A while ago, we explained the concept of the grey market right here. We drew it with little pictures for everyone, so it was all easy to digest and understand. But, even the worst of the best business schools will tell you, nothing beats a good old Case Study to really transfer knowledge. Well my friends, it seems you are in luck. Before you continue reading, it may be helpful to first read this to understand the rules which the average Rolex AD has to follow.
As we dove into our long weekend, a lawsuit popped up in Chicago: Krajisnik v. C.D. Peacock, Inc. (1:21-cv-00775). A former Rolex AD employee is directly accusing one of Chicago’s oldest jewellers and Rolex Authorized Dealer for “terminating her employment in retaliation for whistleblowing and refusing to engage in flagrant illegal activity and engaging in racketeering“. The plaintiff is essentially accusing this major Authorized Dealer for selling watches directly into the grey market, not limited to Rolex and allegedly also – you probably guessed it already – Patek Philippe.
The allegations made in this case are just about as juicy as they get and puts the spotlight dead center on the terrible practice of Authorized Dealers directly selling popular watch models into the grey market. This practice of course artificially increases the rather silly prices customers have to pay on the grey market in order to avoid decades long waiting lists. If you’re not following, I insist you go the first paragraph and click that link to our past explanation on the topic.
The 50-page and highly detailed complaint that has been submitted to the District Court for the Northern District of Illinois Eastern Division is filed by a team of lawyers. As such it is not the most exciting read but since I’m a nice guy (allegedly) I will condense the essentials of the case hereunder after having analyzed the complaint filed by the former employee. Note that for the detail oriented readers, the filed complaint can be found on Pacer if you have an account (link below).
Complaint Summary
As per the filed complaint three employees of CDP, referred to as the whistleblowers allegedly “uncovered a Scheme of illegal activity. They discovered that the Scheme was being perpetrated by a coworker and multiple management-level employees, including the CEO”.
The complaint continues stating that “the heart of the Scheme was a conspiracy by the Defendants to illegally sell Rolex watches to foreign grey market resellers in order to enrich themselves. In order to further the Scheme, the Defendants conspired to violate numerous federal and state laws including but not limited to racketeering, money laundering, mail, wire, immigration, and credit card fraud, and Illinois sales tax evasion”. I guess when it comes to a life of crime, better go big or go home? Allegedly.
They further allege that the scheme was not limited to Rolex watches but also involved “other luxury watch and jewellery brands, including, but not limited to Patek Phillipe“.
And how did that all get to court then you ask? Well, allegedly “the Plaintiff, and the two other innocent co-whistleblowers, repeatedly notified management of the illegal and fraudulent activities while refusing to participate in the Scheme. In response, Plaintiff and the two other co-whistleblowers, respectively, were summarily fired for their knowledge, their unwillingness to be complicit in the Scheme, and their protected whistleblowing activities”.
The complaint goes even further and alleges that “commencing in late 2018, Plaintiff noticed another newly hired employee, who also had no previous jewellery sales experience, engaging in flagrantly illegal behavior”. This new employee “in concert with members of management” allegedly “committed an ongoing pattern of mail and wire fraud, money laundering, tax evasion, and defrauding Rolex (the “Scheme”) thereby allegedly aiding “CDP management and ownership in fraudulently and intentionally violating the Rolex Distribution Agreement“.
Fast forward a bit and “as the illegal behavior accelerated in early 2019, it became clear to Plaintiff that store management was complicit in the Scheme. Later it was discovered that the entire chain of management was participating in the Scheme… The Plaintiff escalated their complaints to higher levels of management, including CDP’s CEO and ultimately to CDP’s owner”. Fast forward a little bit more and allegedly “in June 2019, C.D. Peacock commenced firing whistleblowers”.
The filed complaint is highly detailed and all allegations are accompanied by numerous examples and information. It is a fascinating read once you get into the rhythm of it all. As of yet neither Rolex nor Patek Philippe has joined the dispute. That will be almost inevitable if the alleged scheme is proven true in court.
Case files and documents can currently be accessed on PACER if you have an account.
Edit: The submitted Complaint can also be accessed right here at CourtListener. I invite you to read it yourself as it offers more nuance than the above summary of the listed accusations.
I got no love for unethical people throughout this industry ,people are just to greedy today due to a unregulated industry
This is squarely about misconduct of a Rolex AD. Others on this thread blame end purchasers, but I would suggest that blame is mistaken. There is nothing Rolex can do with respect to regular customers “flipping” their purchases. Doctrine of First Sale prohibits Rolex (or anyone else) from interfering with such behavior – once I buy something as an end consumer, I can do whatever the hell I want with it – I can keep it, I can spray paint it purple, I can crap on it and flush it down the toilet. Or I can resell it to a gray dealer. It’s my right at that point – basic free market economics.
