Floral Group Inc., an importing organization in New York, buys perfumes from GS Inc. in France for $13 a unit. Unknown to GS, Floral Group sells this product in the United States for $15 a unit. This leads to a loss of revenue for GS Inc. as it also sells its perfume in the United States but for a higher price of $18. Which of the following best describes the above scenario?

Question

Quizplus · Accepted Answer

Because of the different prices possible in different country markets, a product sold in one country may be exported to another and undercut the prices charged in that country, known as a parallel market. As Floral Group has bought perfumes from GS Inc. and sold it in the United States for a lower price than what GS sells it for in order to undercut GS, it is practicing parallel importing.