Sunday, August 30, 2015

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 many websites that allow others to list products for sale—such as Amazon and eBay—are popular and 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 where unauthorized sales are taking place.  For many companies, Amazon and eBay pose the greatest problem and threat.  For others, it may be a few individual e-commerce websites that are most relevant.  A few searches on the major e-commerce websites and internet search engines should give a company a good sense of the problem.

At this point, the company must prioritize the websites that are most problematic.  Not all unauthorized sales are the same.  Some of them may be more harmful to a company’s brands than others.

Further, unauthorized online sellers with a large supply can cause the most damage.  For example, these sellers can disrupt the minimum advertise pricing (“MAP”) policies by selling below the set price.  This causes problems for authorized dealers who follow the MAP policies.  They lose sales.  Unauthorized sellers that also compete on shipping terms are most likely to cut into authorized sales.

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

While it will vary by company and product, the most harmful “problem 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 resellers usually cause more problems than the small or one-off sellers.  While fewer in number, the larger problem resellers do the most damage to company policies.  This is due to their consistent breaching of the policies that companies aim to enforce.

For example, resellers that vanish after selling only a few products are less likely to impact the market price.   But if a reseller offers a product at a lower price on an ongoing basis, other sellers may 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 eBay).  Purchasers are more likely to assume that a seller with a storefront is authorized to sell the products at issue.

Addressing Unauthorized Resellers

Once a company develops criteria to target problem resellers, the next step is creating a plan to address them.  Cease and desist letters can be effective.  A company’s lawyers can work with them to determine what legal bases they have against unauthorized sellers.  Often, trademark law and tortious interference are the basis for a cease and desist letter.  A company should also make sure its businesses practices support these legal claims.  If they do not, then some changes to the company’s practices may be needed.

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

Once the source is identified, it is often simple for the company to shut it down.  The company can either confront the authorized reseller or simply terminate the relationship.  Either way, the problem can be resolved.  A company’s attorneys can work with it 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 business can use to address the 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.  With the right approach, the process can be cost effective too.

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