Unauthorized Sellers are a growing and ubiquitous problem for brands selling their goods on eCommerce marketplaces, such as Amazon, eBay, and Walmart. Unauthorized resellers sell products without the brand’s authorization or consent, which hurts a company’s brand, tarnishes its reputation, and cuts into profit margins.
The First Sale Doctrine
The First Sale Doctrine sometimes provides protection to unauthorized resellers that are attempting to capitalize on your brand’s hard earned reputation and goodwill. Under the First Sale Doctrine, a person can generally buy a product and then resell that product. But the First Sale Doctrine is far from absolute and if brands are serious about taking down unauthorized resellers, there are many ways to overcome the First Sale Doctrine.
Previously, we wrote about using quality controls to overcome the First Sale Doctrine. If brands establish quality controls and can demonstrate a reseller does not abide by such quality controls, then the sales are not protected by the First Sale Doctrine.
Brands can also overcome the First Sale Doctrine by establishing material differences between legitimate products and products sold by unauthorized resellers. Importantly, these differences do not have to be physical differences. The most common (non-physical) material differences relate to product warranties. Companies should implement a warranty program where only authorized resellers are permitted to offer the warranty. The effect being that products sold by unauthorized resellers are materially different than products sold by authorized sellers, due to the lack of warranty on the goods sold by unauthorized resellers.
Enforcement is Key
However, as with quality controls, brands actually have to enforce this policy. This means at a minimum, when customers seek out warranty protection, the customer should be required to provide information about where they purchased the product. If the product is purchased from an unauthorized reseller or the company cannot authenticate the purchase, the company should not honor the warranty.
Balancing Customer Satisfaction and Long-Term Impact
Brands may be hesitant to adopt this approach as it may result in an unhappy customer. However, brands should focus on the longer term impacts that unauthorized resellers can have on a company or product line. Thorough warranty policies paired with quality control procedures, implemented on a uniform and consistent basis, will result in an enhanced brand image and an overall increase in customer satisfaction (not to mention an increase in the company’s bottom line).
By establishing material differences and enforcing policies effectively, brands can protect their reputation, ensure customer satisfaction, and combat the challenges posed by unauthorized resellers on eCommerce platforms. If your brand needs assistance in implementing a warranty policy or is facing the problem of unauthorized resellers, contact Alex Jones (440.832.0599; AEJ@kjk.com) or KJK’s eCommerce Group.