” allows resale of copyrighted goods by the owner of a particular copy only when the copy was “lawfully made.” See id. at 985. Omega claimed that the products in question were not “lawfully made” because they were manufactured and first sold outside the United States. See id.

      Costco, on the other hand, claimed that the “first sale doctrine” defense applied to goods manufactured both domestically and overseas. See id. at 984, 987. Costco cited Quality King Dist. Inc. v. L’Anza Research International, Inc. for support, in which the Supreme Court reasoned that the first sale doctrine applied to goods that were manufactured in the United States, exported abroad, and then imported and resold without authorization back in the United States. See 523 U.S. 135, 145 (1998).

      • Erik Hughes says:

        >Omega claimed that the products in question were not “lawfully made” because they were manufactured and first sold outside the United States. See id.

        This is just plain dumb. Omega made the products themselves! How could they not be ‘lawfully made’?

  8. RickinStHelen says:

    I thought these were Gray Market items. Generally if you buy a gray market item, there is no warranty attached as the item was designated to be sold elsewhere, and the diversion or reimportation of it into a non agreed market area voids it. But not really a copyright problem.

    • PatrickPortland says:

      I ran into something similar with Swiss Army because I didn’t buy my watch from an “authorized” retailer. Live and learn…

    • huadpe says:

      Omega is filing a lawsuit that would allow them to abolish that grey market. There’s a reason this is getting as far as the supreme court.

  9. FilthyHarry says:

    I fail to see the manufacturers legal standing AFTER they’ve sold the product.

    I know if this were a case of corp vs people, the people would lose in the end because our justice system has always show its preference for preserving the economical status quo over justice. However it being corp against corp does it come down to who has the better lobbyists?

  10. jessjj347 says:

    We need the freedom of goods like in the EU…

  11. jim says:

    it is all about brand dilution. The strength of a brand allows a company to charge more for their products. Stuff like this weakens the brand so naturally companies want to stop it.

    • Loias supports harsher punishments against corporations says:

      They sold it to an authorised distributor- didn’t they do it to themselves?

  12. Loias supports harsher punishments against corporations says:

    Companies sent jobs overseas – I expect to be able to reap those rewards by purchasing those manufactured goods at prices commensurate with the wages paid to produce them.

  13. infected says:

    Open up that free market some more, baby!

  14. Robert Nagel says:

    Just wait ’til they try to get warranty repairs. No way. Rolex has the same problem. They try to split their market by making the big bucks in the US and smaller profits elsewhere. A gray market Rolex is significantly cheaper. However, the warranty is usually provided by the seller rather than the maker. On the plus side they give a longer warranty anyway.

  15. sir_eccles says:

    Gray imports can be tricky. In many cases while the gray imports may superficially look the same as the authorized version there can be some subtle differences that account for local taste or expected quality. When that import doesn’t live up to the customer’s expectation then the brand image is hurt.

    Simple example: Cadburys chocolate made in the US by Hershey is a very different taste to that made by Cadburys in the UK.

    • jamar0303 says:

      As for the first point- for that big a discount I wouldn’t be complaining. That and typical Costco shoppers probably aren’t going to care about minor differences like that.

      As for the second point- I hate the US-made Cadbury stuff, so why shouldn’t the option be freely available to those who want it?

  16. pawnblue says:

    Another example of the overuse of copyright law. There’s no copyright issue here. It appears to be entirely based on the rights of manufacturers to control distribution chains.

    Hopefully the supreme court will knock this out in the name of good sense, but there is a possibility that they won’t. They will actually be limiting your choice on where you can purchase goods from.

  17. Bob Lu says:

    It is not “They don’t want [...] encourage retailers to buy their products overseas and sell them to U.S. consumers [..]“, but they don’t want the retailer to skip the authorized distributor.

    • Robert Nagel says:

      True,
      The authorized distributor is paying for US advertising at US rates, not Paraguayan advertising at Paraguayan rates.

  18. Tim says:

    First-sale doctrine, anyone?

  19. Oranges w/ Cheese says:

    As you might imagine from all the region coding and other location based stuff that gets tacked on tot DVDs and software, this lawsuit is freaking out the entertainment industry. They don’t want a ruling that would encourage retailers to buy their products overseas and sell them to U.S. consumers for huge discounts.

