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Gray marketing, the selling of trademarked products through [#permalink]
21 Mar 2005, 17:50
Gray marketing, the selling of trademarked products through channels of distribution not authorized by the trademark holder, can involve distribution of goods either within a market region or across market boundaries. Gray marketing within a market region (â€œchannel flow diversionâ€
1. Which one of the following best expresses the main point of the passage?
(A) Gray marketing is unfair to trademark owners and should be legally controlled.
(B) Gray marketing is practiced in many different forms and places, and legislators should recognize the futility of trying to regulate it.
(C) The mechanisms used to control gray marketing across markets are different from those most effective in controlling gray marketing within markets.
(D) The three trademark law theories that have been applied in gray marketing cases lead to different case outcomes.
(E) Current theories used to interpret trademark laws have resulted in increased gray marketing activity.
2. The function of the passage as a whole is to
(A) criticize the motives and methods of those who practice gray marketing
(B) evaluate the effects of both channel flow diversion and parallel importation
(C) discuss the methods that have been used to regulate gray marketing and evaluate such methodsâ€™ degrees of success
(D) describe a controversial marketing practice and evaluate several legal views regarding it
(E) discuss situations in which certain marketing practices are common and analyze the economic factors responsible for their development
3. Which one of the following does the author offer as an argument against gray marketing?
(A) Manufacturers find it difficult to monitor the effectiveness of promotional efforts made on behalf of products that are gray marketed.
(B) Gray marketing can discourage product promotion by authorized distributors.
(C) Gray marketing forces manufacturers to accept the low profit margins that result from quantity discounting.
(D) Gray marketing discourages competition among unauthorized dealers.
(E) Quality standards in the manufacture of products likely to be gray marketed may decline.
4. The information in the passage suggests that proponents of the theory of territoriality would probably differ from proponents of the theory of exhaustion on which one of the following issues?
(A) the right of trademark owners to enforce, in countries in which the trademarks are registered, distribution agreements intended to restrict distribution to authorized channels
(B) the right of trademark owners to sell trademarked goods only to those distributors who agree to abide by distribution agreements
(C) the legality of channel flow diversion that occurs in a country other than the one in which a trademark is registered
(D) the significance consumers attach to a trademark
(E) the usefulness of trademarks as marketing tools
5. The author discusses the impact of gray marketing on goodwill in order to
(A) fault trademark owners for their unwillingness to offer a solution to a major consumer complaint against gray marketing
(B) indicate a way in which manufacturers sustain damage against which they ought to be protected
(C) highlight one way in which gray marketing across markets is more problematic than gray marketing within a market
(D) demonstrate that gray marketing does not always benefit the interests of unauthorized distributors
(E) argue that consumers are unwilling to accept a reduction in price in exchange for elimination of service
6. The authorâ€™s attitude toward the possibility that the courts will come to exercise consistent control over gray marketing practices can best be characterized as one of
(A) resigned tolerance
(B) utter dismay
(C) reasoned optimism
(D) unbridled fervor
(E) cynical indifference
7. It can be inferred from the passage that some channel flow diversion might be eliminated if
(A) profit margins on authorized distribution of goods were less than those on goods marketed through parallel importing
(B) manufacturers relieved authorized channels of all responsibility for product promotion
(C) manufacturers charged all authorized distributors the same unit price for products regardless of quantity purchased
(D) the postsale service policies of authorized channels were controlled by manufacturers
(E) manufacturers refused to provide the â€œextended productâ€
Here're my answers and the explanation follows.
It was a tough one, took me a greater part of 5 minutes. Real bad one. Writing explanations has taken over half an hour
1. (A). Discussion clearly was on the losses to trademark owners (begining of para 2) and the legal ways to battle it. B has a wrong second half. C is not mentioned in the paragraphs. D is out of scope. No "case outcomes" have been discussed. E is clearly wrong (the laws have failed to curb the gray markets, not increased - besides one of the law is capable of controlling them).
2. (D) A is wrong (motives are not discussed). B is wrong because channel flow diversion iis the generic term for both market in market and parallel importation, C is not true because the three theories have been discussed only for parallel importation cases and not general gray markets. D is a generic statement, and is true. (though the word "controversy is not used, it does describe conflicting viewpoints over gray market practices). E is wrong because no economic factors have been discussed.
3. (B). Comes directly from the statement "Equally important, authorized distributors may cease to promote the product if it becomes available for much lower prices through unauthorized channels"
4. (A). This is because (a) Territorial and exhaustion differ only in the country in which the product is registered, and (b) Exhaustion rules out rights after the sale from trademark holder to distributer, while territorial makes no distinction. Since both these aspects are covered in (A) hence this option.
5. (B) Seemingly pretty straightforward. A, C, D and E are all not mentioned in the passage.
6. (C). Since there's no enthusians or a lot of emotion involved, options B and D can be ruled out. Since there's no sarcasm or cynicism in the passage, option E is out too. Since the author does have hope that one law does protect gray marketing, resigned tolerance is also ruled out.
7. (E). This is because A is almost unfavorable to authorized distribution, B makes no difference to avoiding gray market (non-promotion is a symptom of gray market, not a cause - so tackling a symptom doesn't remove gray marketing), C makes no difference at all, D, like B is an effect of gray markets - auth dealers would refuse to promote or post sale serve the customers if the gray markets continue to eat into their profits - taking them into the manufacturer's prerogative is almost like opposing the auth distributers themselves. E almost ensures that the consumers would not buy the gray market products, knowing they'd not get "Extended product" support.
5th question was a bit tricky for me. One of the choices, B, makes a reasonable generic statement on what goodwill is, but in the passage the author seems to calls out goodwill to be the aspect of losing favor with customers if there was no service even if the prices were low. So, picking the specific option here.
"...since such practices clearly jeopardize the goodwill established by trademark owners: consumers who purchase trademarked goods in the gray market do not get the same â€œextended product,â€
hmm....# 5 was difficult....I was torn bet B and E....author seems to be saying that the customer suffers becose of no service, but we still can't assume that customer is not willing to pay less as discussed in "E", but again "B" says that most harm is to the manufacturers but I gathered that the author seems to be saying that the loser in this deal is the customer.