The ravages of the ongoing recession have been creating unwanted incentives for distributors and original equipment manufacturer (OEM) customers of General Electric's lighting and industrial products businesses to deal more in the gray market. The often opaque nature of gray market transactions also increases opportunities for counterfeit products to enter the sales channel. In response, the company is taking steps to discourage its partners from buying from or selling to unauthorized sources.

In a letter to authorized distributors last month, the company announced changes to its OEM agreements and distributor special price agreements (SPAs) designed to ensure when customers buy from authorized distributors they can have confidence that the product was procured from the manufacturer.

The letter was sent by Gary Arnott, general manager for North America Industrial Sales for what was GE Consumer & Industrial, Louisville, Ky. In it, he outlined three new policies designed to raise the visibility and trackability of products in the channel:

“First, we are going to begin serializing breakers and creating databases that will allow us to track products we sell. This costly change greatly improves our ability to identify counterfeit products and trace any quality assurance concerns. Also, this change helps us ensure that GE products sold at special prices intended to meet a competitive situation for a specific project, segment, or end-user are used solely for that project, segment or end-user.

“Second, we are updating language used on our special pricing authorizations to further confirm that such prices are good only for purchases that meet the special pricing authorization requirements. GE will seek reimbursement (i.e., list price less SPA price) for any other purchases that do not actually meet the SPA requirements.

“Third, we have developed a new OEM agreement that is more explicit in providing that direct-served OEM customers can only sell products as part of their OEM product or as replacement parts for OEM product they have sold, so they are expressly prohibited from distributing the products separate from their OEM products.”