    Then sell your product at a reasonable cost, and stop complaining. Seriously.

  20. Floppywesl says:

    I would love to pick up a PO xl for 700 less but grey market watches are a nightmare to get serviced.

    • David in Brasil says:

      For $700 you could buy a lot of service.

      If the product were valid (not a Chinese copy) anyway, what are the chances that it would need warranty work? I’m willing to take that chance.

    • Rose says:

      No, they’re not. We used to send watches from all over the world back to Omega for specific repairs, and we used to order parts to repair Omega watches ourselves.

      You may not get the 3-year-warranty, but you probably wouldn’t use it, anyway, because they’re really good watches. By ‘we’, I mean a small, locally-owned jewelry store with no ties whatsoever to Omega, aside from having a basic parts account that anyone could open.

  21. Macgyver says:

    Omega sold to an authorized distributor in Paraguay.
    That means Omega has no say over the product, because they already sold it, it’s not theirs anymore.

    • Scorps1 says:

      Nope. Goods are purchased by means of a contract which frequently spell out conditions of the sale which stipulate terms such as how merchandise can be displayed, advertised, and at what price they can be sold.

      A condition of the sales contract may have stipulated that the goods cannot be sold out of the country.

      Occasionally we sell items that have had the manufacturers name removed and we cannot advertise it. Nitendo used to stipulate the minimum price at which it’s products could be offered.

      Sometimes defective goods can be returned for credit, most of the time they can’t. Sometimes a discount is given on the purchase order to cover claims.

      A major retail chain sells furniture that lists manufacturer’s warranties. In reality the warranty is backed by the retail chain and as a result it receives a discount on cost.

      The average consumer thinks a retailer can just send defective goods back to the manufacturer…. This is just often not the case.

      • gman863 says:

        A major retail chain sells furniture that lists manufacturer’s warranties. In reality the warranty is backed by the retail chain and as a result it receives a discount on cost.

        Stop the redaction! I used to be a local ops. mgr. for an Ashley HomeStore franchise group.

      • Erik Hughes says:

        >A condition of the sales contract may have stipulated that the goods cannot be sold out of the country.

        Yes, and if Costco went to that country and bought them legally, they are not a party to the contract that bound the seller. I don’t even see how the seller could get in trouble, since they did sell the item in the country that the contract specified.

  22. Gravitational Eddy says:

    I never really understood this marketing at different times/different places in different countries.
    Like the recent Ipad spectacle….right now I can go to Walmart and buy any of the four models.
    And all of them are in stock.
    But just go to Ebay and check the international and yes even the US auctions for the Ipad.
    It’s unbelievable how many sales there are, and how much money is turning over.. You would think there’s a sellers market going on, hello? they are in stock at Target, Walmart, other places.

  23. bruce9432 says:

    Copyright is a shady law at best, do you ever notice that it always gets extended right before the copyright on Mickey Mouse is about to expire

  24. TooManyHobbies says:

    This has been going on for decades in the camera industry. Lots of really cheap prices online (and before that, in mail order) are “grey market” – cameras, lenses and the like purchased by the pallet, usually in Japan or elsewhere in Asia close to manufacturing, and sold in the US.

    The downside to the customer is that there is generally no U.S. warranty so the only source of repairs is to ship back to the place you bought it from and hope they honor the warranty, or pay full price for the repair from the manufacturer.

  25. Portlandia says:

    This is why when I was in Argentina a couple years ago I bought about 10 LaCoste shirts. In the US they sell from $59 – $99 USD. In Argentina they sell from $39-$99 ARGENTINIAN Pesos. THEN, there were 3 Pesos to 1 US Dollar. I bought them all for about $15-30. So, when you ask me about this…F**K Omega.

  26. jiarby says:

    My large format printer (64″) is MFG’d in Japan. The company had a USA Subsidiary that sells them here in the US and handles tech support and service.

    The hitch is that the US Subsidiary does not sell direct to the pubic, only through an authorized dealer network.

    If I need a replacement part (my printer is no longer in warranty) I have to buy it from an authorized dealer. Consequently my part gets marked up when the AMERICA subsidiary imports it from Japan, then gets marked up again by the Authorized dealer.

