Unauthorized Sellers are a menace. Now you can finally beat them.
Many companies today struggle with their products being sold without permission on websites such eBay and Amazon. Direct selling companies are particularly vulnerable, from former distributors who post their products for sale, to larger aggregators who deliberately buy up product and offer them at a discount to prices the selling field can offer.
Unauthorized sales cost direct sellers millions of dollars a year in lost revenue and inhibit your ability to attract and keep legitimate distributors happy. Add in damage to your brand and trademarks over time, and you’ve got a critical issue to tackle.
In our FieldWatch compliance management practice here at Momentum Factor we have wrestled with the challenge of unauthorized sales for years. The primary obstacle to effectively managing the problem has been resources and cost — many sellers are not worth the trouble of pursuing, and the ones who are can be highly elusive and are skilled at keeping trademark owners off their trails. Going after onesy-twosey former distributors is cost prohibitive and filing lawsuits against unknown sellers usually leads to an expensive dead end.
A New “Harm-Reduction” Approach.
To date, most companies have resigned themselves to the futility of getting the sites to take down infringing listings, and it can be near impossible to identify the infringers. Investigating a seller and then taking legal action can be cost prohibitive, and ultimately not very effective in stemming the tide of listings.
However, with a smart application of technology, data analysis, cyber investigation and highly efficient legal methods, you can not only stem the tide of unauthorized sellers, you can substantially reduce the vast majority of listings, effectively rendering them a non-issue. This is a “harm-reduction” approach — you may never completely solve the issue, but you can make it difficult enough for those who insist on reselling your products that they move on to new targets.
This is a big deal for the industry. To have gone from throwing our collective hands in the air to deploying an efficient, high-return procedure likely to result in the removal of unauthorized product listings is a 180 degree swing in the right direction.
Minimizing the Unauthorized Seller Threat: A Step-By-Step Guide.
We have identified the following steps to successful unauthorized seller enforcement. (And yes, when executed in a comprehensive and efficient manner, this works!)
Step 1: “Illegalize” Unauthorized Sales.
First, your policies and agreements should utilize the latest case law and best practices that make enforceability work. For example, a post-sale return policy that only applies to authorized sales, prohibiting selling products through unauthorized channels, or adding liquidated damages provisions provide legal heft to your enforcement activities.
Step 2: Build Your Target List via Monitoring Technology.
Next we’ll seek to understand the scope of the problem by gathering and prioritizing all the data on resellers and transactions. In our FieldWatch practice we have designed an easy to use portal for clients to collect all reseller listings and filter them by resellers, sites, number of listings and so on. This provides an instant and obvious target list for further action which can then be cross-checked against your rep data and entered into case management for further action..
Step 3: Release the Hounds.
Our next step is the judicious, liberal and efficient delivery of Cease and Desist letters. This is key to making the program affordable. A single C&D to one distributor won’t bring a sufficient return—a more “blanket” approach will likely yield good results from resellers who don’t want a problem. Note that this is done before an investigation is initiated, as our goal is to get the sellers removed as cost effectively as possible, and at this stage we find many resellers simply take down their listings voluntarily, eliminating the need for further investigation.
Step 4: Investigate the Worst Offenders.
Professional unauthorized sellers are skillful at hiding their identities to avoid legal actions and subpoenas. Very often they use a network of online identities, corporate shells and other tricks to stay in the shadows. Amazon and Ebay are often little to no help in this regard—it is up to trademark owners to investigate a site’s users, as unfair as that sounds. Cyber investigators, when engaged in this specific program, will purchase and receive products, run extracted information through advanced databases, and can eventually determine many if not most of the sellers’ identities and even physical locations.
Step 5: Activate the legal machine.
Once your targets are identified, you can terminate the agreements of your own representatives who are found selling in unauthorized channels. Additionally, an attorney can send a C&D letter or draft complaint directly to the seller with their name identified, making it clear that you have uncovered their identity and can take further legal action against them if necessary.
Step 6: Increase the pressure.
Continuing the legal efforts, for any remaining unauthorized sellers, the next step is to increase legal pressure, which may involve sending a subpoena or actual filing of a lawsuit against the unauthorized seller. There are an array of different tools attorneys can use to put further pressure on unauthorized sellers, including claims for actual or liquidated damages, and/or injunctions to de-index websites, transfer domains, and/or freeze assets in a merchant account. A temporary restraining order aimed at freezing PayPal assets, for example, can be very effective at getting a reseller’s attention.
Protecting Your Field.
Products sold at lower prices online often result in consumers opting against buying from the sales field at suggested retail. Fewer sales can lead to upsetting your current field, while prospective reps – seeing the prices of the products being sold online – may be reluctant to sign on with you in the first place.
In other words, unauthorized sales can damage not only your ability to keep your distributors happy and to maintain positive relationships with them, but also to attract new reps to sell your products. Both existing and prospective distributors will be turned off by the ease with which consumers can simply go online and buy the products at lower prices. They may even seek to return the product.
Protecting Your Trademark and Brand
Unauthorized sellers often do not adhere to businesses’ quality control standards, meaning a consumer purchasing a product might end up with a damaged or lower quality product.
Many products – such as those in the nutritional or skin care categories – are intended by the company to be distributed by trained professionals, thus the products consumers purchase from unauthorized sellers might not be entirely effective, or are potentially unsafe.
In short, unauthorized sales are disrupting direct sellers, inhibiting their overall growth – both directly and indirectly. Given the problems of products sold on the internet without authorization, companies should strongly consider implementing solutions to stop the unauthorized sale of their products online.
You Can Enforce Against Unauthorized Sellers.
Make 2016 the year you rid your company of this problem. Our firm has released the FieldWatch Unauthorized Seller Solution in conjunction with specialty law firms and investigators who have the tools and expertise to solve this problem for you.
Whatever you do, do something. As unauthorized sellers become more successful reselling your products, the problem will only fester as more and more of them wind up on marketplace sites, undercutting your sales and tarnishing your field relationships.
- Learn More About the FieldWatch Unauthorized Sellers Program