@frank flapjack – that is true, however Rolex are demanding that their ADs, certainly in Europe at least, are doing a reasonable amount of due diligence.
I was asked to wear my SD43 on the day of picking up my BLNR. They ask you for your social media info when you sign up, and I’m told that with some customers they’re unsure of or are relatively unknown to the store, they’ll check up on the person to see if they seem like a flipper.
One of the stores I frequented near my office (pre-covid) sells a handful of brands, and the guy I speak to there is the rep for Rolex and Panerai. He joked with me once that his time is split between selling (Panerai) and being a private investigator (Rolex). Every Rolex that store sells – and its a small family chain of 4 stores, so they don’t get huge volumes – the rep has to ‘vouch’ for you in a meeting with the CEO and sales managers. They are tasked with knowing their clients, and one of those stipulations is that you’ll wear the watch. Hell they then invite you to events and at least once I’ve had them formally ask me to wear it and if I’d mind the staff showing it to other customers (has also occurred with my Vacheron Overseas now that they’re so hard to get).
Some ADs are really trying to do the right thing and put watches in the hands of watch fans.
Others – well, see the article. And this isn’t new, it’s been known for a long time there’s stores in India and Hong Kong been doing this brazenly. This is the first time I’ve heard anyone being taken to task for it, even then it seems to only have occurred due to the employment termination.
Does this explain why all the cases are empty? It’s not as if rolex completely stopped making watches.
Love the fact that you guys highlight such obscure happenings in the industry. These allegations are mindblowing stuff. Hopefully this complaint and the case that follows will also shake up similar shady dealings at SO MANY other Rolex and Patek dealers. That this happens is a public secret, but the industry doesn’t seem to care at all. Perhaps a few of these public falling out cases will help them change their mind
I worked for an authorized retailer before for almost ten years and a similar situation happened when the new Daytona’s came out in the 90’s unfortunately this has been a practice that has become a norm, authorized retailer are backdooring the watches to enrich themselves…. Yet lying to customers and telling that they have to wait years…
Good thing I shy away from the Rolex games.
I guess the issue with this lady was she said the quiet part out loud…showing what we have suspected all along came out to be true. Sadly many people still believe in the hype.
Interesting read, yet suggestive. Being active in watchbusiness for many years i can confirm, yes, some watches are bought from AD’s but at least 90% of the “hot cookies” from Rolex, Patek Philippe and AP are bought from so called private “watch enthousiast” who flip their long awaited watch within hours or days. Some have their name on the lists of many different dealers all over the US and also Europe and get them with the most romantic stories but with one sole purpose. Quick cash…
So, a Submariner Batman for $10,000 retail is sold grey market for $15,000, then resold again for $18,000?
Normally with the greys they have to take a couple unwanted pieces too. That helps the AD hit the target of clearing the decks if even the pearlmasters are gone. Even moreso if they take other brands. Jomashop’s business model involves getting hold of sought-after stock, sometimes at discount, in return for taking on heaps of unwanted stock. Companies like Tudor, Tag, they give stores volume targets and durations for how long a watch can sit. I know one store where, after a Pelagos LHD sat for 6 months they were going to get in trouble with Tudor cos they’re supposed to sell those quickly, so an employee had their girlfriend buy it. So the stores have to ensure their stock turns over regularly, and a handy way is if a grey dealer will take 10 watches if you throw them a couple Rolex at or near RRP.
The Pontiff sent me here.
haha, thank you for pointing that out. This is the way?
Well in 1991 I went to buy a Daytona $1000 deposit to watch was $3800 for the stainless $5800 for stainless and gold 20% off was what rolex used to offer 8 weeks past I get a call from the sales lady She said to me you’re watch never came in but we have this to tone for 5800 no thank you I’ll just wait whell come see it anyway because I don’t think that you ever going to get the stainless Daytona for list To be honest with you if it comes in their 61 people waiting for it And your 20th one on the list I should Iknow my reply don’t understand well if your heart set on it would you pay over list I well the thing is is that I want to get the 20% off of the 3800 That’s really what I could afford plus tax At that time I think tax was 6.75 She says no you don’t understand this is a most desirable watch of the line of rolex when it comes in you have to pay over list I went back I got my deposit back I went back to 3 reputable people And that happened the same way never never received the watch Truth the whole truth and nothing but the truth in rolex world.ps This is teaching from rolex rolex is a charity company is not owned by a person it owns itself are I even called Switzerland If they saw the watch’s to the customer who orders to watch It has to be the high end watches which are the gold the platinum they will receive their watches the people who order the inexpensive watches are the ones who get harassed and they become popular because they’re inexpensive and that’s the truth
And just to add the rolex The president 18 karat gold doubled quick was 10,700 After a 20% discount Someone told me how much is a regular president today
There is no such thing as a Rolex President (it’s the name of the specific bracelet) Its actually called the Day Date.
