Unauthorized Distribution – Tracking Stock Lots to Authorized Factories
For brands manufacturing product overseas, it is not uncommon for stock lots to make their way into the wholesale market. In any production run, there may be excess product made over and above what was specified in the Purchase Order (PO) from the brand. If the factory (or broker with close factory connections) starts selling this excess into the wholesale marketplace, this has the potential to create an unauthorized secondary distribution channel. Such goods may be referred to as gray market or parallel goods. Such stock lots are offered & available every day online if you know where to find them – and Vaudra does.
As a result of Vaudra’s market resources, the client learned of an assorted stock lot of 100,000+ units of their product offered in the online wholesale marketplace. Based on the initial details, the client recognized these products as theirs and was concerned that an authorized manufacturer was involved. Further evidence was necessary to verify this possibility and evaluate options to hold the factory or other related parties accountable.
In contacting the broker undercover, Vaudra started discussions to negotiate a purchase for part of the stock lot. During this process, we obtained product samples. The client was able to authenticate the samples and confirmed they were genuine articles, which warranted further investment in a larger purchase. Through dialog with the broker and related investigation, Vaudra obtained valuable details on the stock, involved parties and movement of goods between countries. After negotiations and purchase, we compiled evidence that enabled the client to hone in on the factory at issue. As regularly done on these kinds of cases, the entirety of this investigation was completed from Vaudra’s North Carolina office, without the need to involve an overseas investigator (saving the client time & money).
The client was able to confront their factory, using the evidence obtained from the investigation. As a result, the client penalized the factory for its transgression, which also created a deterrent against future similar situations.