    Because of the miracle of the internet I can find a non-US dealer that buys direct from Japan and drop ships it direct to me… Resulting in a $800 part being reduced to $300. Same OEM Part.

    This is the same issue the pharma people have. AIDS medicine costs a fraction of its US Price in other countries, causing US people to want to import it themselves rather than buy at Walgreens.

  27. jp7570-1 says:

    Costco may be acting like a gray market retailer, at least for items such as high-end watches like Omega. If you buy one at Costco, you will probably not be able to get it serviced at an authorized service center in the US, at least for warrant work. (Yes, every so often a high-end wtach will need service during its warranty period.) Because your watch’s “warranty” won’t be honored in the US, the extra amount you have to spend could negate any savings you had at purchase. You might get lucky and not need service during the 1 to 2 year warranty period, but that’s a calculated risk.

    Costco may claim they are buying from authorized sources outside the US, there really is no guarantee you are actually getting a 100% genuine item. Counterfeiting is a billion-dollar industry so be sure you can tell the difference between a real Omega (or IWC or Breitling or TAG or whatever) and a fake.

    Here’s one easy way – if a watch is an automatic with a mechanical movement (as most high-end Swiss watches are), the seconds hand will sweep smoothly across the dial. If it jumps forward each second, it is most likely a quartz or electric movement. That’s a fake. If it has a link bracelet, look at the links themsleves. A real Swiss watch will have solild metal components in the links. A counterfeit will likely have rolled-metal parts in the links with a visible seam – these will come apart, pinch your skin, and are an inferior and cheaper construction process.

    So if you see a watch at Costco that you’d like to buy, first go to the watch manufacturer’s website. Some specifically state they do not sell online or at unauthorized retailers. Some will also list their authorized US retailer locations. In some cases, Costco may indeed be a legitimate authorized retailer. If so, you are probably okay.

    Caveat emptor.

    • H3ion says:

      Uh, that may not be right. The second hand on my Rolex moves in increments rather than smoothly. It is not electronic. And it is genuine. It was purchased from a Rolex dealer in Geneva.

      My son’s “Rolex” on the other hand, cost $25 on Seventh Avenue and the second hand moves smoothly.

    • Happy Tinfoil Cat says:

      My friend bought a Cartier hi-qual knockoff in HK. Years later, he took it to an expensive jeweler to get the thing fixed. When he picked it up and asked for the bill, the jeweler replied, “Oh Sir! We NEVER charge for service of a Cartier.”

      I think it may not be so hard to get service of a luxury item, especially when they think you are buying more.

  28. Pax says:

    ….. has the entire Court system forgotten the DOCTRINE OF FIRST SALE …?!?

    Copyright is not “price control”, copyright is “right to control the making of copies”.

    • NeverLetMeDown says:

      No, it hasn’t forgotten the doctrine of first sale. Doesn’t it cross your mind that, if the Supreme Court granted cert on this, the issue might just be a teeny bit more complex than you’d assume?

    • Merricat says:

      The real scary thing here is that the loophole Omega is attempting to use here is that the currently held belief in the courts is that First Sale Doctrine only applies to items legally made under the Copyright act (i.e. manufactured in the US) and therefore you have no first sale rights related to anything manufactured outside of the US and imported.

      Next time you are home, do an inventory, and ask yourself, how many things do you own can you prove have been made in the US and thus have the right to resell somewhere without asking permission.

  29. seandavid010 says:

    Any WIS out there knows that you’re never supposed to pay retail for a new watch. If you’re not getting a 30-35% discount, you’re paying too much. Remember, buying a watch is like buying a car – go in with a number in your head and don’t be afraid to walk out (or play two dealers off one another.)

    Now, let’s assume we’re talking about a 45mm Seamaster Planet Ocean (the watch pictured in the post) getting a 30% discount on the retail price of that watch (~$2,700) is MORE than the $700 discount Amazon was offering.

    I guess that’s why I have a problem with this. Omega must know that authorized dealers are wheelin’ and dealin’ – but they have a problem when Amazon does the same thing without haggling. Huh.

  30. Merricat says:

    The real scary thing here is that the loophole Omega is attempting to use here is that the currently held belief in the courts is that First Sale Doctrine only applies to items legally made under the Copyright act (i.e. manufactured in the US) and therefore you have no first sale rights related to anything manufactured outside of the US and imported.

