Online Seller Enforcement

Online Seller Enforcement

Cutting edge strategies combining law, investigations, and technology to protect businesses’ online distribution channels

Controlling Pricing, Stopping Unauthorized Sales in Growing e-Commerce World

Posted in Product Diversion, Unauthorized

It is no secret that consumers are spending a lot of money online each year. In fact, e-commerce grew 16 percent in the first half of 2016, while U.S. consumers are projected to spend $385 billion online this year, according to a Nov. 2016 Business Insider article.  By 2020, Business Insider’s premium research service projects that number to rise to $632 billion.

Control Prices, Stop Unauthorized SalesWithout question, e-commerce is on the rise, and it is showing no signs of stopping.

This trend can be largely attributed to the success of the increasing number of third-party online marketplaces – not only the major e-retailers but also others that have emerged in recent years.

Many companies have utilized these online marketplaces to sell their products, both directly and through the aid of authorized distributors. And certainly it can be highly beneficial to sell online, outside of standard company websites.

Regardless of whether companies might be taking active roles in selling on third-party websites, e-commerce has made companies susceptible to abuse at the hands of online sellers. Therefore, it is important that companies work to both control pricing and stop unauthorized sellers in order to reap the benefits and avoid the pitfalls associated with online sales.

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How to Identify Anonymous Unauthorized Online Sellers

Posted in Product Diversion, Unauthorized

According to a Nov. 3 Business Insider article/report, U.S. consumers are expected to spend an estimated $385 billion online this calendar year.

Identifying Anonymous Unauthorized Online SellersWhile this generally sounds great for companies engaging in e-commerce, many companies are being harmed by countless unauthorized sellers. These bad actors can cause a host of problems.  This includes, but is not limited to, selling products at low prices (which causes companies to lose control of pricing and affects their brands) or simply selling non-genuine goods.

In cracking down on unauthorized sellers, including putting an end to their impermissible selling activity and obtaining the sources/suppliers of their products, it is beneficial—if not necessary—to identify the sellers.

A major component of an ideal enforcement system is sending cease and desist letters. The first wave can be taken care of online via private messaging on the relevant forums on which the sales are taking place.

But if the unauthorized sellers ignore the messages or explicitly refuse to comply, the next step would be to try to identify them and send them cease and desist letters to their actual addresses.

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Companies Should be Aware of, Seek to Stop Traffic Diversion by Competitors

Posted in Uncategorized

Unauthorized sales are causing issues for many companies across numerous industries. In highly competitive spaces, such as the beauty or skin care industries, a common (but much less talked about) issue affecting many of these same companies is traffic diversion. Stop Traffic Diversion

In short, companies (or representatives of the companies) attempt to use the registered trademarks of well-known/reputable companies to divert web traffic to other websites – for their own commercial benefit, of course. In other words, competitors (often less-established ones) hijack the goodwill of other companies’ products and brands in order to draw consumers to  their own products.  This is essentially a “bait and switch.”

Traffic diversion can take on a number of different forms online. One common practice we have seen is for a website to display what appears to be an objective comparison of several products competing in the same market.  However, the purported “Best” or “#1 Recommended” product—often accompanied by a link to another website where a consumer can purchase that product—is actually manufactured or sold by the same individuals or entities operating the website.

Similarly, a company might “review” a well-known company’s product. This might consist of arbitrary numeric ratings, presenting the product as fairly average.  Adjacent to or below this review and the ratings, the company will provide an eye-catching graphic and link to the “best” alternative product or the claimed “approved choice.”

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Maintaining Internet Minimum Advertised Price (IMAP) Policies While Avoiding Antitrust Issues

Posted in Grey Market, Product Diversion, Unauthorized

Given the continued (and rapid) growth of e-commerce, retailers and distributors are likely to see a continued increase in manufacturers’ use of Internet Minimum Advertised Price policies—or IMAP policies—as a means to reign in excessive price reductions on the internet.

IMAP PoliciesMost courts that have addressed this issue have upheld such policies as valid under the Sherman Act. But there is a lack of uniformity in state law. Thus, manufacturers, distributors, and other companies should carefully vet the language of their IMAP policies to avoid unwanted antitrust scrutiny.

Colleagues Daren Garcia, Ken Rubin and I recently published the following article, “Practical Tips for Maintaining Online Minimum Advertised Pricing Policies and Avoiding Antitrust Issues.”

Click the above hyperlink or download the PDF to get a closer look at how to craft IMAP policies so as to avoid scrutiny under antitrust laws.

This article discusses the legal issues relating to IMAP policies, including a look at the legal background and recent developments (i.e. case law) relating to policies. We also provide several recommendations for companies looking to implement an IMAP policy.

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Gibson to Lead Upcoming Live Webinar on Stopping Unauthorized Sales on the Internet

Posted in Product Diversion, Unauthorized

Whitney Gibson, who leads Vorys’ online seller enforcement group, is presenting an upcoming webinar: “Efficient and Effective Strategies for Addressing Unauthorized Sellers Online.” This webinar, hosted by Lorman, will take place on Friday, Oct. 14, from 1:00 to 2:30 p.m. ET.

Whitney Gibson - Stop Unauthorized Online SalesGibson will discuss how to integrate technology, investigation and legal tactics to identify, remove and stop unauthorized online sellers. A full course description, agenda and registration information for the webinar can be found on Lorman’s website.

The webinar is intended primarily for attorneys. Information about CLE credit is also available on the hyperlinked webpage.

