The causes of gray marketing and its threat to sales turnover of authorized distributor channels in Ghana have been investigated. A qualitative case study methodology was used to examine the causes of gray marketing using the case of an authorized IT distributor in Ghana. The information in the case was linked to the literature on gray marketing to bring out specific issue of price differential among regions and territories as the cause of gray marketing. The study revealed that due to poor pricing coordination and communication among regions and territories, and the aggressive profit maximization drives by certain distributors, gray marketers capitalized on the price arbitrage created among authorized distributors in territories and regions. Consequently the study indicated that the cost prices of some fast-moving handy IT products were 30% to 40% higher than the selling prices of the same products for gray markets resulting in 10% loss in sales revenue from 2001-2007. The paper further revealed that some of the gray products were 20% lower than the manufacturer’s price which can best be explained by the activities of criminals taking advantage of gray market products to launder monies. Finally the study recommends that multinational companies should establish coordinated pricing and communication system among regions and adopt a differentiation strategy to distinguish authorized brands from gray products.