Nobody knows how the legal dispute will turn out between C. D. Peacock and a former employee who is accusing the business of covering up sales of Rolex and Patek Philippe watches to overseas grey market dealers.
CDP’s legal counsel Jane McFetridge says it may take two years before the case brought by Suzana Krajisnik is concluded, but is confident the most serious charges relating to Rico Statute offences including fraud and racketeering will be dismissed much sooner.
CDP admits it had discovered at least one instance of watches being sold inappropriately and fired the employee responsible for it in January this year.
There were two other former employees named in the Suzana Krajisnik lawsuit that Ms McFetridge states were “Let go for rules infractions that violated company policies, in addition to having not great performance”. When asked by Watchpro whether any of those infractions related to the way watches were sold and to whom, which is at the heart of the Suzana Krajisnik case, Ms McFetridge conceded: “For one of them, it was. We looked into it and fired him.”
Watch brands like Rolex and Patek Philippe have strict rules with their authorized dealers that ban them from selling outside their home countries. It is one of the reasons customers must still come into stores to buy their watches in an era when the vast majority of brands allow home delivery of watches bought over the internet.
CDP has followed these rules assiduously for the 30 years it has been a Rolex partner, but it is almost impossible to be 100% certain employees will not find a way to profit from the over-retail prices commanded by many Rolex watches.
The temptation to feed watches to the grey market has been even more intense this year when stores have been closed for months.
Stories are emerging of authorized dealers selling Rolex watches by the dozen to grey market traders. These flippers will acquire, let’s say, 11 easily available watches at a time if the authorized dealer will include one steel Daytona or Batman in the bundle that can be sold at a huge markup.
Given the fact that even precious metal Daydates and Date Justs retain their value these days, it is an easy win for the flippers if they get their sums right.
This would not even contravene Rolex’s policy, although it certainly tramples on the spirit of the agreement between brand and retailer.
Imagine the temptation at a time when the pandemic is threatening the survival of your business and a flipper offers a $200,000 deal for a dozen watches. How easy would it be to turn that down, and would Rolex stand in your way?
The answer is yes, Rolex would stand in your way, and these sort of deals can lead to an authorized dealer being cast out from the Rolex family.
CDP did exactly what Rolex would have wanted when it fired a member of staff after discovering infractions, but is still vulnerable to charges of a cover-up and may have to settle the case with Ms Krajisnik when it comes to her claim of being fired for whistle-blowing rather than simple under-performance.
This is an example of the constant nightmares faced by authorized dealers of the world’s hottest brands. They would all like every watch to go to a passionate collector or to somebody marking a special occasion like a birthday, anniversary or retirement, but the market is not working that way.
Volume deals, or at least prioritizing sales to people that buy a lot of watches, are commonplace, and that has exposed retailers to greater risk of selling to grey marketeers.
I completely agree, thank you for your comments!
Seems like you want to cover up CDP’s misconduct. Did you read the full complaint? These people committed serious crimes (allegedly) and I think their Rolex contract is probably the least of their worries.
How does an authorized dealer not know every watch they sell and to who and where?
You make it sound like these AD’s are fighting for survival due to covid. Maybe they are fighting for survival, but whose fault is it? The market has never been hotter for Rolexes and buyers are lining up but the ADs are not being sent stock of the units in demand and the blame should be placed squarely at the manufacturer’s door — but stock still seems to be ‘magically’ being diverted to the grey markets. Rolex could easily ratchet up production to meet demand and stabilize grew market prices — after all at production of one million or so units annually, volume clearly has little to do with demand and price –, but the company clearly shows no inclination to do. That alone smells to high heaven and is suspicious. Clearly, something that is widespread and criminal is going on. It’s criminal at the very least because the taxman globally is being defrauded; he is not getting his cut. Despite Rolex’s presumed influence at high places, that shouldn’t be enough to shield it from a US government investigation, I would have thought. A price-gouging/fixing mega legal investigation/ lawsuit must surely eventuate at some point . And if Rolex is in any way implicated, that could bring down the whole farcical parade.