Stopping Unauthorized Online Sales and Product Diversion: A New Approach (White Paper)

We have developed a new approach to confronting and stopping unauthorized online sales.

Stopping Unauthorized Online SalesThis approach combines legal, technology and investigation-based techniques into a comprehensive system designed to efficiently and effectively stop unauthorized online sales. In our recently published white paper entitled “Stopping Unauthorized Online Sales and Product Diversion”, we explain the importance of companies combating unauthorized online sales. We also discuss how companies can tailor their policies and procedures to support enforcement efforts. We then provide an overview of our recommended graduated enforcement system.

Companies from many industries have long been contracting with people to sell products on an exclusive basis. As technology has evolved, however, it has become easier for anyone to sell products on the internet. One result is that it is easy to divert products to unauthorized online sellers. And this poses a serious threat to companies.

For authorized sellers, the proliferation of diverted products on eBay and other websites and online marketplaces is frustrating and demoralizing. These products are often sold at prices much lower than those at which authorized sellers are expected to charge.

Thus, when authorized sellers see a high volume of unauthorized sellers and products available online, they begin to question the company’s commitment to stopping unauthorized sales. This generally leads to complaints, decreased motivation and often even termination of their agreements with the company.

A company in this situation not only deal with these issues within its seller network. It must also confront the facts that: 1) product diversion directly harms companies’ bottom lines by reducing prices and diverting revenue, and 2) unauthorized sales also damage their brands and their reputation with customers.

In short, although the problem is obvious, the solution is not. Many companies are still struggling to identify effective tools to combat the problem of product diversion.

Download our white paper. Note that since publishing this original blog post, we added a revised version of the white paper.

The downloadable white paper include case law demonstrating the exceptions to the First Sale Doctrine. It also contains an in-depth overview of our recommended five-step graduated enforcement system. The enforcement system includes identifying unauthorized online sellers; targeting the sellers through electronic cease and desist letters, sent online; identifying the sellers through product purchases and other techniques; sending cease and desist letters to the addresses of the identified sellers; and taking escalated legal enforcement actions, as necessary.

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