In 2016, E-Commerce in the United States accounted for an estimated $400 billion of the overall retail marketplace. The web, however, is not immune from the problems that have plagued the physical marketplace since the dawn of time – the more money there is to be made, the more likely criminals will infiltrate the system.
In an ever-growing E-Commerce world, manufacturers of durable consumer goods are growing ever more frustrated with unauthorized sellers. Their concerns are valid as these rogue retailers cause a host of problems. For example, many unauthorized sellers do not adhere to manufacturers’ Minimum Advertised Pricing (“MAP”) policies. In most cases, they also fail to adhere to manufacturers’ warranties, money-back guarantees and standards for customer service. These tactics have the downstream effect of minimizing brand value in the eyes of consumers and hindering sales made by authorized retailers.
Perhaps most frustrating is the fact that it has been historically difficult to stop these illegitimate sales. Fortunately, E-Enforcement professionals are developing proven methods to put an end to their shenanigans.
Think Like a Criminal
Law enforcement officers will tell you that to catch a thief, you must think like a thief. American law enforcement is certainly doing a lot of thinking on this issue. The federal government spends significant resources combatting E-Commerce related problems on a global scale. In fact, the feds have developed a National Intellectual Property Rights Coordination Center (the “IPR Center”) made up of over 20 federal and global agencies, including the Federal Bureau of Investigation, Homeland Security Investigations, the U.S. Postal Inspection Service, the U.S. Army Criminal Investigative Command Major Procurement Fraud Unit, the Royal Canadian Mounted Police, Interpol and the Mexican Revenue Service, just to name a few. In fiscal year 2015 (the most recent year for which statistics are available), the IPR Center seized over $3 million in merchandise and set “FIRE” (froze, indicted, restrained or encumbered) to over $185 million worth of goods.
So, who are the people wreaking such havoc on our E-Commerce system? Perhaps surprisingly, most are not hard core criminals. Rather, they are just normal people trying to make a quick buck by buying discounted products and then selling them for a profit online. On the more virtuous end of the spectrum, we see people such as brick & mortar store employees who purchase products using employee discounts and in-store sales with the express intent of turning a profit by selling those items in brand-new condition on the web. Often, these individuals have no idea they are doing anything wrong and will typically halt operations after receiving their first Electronic Cease and Desist Notice (“E-C&D Notice”).
As sellers become more seasoned, however, they also become harder to stop. By the time a casual seller starts making enough money to turn E-Commerce into a full-time career, they are typically armed with just enough legal knowledge to allow for a continuing (albeit wavering) belief they are not doing anything wrong. At this stage, rogue sellers may ignore E-C&D Notices sent from a brand’s in-house enforcement team. Alternatively, they will respond by raising the “First Sale Doctrine” under the erroneous belief that the doctrine is an absolute defense to their illicit sales tactics.
The more sophisticated unauthorized sellers also know that even the largest brands loathe spending money on trademark infringement lawsuits as a method of E-Enforcement. Thus, they become more brazen and will sometimes ignore second or third Cease & Desist demands. Another common tactic is to hide behind a cloak of anonymity. After receiving an initial E-C&D Notice, unauthorized sellers may simply change business names or move their sales away from one online retail platform in favor of another. And, so long as they keep eluding E-Enforcement efforts, their principal concern is finding products at low enough prices that they can turn them for a profit.
These insolent behaviors may seem penny-wise, but they will prove pound-foolish. Generally speaking, unauthorized online sellers do not have the capital to fight prolonged court battles with powerhouse brands, such as Adidas, Tempur-Pedic or LG Electronics. Even though these individuals tend to be more technologically savvy than the law firms that are pursuing them, the best law firms are partnering with E-Enforcement Teams who can stop them in their tracks.
So, now that we understand how these unscrupulous sellers operate, what can be done to stop them? The key to stopping unauthorized sellers is no different from the key to stopping other criminals: an effective enforcement strategy is a combination of approaches ranging from education, to effective legal warnings, to the filing of legal proceedings against bad actors.
Education, in this realm, is principally focused on consistent messaging. Both retailers and consumers should know that: (1) the manufacturer has a network of authorized sellers; (2) the manufacturer will honor warranties or money back guarantees only for products sold by authorized sellers; and (3) customer service is only available for products purchased from authorized sellers. Likewise, distribution agreements should set clear MAP policies and inform distributors of the manufacturer’s intent to enforce those policies. Finally, manufacturers must demand that all illegal sellers stop selling their products. If first E-C&D Notices are ignored, the manufacturer must be willing and prepared to step up enforcement efforts.
This is where a seasoned E-Enforcement team becomes a fundamental tool in the manufacturer’s attack. As noted, many unauthorized online sellers will respond to the initial E-C&D Notice by simply changing business names. E-Enforcement teams have the expertise and proprietary know-how to identify the people behind these sham businesses. They have databases that track illegitimate sellers by their business names, selling techniques, open source information, breadcrumbs and modus operandi. Their databases are rife with names, last known addresses, sales volume histories, favored products, selling tactics, platforms and the methodologies they use to obfuscate their identities. Additionally, E-Enforcement companies have access to law enforcement databases that are simply not available to other professionals who operate in this space – MAP Monitoring Services, tech companies and law firms among them.
More Importantly, a professional E-Enforcement Team knows how to escalate pressure on the seller utilizing a variety of other enforcement tools. Those tools include: (1) the initial E-C&D Notice; (2) post E-C&D Notices of Non-Compliance (often sent to a individual at their home or business address); and (3) consistent tracking of the sellers’ online maneuverings. These actions send a clear message that they are dealing with a brand that is dead-set on enforcing its trademark rights.
If the seller remains non-compliant after those tactics are exhausted, E-Enforcers, in conjunction with a manufacturer’s legal team, will simply file a lawsuit against the individuals and notify them of the case number. This typically puts an end the manufacturer’s unauthorized seller dilemma. The key to this level of enforcement is having the expertise, knowledge and access to proprietary tools that will root out illicit sellers personally and continually increase pressure on them until they stop.
For more information, contact the E-Enforce™ enforcement team at firstname.lastname@example.org, or call us at (800) 892-0450. You can follow us at e-enforceCIS@twitter.com, Ecommerce Enforcement Group On Linkedin and E-Enforce.com.