In a split decision, the United States Supreme Court has upheld an appeals court ruling that found Costco Wholesale Corporation had violated U. S. copyright law when it sold Omega Seamaster wristwatches well below retail price without Omega’s permission.
The practice employed by discounters and off-price retailers of buying imported luxury watches and other products from middlemen and selling them at lower prices is referred to as grey market trading.
Omega argued successfully that it could use the copyrighted logo on its watches to block their sale. For Omega, the decision was a victory as it upholds their right to control the distribution, price and resale of its products.
The Swatch Group and Omega commend the decision as it provides a legal mechanism to help control the spread of grey market trading. According to an analysis conducted by Deloitte LLP for Bloomberg in 2009, the grey market costs manufacturers as much as $63 billion per year.