    Next time you are home, do an inventory, and ask yourself, how many things do you own can you prove have been made in the US and thus have the right to resell somewhere without asking permission.

  31. H3ion says:

    There’s also a question as to whether the distribution agreement actually constitutes a sale to the Paraguayan company or only the ability to redistribute the watches to a particular market. If title actually passed to the Paraguayan company, it should make little difference whether they sold to a New York wholesaler or to Costco directly. It may be a violation of their distribution agreement but not necessarily a copyright violation.

    The mail order camera stores in New York used to sell 35 mm film in bricks. I think there were 20 rolls to the brick. The price was well below half of the price charged by camera shops. The film was gray market, intended for sale in Europe, and the instructions were in multiple languages, but it was the identical film, same speed, same grain, same everything. If I recall correctly, there were some suits brought by Kodak and others. Since the practice is still going on (for those of us who still use film), I guess Kodak didn’t win.

  32. JonBoy470 says:

    This seems pretty cut and dried to me. Costco is legally purchsing the watches in Paraguay. The only leg Omega could stand on is if Costco is advertising themselves as an authorized distributor of such watches. So long as Costco is truthfully portraying the warranty status of their wares, then Omega can pound sand.

    I have little sympathy for makers of luxury goods who foist goods ordinary items on the public for orders of magnitude higher profit margins.

  33. Damocles57 says:

    This is about Omega (and Rolex and Hermes and any “exclusive” manufacturer) protecting their distribution channels and pricing metrics in what used to be distinctly different geographical markets. The internet has thrown this concept out the window.

    What each of these manufacturers wants to do is to price their products to the income or social strata in any unique market. If Rolex wants to cater to the upper 5% of people with regard to wealth, this wealth range will vary depending on the financial strength of the particular market. There will always be arbitrage opportunities for people or companies who want to take advantage of the price differences between different markets.

    What exclusive manufacturers don’t want is to have their products available to a large percentage of the “great unwashed” in different markets. If I want to feel superior to you by wearing an Omega watch that cost me $2000, how dare you find a way to wear the same watch that cost you only $1200. You shouldn’t be able to afford the same mix of products that I buy. I pay Omega and Rolex to provide exclusivity in their products and if they can’t do it, I’ll find someone who can.

    The goal of wearing Hermes scarfs/ties or Rolex watches or driving a Rolls Royce is to make sure you see that I am different (and better) than you and that I can afford these economic and social indicators and you cannot. It makes my place in the social order known to you and to others with me having to state it overtly to every stranger who will look at me. If you can make the same statement at a lower cost, then how can I feel superior?

    This isn’t about making a reasonable profit from making and selling a needed product to the broadest group of people who might defive a reasonable benefit. Omega is defending their “right” to sell their products to the “right” people in the “right” social strata in each geographical market.

  34. Happy Tinfoil Cat says:

    Paraguay is one of the poorest nations on the planet. From there to the sleezeball pit in the Bronx to a bulk warehouse club. Laugh. The half-starved people in Paraguay have no use for a bloated symbol of avarice.

  35. bearymore says:

    Now they’re going after physical goods. Just a few weeks ago, it became impossible to buy ebooks from sites outside the US, thanks to our friends in the the publishing industry.

  36. Ken V says:

    Could this not be considered price-fixing if these manufacturers do not get their way?

    • gman863 says:

      I’m still trying to figure how some manufacturers (like Bose) get away with price-fixing their merchandise.

      If you want a given Bose system, it’s $1999 – no matter if it’s at Macys, Best Buy, Sears or Fry’s.

      “Minimum Advertising Pricing” (MAP) only set a limit on the minimum price an item can be advertised at. This is why many web sites such as Amazon make you “add to cart to see savings” – a loophole around posting a sale below MAP.

      Bose, however, is clear: If you sell it below our fixed price, we drop you as a dealer.

  37. Levk says:

    So… Instead of making some money the companies decide to make no money? Yea that makes sense if places cant buy the stuff cheaper and offer em cheaper then customers will buy less making the company that owns product not sell as much unit and meaning that they produce less making less money >> seems like companies do not want to make money anymore

  38. archer117 says:

    Hooray for the free market! Manufacturers’ shouldn’t be able to use copyright laws to restrict where and for what price their products are sold. And the same goes for the region coding on DVD’s.