Rolex should sell direct to customers. Most ADs will tell you they also sell only to their VIP customers… not true. It’s a lie. A sale is a sale is a sale. The issue is systemic. These large luxury watch companies are to blame aswell. They created the environment because they lacked providing a fully integrated retail logistics solution to their business model that held dealers accountable.
Come on, it’s not like Rolex or PP is unaware of this. They chose to ignore it and this will change nothing.
Thank you for the correction On the rolex day date with the president band . I try not to get caught up on Pacific’s Trying to explain the story if you get hung up on Pacific’s that turns into arguments Nevertheless Explain the story and the ruthlessness Of this watch company success
One day I walked to the Rodeo Boitique and saw the manager showing to a custpmer a Batman.
Another salesman aaked me if I needed any halp and I replied that if that customer did not buy that watch then I would get it, so I sat aside and waited. After about 10 min the manager came to me and told me that the watch is sold and that the customer had access to it because he was purchasing 23 watches….
Yep to flip them all on Ebay for a profit. We all wonder if the mamager is gettimg a kickback or if he is just blind.
Rolex doesn’t let you buy that many in one sitting. Hell it’s 4+ years since any store would have even had 20 pieces in it.
Patek itsself is playing these games probably on their own account if you consider the following: The head of the Geneva Flagship store ( Salon de PP ) is family owner of the Lausanne Boutique L´Emeraude, a PP dealer since the 1930`s. He and his family are official Rolex dealers and have pushed out an other Rolex AD Family in order to obtain this contract in 2018. He even shows up at small grey market dealers in order to intimidate them and to find out where their watches come from and asks them to stop dealing in certain independent brands. And of course, he decides which friend gets the SS watch in the Salon as well as at l`Emeraude. Everyone who is not complying with his orders is fired ! In the PP Geneva Salons reigns an atmosphere of terror and fear.
They know beforehand which model will be stopped and then position themselves. Isn`t it funny to claim the need to stop the 5711 in order to protect the brand and in the same instance announce a final lap for this harmful watch ? Do you really think that PP renounces on anything in not selling the 5711 at $ 30k ? They now sell the final lap directly to their gray market operation with a 300 % margin as they did before with the 5711.
Thierry Stern plays his role as keeper of the tradition. In reality he is double faced and helps to betray his customers.
You probably know the old saying : The fish stinks from the head ! Under these circomstances the PP saga should soon come to an end unless they clean up their act. Which I doubt they will. Without the SS Nautilus/Aquanaut media coverage nobody would pay attention on the mostly badly designed,often technically failing, overpriced, boring oligarch complications in their sales program that decline in price by 50 % once you leave their premises.
At he same time Hodinkee is being bought by LVMH and covers the PP Nautilus saga. No critical coverage of the PP market dealings. Smart move because from now on Arnault can turn up the heat on PP ( and others ) and threaten to publish ( like Murdoch does it ) the cruel facts or if Stern sells at a nice price to shovel all negative news under the carpet !
But by now the ghost is out of the bottle and they can not entirely control the flow of news anymore.
We are probably very close to the climax of the SS bubble market.
Guess I’ll buy a quality fake instead, since I would be throwing the money away on sales tax for the real thing anyway, and there is no integrity in the business, so what’s the difference? On second thought, I think I’ll just buy a nice Steinhart, be happy, and retire early…
You’re right it wouldn’t make a difference is just a status that everybody recognizes and if you’ve got a good copy what is the difference Everyone in America Everyone agreed To destroy the fakes and and rolex encouraged the people to do that so the same encouragement your statement could catch on and that will bring rolex down to its knees Good idea
Just one more thing On agreeing with you Popular yes rolex is because it holds value because it’s waterproof and I could take the abuse of the environment and the depths of the ocean and beyond but their are other watches out there that could do the same! Breitling Is the Better value In today’s market all so tag heuer think if they get Boycott or may be The biggest word in the world in the USA Today is cancel Culture give to them thay need it Mark these words and remember it And one year from now when this done their prices will be affordable again.