Gibson has spoken on stopping unauthorized sales and related topics throughout this year, including at June’s Direct Selling Association 2016 Annual Meeting and in September at both Channel IQ’s Compass 2016 conference and Retail Global’s e-commerce conference.

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Communications With Distributors, Customers Key to Enforcement Program

Posted in Unauthorized

As stated in a recent post, we recommend that companies adopt a three-step approach to tackle unauthorized online sales.

Communications with customers and authorized distributorsStep one is to revise company policies, procedures and agreements. Step two is to implement a graduated enforcement system designed to actually crack down on and stop the unauthorized sales.

Finally, step three—the focus of this post—is to create and implement a communications strategy targeting both authorized distributors and customers.

Communications with authorized distributors

For companies actively working to stop unauthorized online sales, it is generally beneficial to be candid with their authorized distributors about their enforcement efforts.

Obviously one of the main issues with unauthorized sellers is that they cut into authorized distributors’ sales. However, they can also upset the authorized distributors such that the authorized sellers might try to negotiate lower prices and/or ignore MAP policies.

Thus, it is likely in the best interests of a company to communicate to its authorized distributors that (and how) the company is actively working to protect them.

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Combatting IP Infringement, Unauthorized Sales on Shopping Apps

Posted in Product Diversion, Unauthorized

Now-popular online marketplaces like eBay have made consumer-to-consumer e-commerce possible. Today, it is getting even easier through “flea market” and consignment shop-style apps, which pride themselves on the ease with which people can Infringement, Unauthorized Sales on Shopping Appsshop for and sell products.

Leading fashion marketplace apps include Mercari and Poshmark. Each offers fun and easy ways to shop for and sell items through mobile devices and tablets.

As with other more traditional online marketplaces, however, a small percentage of bad actors can exploit these platforms and their users by using the apps to engage in the unauthorized sale of others’ products.

Mercari

For those unfamiliar with Mercari, the app is in good company among other free iPhone apps.

According to Apple Inc. data for the week ending Aug. 21, 2016, as published by SFGate, the top 10 free iPhone apps that week were the Bitmoji Keyboard, Snapchat, Messenger (for Facebook), Instagram, Google Maps, Facebook, Pokémon GO, YouTube, Uber and Mercari.

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Minimum Advertised Price (MAP Policy) Enforcement

Posted in Product Diversion, Unauthorized

One increasingly common technique companies are using to safeguard their brands is implementing MAP policies. Short for a minimum advertised price policy, these are policies that companies establish declaring the minimum prices at which authorized sellers are permitted to advertise their products.

MAP Policy EnforcementIt is important to note that these are policies and not actual agreements. This distinction is important from an antitrust scrutiny perspective, discussed more at length in a different post.

As online shoppers generally seek out the lowest-priced goods up for sale, plus many e-commerce websites display (or allow consumers to sort) products from lowest-to-highest price, MAP policies are often critical to companies’ success.

The various benefits of an effective MAP policy include:

  • price coordination among sellers;
  • better control of margins;
  • avoiding downward pressure on pricing from large retailers;
  • a decrease in “showrooming”; and
  • keeping authorized distributors happy.

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Serving Subpoenas to Identify Unauthorized Online Sellers on eBay

Posted in Unauthorized

We have published various posts on our blog about implementing an effective enforcement system to stop unauthorized sales, including our recent post featuring a video about our online seller enforcement program.  As mentioned in numerous posts, an ideal enforcement program combines technology, legal and investigation tactics.

“Investigation tactics” frequently refers to the techniques utilized by skilled cyber investigators. It also encompasses subpoenas – a legal mechanism of identifying (in this context) targeted unauthorized sellers of products on eBay and other sales platforms.

As a brief refresher, our recommended graduated enforcement system features the following steps:

  1. Identifying diverted products; Identifying unauthorized sellers
  2. targeting sellers via electronic cease and desist letters sent through the specific websites (e.g. eBay)
  3. conducting investigations or serving subpoenas to obtain the actual identities of any sellers who fail to comply with the electronic cease and desist letters;
  4. sending physical cease and desist letters to the noncompliant sellers’ physical addresses, based on the information identified through step three; and
  5. if necessary, pursuing any sellers who ignore the letters through escalated enforcement actions.

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Gibson to Co-Present Free Webinar With Market Track on Strategy for Stopping Unauthorized Online Sellers

Posted in Product Diversion, Unauthorized

On Thursday, August 11 at 12:30 ET, Whitney Gibson—leader of Vorys’ illegal online seller enforcement group—will co-present an online webinar entitled “A New, Comprehensive Approach for Stopping Third-Party Unauthorized Sellers Online.”

Whitney Gibson - Stop Unauthorized Online Sales WebinarGibson will join Chris Barnes, Market Track’s Senior Vice President of e-Commerce Solutions, for this free live webinar. Market Track is a leading provider of e-commerce channel management solutions. The company recently acquired Channel IQ, a leader in minimum advertised price (MAP) monitoring.

This webinar will cover Vorys and Market Track’s joint strategy for efficiently and effectively addressing unauthorized online sales on websites like eBay – a two-step program centered on implementing a graduated enforcement system that integrates technology, investigation, brand enforcement tactics and legal techniques to stop unauthorized sellers.

Gibson will discuss how companies can create a foundation for legal claims against the third-party unauthorized sellers. He and Barnes will then walk attendees through the different steps of the recommended graduated enforcement system (see graphic below).

People interested in attending this webinar should click the above hyperlink and claim their spot online.  Space is limited.

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