  39. technologiq says:

    This is how Costco has done business for a while to get one-off items so cheap. Its also why they will offer their own FREE watch servicing if you ever need help with that watch.

    That said though, I bought a Tag Heuer at Costco a few years ago and had to have the battery replaced the second year. Tag didn’t blink an eye at fixing the watch under warranty.

    While they’ve become authorized distributors for many products now, they still need to do stuff like this to keep stock and keep business going.

  40. Extended-Warranty says:

    I like saving money as much as the next person, but this practice NEEDS TO BE MADE ILLEGAL. Everyone needs to get off this mentality that cheaper is always better. We’ve already destroyed profit margins enough with the internet and mega discounters. This has contributed to the economy that we are in. We don’t need to make it worse.

    I’m intrigued as to why they went after copyright here. There seems to be many other laws violated here. For one, it is incredibly monopolistic. If Costco has a contract to buy from the company on Paraguay, what retailer, be it small or large, can buy (and sell) the same goods for the same price?

    Seriously, say this gives the green light to these kinds of practices. Do you think this will in any way positively impact jobs? I agree we need to tackle the issue of outsourcing jobs, but doing this won’t help anything.

    • Damocles57 says:

      One of the main principles of economics is to maximize value while minimizing costs. So, yes, less-expensive is better. If not, then every manufacturer and supplier should look for the highest cost inputs and pass these costs on to the final consumer to make overall sales and profits and taxes larger. But they don’t, do they? They look for the least cost suppliers of their inputs and look for the highest prices they can charge to sell their final products.

      The idea of artificial scarcity and manipulated pricing being forced on consumers so businesses and governments can squeeze excess revenue from an already over-taxed consumer base is not the best business model for consumers to buy into. I don’t necessarily fault the business/governmental/industrial complex for trying all the things they do. I do question the sheer number of consumers who seem to fall for the traps set before them without learning from their mistakes.

  41. GriffonJames says:

    About 10 years ago, I bought my new Honda from a Canadian dealer and had all the appropriate inspections done so that I could register it in my home state, Massachusetts. Saved several thousand dollars. But when the car had a mechanical problem, I had to drive it back to the nearest Canadian city to get it serviced under warranty. The US dealers did not honor the Canadian warranty.

    I went into the deal knowing that I wouldn’t be able to go to a US dealer for warranty issues, and I chose to save the money, betting that the Honda brand generally performs well and usually won’t need warranty service. I think I broke even, after taking into account needing to take a vacation day from work to drive up and back to Canada for that service. Would still do it again, if the price difference and exchange rates were similarly advantageous.

  42. chaquesuivant says:

    Next, Omega – or rather the conglomerate that owns Omega, the Swatch group – and other watch makers will include a EULA with their watches (this is rumored actually) that bans the buyer from ever selling the watch for less than the price they paid. Good luck enforcing that, morons.

    Also, I’ve heard they’re lobbying eBay to ban sales of used, even Vintage and collector watches, using copyright and trademark reasons. Supposedly they will pay eBay at least some of the lost listing fees to accomplish this, but they’re also lobbying law makers for a better solution than simply bribing eBay.

    A friend of mine heard this from his boyhood pal Michael Medved – who of course thinks this is a wonderful idea.

    What is it with these so-called neo-cons? They claim to be against ‘big gubment’, yet they think shit like this is a great idea.

    Oh…another thing…the little bitch Gene Simmons of ‘Kiss’ is also a neo-con and is great friends with Medved. They are also in the same Fantasy Football team together and Medved even insists on calling his 16 year-old house-boy, Pablo, ‘Genezy’, in honor of Simmons. Yes – Medved has a houseboy named ‘Pablo.’ Think of Hank Azaria’s character in ‘The Birdcage.’ (The kid totally creeps my friend out.) Simmons in turn named his new Bentley ‘The H.M.S. Medved.’ Rich people are strange.

  43. TampaShooters says:

    So an authorized dealer in Paraguay got authentic Omega watches for cheap, and sold them to another retailer for cheap, but Omega doesn’t want Americans to buy them cheap so they are complaing about American getting a deal?