Hyundai Construction Equipment USA Inc, the North American sales arm of Korea's Hyundai Heavy Industries Co, on Thursday sued to stop a Michigan company from selling what Hyundai calls inferior, gray market machines.
The suit asks US District Court judge Harry Leinenweber in Chicago to permanently enjoin a Macomb Township, Michigan equipment dealer from selling machines which, while they are made by Hyundai in South Korea, don't meet US emissions and safety standards and aren't meant to be sold here.
"We don't know whether this is the tip of the iceberg or not," said plaintiff's attorney Fredric Mendelsohn of Chicago.
"This is the first time there's been an issue," he said.
The suit names as a defendant Chris Johnson Equipment Inc.
Reached by telephone at his business, Johnson said he had not yet seen the complaint and declined to talk about the case.
While this is Hyundai's first gray goods lawsuit, the issue isn't new in other US industries. Computer maker Hewlett-Packard Co in March announced partial settlement in an US$8.6 million gray market suit it brought against a Tennessee reseller.
Five years ago, Hewlett-Packard helped found the Alliance for Gray Market and Counterfeit Abatement in San Jose, California. Other members include Cisco Systems Inc and 3Com Corp.
More recently, a federal appeals court overturned a US International Trade Commission ruling that would have blocked US sales of harvesters made by Deere & Co for the European market.
Alliance secretary Marla Briscoe said in a telephone interview that gray market trade was also prevalent in the auto, pharmaceutical and cosmetic industries.
"It's really based on supply and demand," Briscoe said. "Where there is demand for these products and a dollar to be made, you'll have secondary mar-kets springing up."
Sales of gray market technology generates more than US$40 billion in annual revenue, according to the alliance's Web site.
Consumers sometimes are unaware that they are buying gray market goods until they contact the company seeking warranty service and discover that their purchase came from an unauthorized dealer, Briscoe said.
She added that alliance mem-bers had been combating the illicit sales through covert investigative work, tracking newspaper ads and Internet sales.
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