Combating Unauthorized Sales: How to Deal With Unauthorized Resellers

Companies often struggle with how much time and effort to put into curbing unauthorized sales.  For some, the problem seems so widespread that the fight can seem fruitless.  After all, selling products online is easy and most websites offering third-party sales are easy to use.

But does this mean a company should throw in the towel and stop efforts to control unauthorized sales?  If not, how does a company decide where to expend its resources?  The key to making progress is to develop a plan and keep chipping away.

Identifying Unauthorized Resellers

The first step is to identify the problem and find out the sources of the product diversion. In other words, it must start by determining where unauthorized sales are occurring.

For many companies, eBay poses the greatest problem and threat.  For others, it can be a number of other third-party onlineUnauthorized Sales selling platforms. A few searches on the major e-commerce websites and internet search engines should offer a good overview of the problem.

At this point, the company must prioritize the most problematic websites and pursue the highest volume sellers.

Unauthorized online sellers with a large supply can cause the most damage.  These sellers can disrupt MAP policies by selling below the minimum advertised price (a.k.a. the “MAP”).  This causes a number of problems for authorized sellers who follow the MAP policies.

Figuring out which type of unauthorized seller is causing the most harm is key.

While they will vary by company and product, the most problematic resellers share similarities.  These problem resellers often have a steady supply of product.  Moreover, they sell product below the retail price, and also might exaggerate the discount to generate clicks.  Further, they also readily show up online when customers search for the product.

These large unauthorized resellers usually cause more problems than the small or one-off sellers. For instance, they often consistently breach manufacturer’s policies.

Unauthorized resellers who disappear after selling only a few products are less likely to impact the market price.  But if a reseller consistently offers products at lower prices, other sellers likely will lower their prices to compete.

Beyond the number of products available, sellers without storefronts usually cause less of an impact.  Online storefronts can suggest a more business-like image (as opposed to a single auction on a website like eBay).  Purchasers are more likely to assume that a seller with a storefront has permission to sell the products at issue.

Addressing Unauthorized Sales

Once a company develops criteria to target problem resellers and product diverters, the next step is creating a plan to address them.  Cease and desist letters, for example, can be quite effective.

A company’s lawyers can help out in determining the legal bases for pursuing the unauthorized sellers.  This might include trademark infringement or even tortious interference claims.

Companies should ensure their business practices support these legal claims. If not, they should make the necessary changes. For example, they might establish legitimate quality controls to overcome the First Sale Doctrine.

If the goal is to identify unauthorized resellers, other tactics will be useful.  Sometimes ordering the product can get you valuable information. Other times, subpoenas can provide identifying information for the source of the products. Quite often, the source is actually an authorized seller who is violating a manufacturer’s agreement.

Once a company identifies the source of product diversion, it is often easy to stop him or her.  The company can either confront the authorized seller or simply terminate the relationship.   A company’s legal team can help to develop a plan suited to the particular business.

There is no one-size-fits-all plan of dealing with unauthorized resellers.  But in most cases there are tools a company can use to efficiently and effectively address the unauthorized sales problem.

A company can make real progress in curbing unauthorized sales with the right system in place.  The key is to identify and go after the major schemes and sellers first. From there, a company can and should work its way down to other less-high volume sellers.

For more information, contact Vorys’ Illegal Online Seller Enforcement team or call us at (513) 723-4823.

About Whitney Gibson

Whitney Gibson

Whitney is a partner and leader of the firm’s group that focuses on internet brand and reputation issues, including both illegal online sales enforcement and internet defamation.
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