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Cisco On Combating Gray Market, Fraudsters ‘Undercutting’ $1.2B In Legit Channel Business With Counterfeit Goods

‘There are temptations out there. Be aware, be careful, especially in these times. There are many fraudsters out there that are trying to cheat you out of legitimate business. And if it’s too good to be true, it probably is,’ says Al Palladin, Cisco’s legal director of Global Brand Protection, to the company’s ‘good guy’ partners.

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A Growing Problem 

Supply chain challenges are generating long lead times for new IT hardware. As a result, the global issue is causing a rise in technically legal but frowned-upon gray market activity as well as a spike in the creation and selling of counterfeit IT gear, which can be dangerous for enterprises, according to Al Palladin (pictured), Cisco Systems’ legal director of Global Brand Protection.

Illegitimate Cisco gear being unknowingly installed is a major issue that’s impacted some of the largest U.S. banks, airports and utility companies. In an effort to save a little money, the consequences could have been tremendous if genuine Cisco products were not brought in to replace the counterfeit gear in these critical infrastructure installations, Palladin said. And it’s not just customers that are being tempted by gray market or potentially counterfeit products—it’s solution providers too.

Gray market products, gear sold legally outside the brand’s permission by unauthorized dealers as well as fake and altered Cisco products, are undercutting legitimate business for solution providers to the tune of $1.2 billion a year, and that’s just for Cisco partners. The economic loss to solution providers as a whole exceeds $100 billion a year, according to the nonprofit Alliance for Gray Market and Counterfeit Abatement.

Palladin spoke with CRN about the growing issue of gray market activity and counterfeit products, unfortunate cases of Cisco partners getting tangled up in the gray market, and the importance of sticking to the Cisco authorized channel for the sake of both Cisco and the channel partner’s own reputation. Reputational loss is the biggest blow to any solution provider business, Palladin said.

What follows are excerpts from the conversation.

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