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.