Losing $63 Billion in Diverted U.S. Goods Is Sleuth Obsession

Old-fashioned arbitrage on an international level has a new name: “product diversion.” It means the same thing though: buying low in one market and selling higher in another. The difference is that many multinational corporations (MNC) are now employing investigators and litigators to identify and crack down on the practice. Some MNCs have gone so far as to end business relationships with distributors they suspect are engaged in product diversion. But there’s little MNCs can do legally if large scale distributors are able to identify price disparities and exploit them within the bounds of the law. But this doesn’t prevent corporations from employing other methods to stop the practice including adding non-harmful substances that are banned in certain countries or altering the packaging by locale to identify perpetrators. This story details such operations by companies like Procter & Gamble Co. Nevertheless, the incentive remains for product diversion to persist, perhaps more so in light of the economic downturn. And companies that specialize in product diversion are likely to grow further especially if they enjoy a competitive advantage in terms of shipping costs – a key to success in this form of arbitrage. – YaleGlobal