Just to clarify, I do not wish to bring Rolex to it’s knees. I believe Rolex cares about it’s market share and am sure they will come up with a solution for dealing with AD’s engaging in backdoor grey market deals. Rolex has been in business a long time and knows what will happen if they don’t regain control of the market. I would rather focus my attention on the bigger picture of why this behavior started in the first place. Capitalism works well, as long as the people engaging in the free market have integrity, honesty and a good moral compass. Unfortunately, this is not the case. Due to greedy self interest, we will be seeing a lot more of this behavior in every aspect of our society. It could be stopped, but only with accountability, law and regulation. I doubt this will happen because of the aforementioned.
To whom it may concern which is everyone in watch world I’m also watch collector 40 years When I read everyone’s truth and concerns about what the company’s doing I got carried away thinking let’s do something about it I don’t just want to vent So what respect for everyone I apologize
I thought About this for a long while and I thought of this way to beat system the best way to do it is to buy pre owned And customize the watch.there are dials & bezels which all of you already know that this is available And create what you would like and stop the fuss over the new dial a new bezel Incorporate that We still have the watch Which will be authentic but the parts will not be .you as consumer Would still be in the game And you still feel like you’re a part of it From talking about In style Which has on going on for decades Howard from in chicago is the aka rolex king Pre owned 312 332 5999 Want the best deal he could do itWhy be a fool & get screwed and not have that watch and buy a seiko Instead of not buying a watch.buy A pre & customize it and own it Good luck and God-bless
The fix is in and the cat is out of the bag. What a scam! Explains why a Rolex GMTGMT A GMT (Greenwich Mean Time) complication is a feature found in some watches that allows the wearer to track two time zones simultaneously. It typically includes a 24-hour hand and a bezel or a second hour hand that can be adjusted independently of the main hour hand to track the time in a different time zone.
[Learn More] Master II Pepsi is now going for north of $20,000. Retail $9,600. Artificial scarcity to justify inflated prices in these so called grey markets. Paying twice as much above MSRP for a timepiece that keeps less accurate time than your run of the mill quartz movement?
Sorry, you are a sucker.
There is a fair and simple way to get the gray market to its knees: Rolex Corp. to properly increase the listed selling price of the watches and to take the Certified Dealers out of the temptation to sell the watches to sub-dealers to generate extra profit.
This is interesting, but one should note that the agreement linked is 21 years old.
Modern agreements have likely changed quite a bit.
Bucherer, one of the main ADs in Germany, ship their Rolex stocks directly to Hong Kong resellers. Other HK resellers get their stocks directly from Belgium or the Netherlands and well, pretty much everywhere including Asian countries. I guess the same goes with HK AD stocks going abroad. So while it’s true that demand is high, scarcity is for the most part manufactured. Rolex has lost control of its authorized dealerships but they are also able to sell a lot more precious metal stocks than before so they’re unlikely to take any action.
@uptick – HK greys get their stock from abroad because there’s no import tax. And for a while the exchange was good. Watches don’t go the other way, because the tax and duty upon import would swallow a chunk of the profit margin.
But HK is one of the places where this selling direct to greys is most flagrant, there’s a company where the AD is in one store, and their sister company run by the same family that does used pieces is like 4 doors away. They don’t even try to hide it.
ADs In Hong Kong own grey market outlets and send stock that arrives straight to them. It’s all on Uptickwatches on YouTube. No way Rolex is in the dark about this. They just send more. China is swallowing the market.
Also the sports watches like Subs are way lower prices than online even before bartering because there are so many and due to Covid lockdowns the mainland Chinese can’t get there.
……but I gotta add that this modern craze for collecting and hoarding watches sure isn’t helping esp with the internet pushing Rolex like crazy. Of course there will always be sheep and wolves but now the internet has seen a proliferation of Judas Goats.
I have been a Rolex owner since I was 19, I AM NOW 56. I have bought and own quite a few Rolex watches. I am highly disappointed and disgusted with the business practices of the company. I am unable to purchase a new Rolex that I want. I am unable to order a watch and submit a deposit. I am however able to contact a non-Rolex jeweler who has a friend who is a authorized Rolex dealer and purchase a watch significantly OVER RETAIL LISTED PRICE. F Rolex!
Yeah that is why one seller has 17 new unworn watches for sale on Kijiji here in Canada. Ridiculous
I knew this all before many years ago in my comments I told you about what I went through if no one remembers because I haven’t been Keeping up Quick rundown 1992 gave a deposit on Daytona stainless 4k two times in Illinois usa Never received it always seen something else they had and Calling me to show me what came in never what I ordered And results I’ve got my refund twice 2 separate places There’s better watches out there without the games