Creating a Do Not Sell List? Be Mindful of Antitrust Laws

August 10, 2023

In the ever-evolving landscape of ecommerce, businesses often face challenges maintaining control over distribution, preserving brand integrity and complying with antitrust laws. Two key aspects that arise in this context are Do Not Sell Lists, which are sometimes referred to as “Restricted Distribution Lists” or “Prohibited Customer Lists,” and the potential impact of the same as it relates to boycotts under state and federal antitrust law. While a company might aim to limit its distributors’ sales of products to specific customers and redirect sales from others, it’s important to note that United States antitrust law may prohibit certain restraints on trade. These restriction could involve agreements between two or more businesses to not do business, or boycott, another business.

What are Do Not Sell Lists

A Do Not Sell List is a useful tool employed by manufacturers to regulate their authorized distributors’ sales of their products. Essentially, it involves maintaining a list of companies or entities to which distributors are prohibited from selling the products. By implementing such lists, businesses seek to exercise control over distribution channels, protect their brand reputation, and enforce contractual agreements. Do Not Sell Lists enable businesses to ensure that their products are sold through approved channels or to specific customers, helping them maintain quality standards, market positioning and consistent customer experiences.

Implementing a Do Not Sell List, however, is no small task. While a company may have a set of businesses or individuals in mind that it does not want to receive its products, it’s more difficult to actually prevent the products from making their way into unwanted hands. For example, in this ecommerce age, nefarious actors can obtain products from a variety of sources and still turn a profit, such as bulk discount purchasing via brick-and-mortar, online, or liquidation sales. Because of this, the selection process of a company’s business partners has become more important than ever. Businesses should vet their authorized distributors and periodically monitor current inventory levels, sales volumes and trends and end-customer receipts, all of which will go a long way in implementing other important processes, such as

Boycotts and Antitrust Law

Under United States antitrust law, boycotts are generally considered illegal. Boycotts refer to collective actions by competitors to refuse to do business with a targeted company or exclude it from a market. Boycotts can harm competition by restricting the targeted company’s participation in the market, reducing consumer choice, raising prices or impeding the entry of new competitors. To safeguard competition and prevent anti-competitive behavior, antitrust laws prohibit agreements among competitors to boycott or exclude specific businesses.

Preventing Do Not Sell Lists from Becoming Boycotts

Generally speaking, United States antitrust law allows the implementation and maintenance of vertical policies at different levels of a supply chain. Indeed, federal agencies reviewing vertical restraints almost always employ a “rule of reason” analysis, which asks whether the vertical restraint has a pro- or anti-competitive impact on the market.

One way to promote competition with a Do Not Sell List is to incentivize compliance with beneficial programs, such as cooperative advertising funds. Another way is to make a Do Not Sell List part of an authorized distributor package, which should also contain at least distribution agreements, a minimum advertised price policy and warranty process. Of course, a Do Not Sell List should also be unilateral in nature, limited in its scope and subject to review and modification.

Relevance to Ecommerce

In the realm of ecommerce, the combination of Do Not Sell Lists and antitrust law takes on particular significance. With the rapid growth of online marketplaces, maintaining control over distribution becomes more challenging. Ecommerce platforms offer wide-ranging opportunities for businesses, creating complexities in enforcing distribution restrictions and ensuring compliance. Ecommerce businesses need to navigate these challenges carefully to avoid running afoul of antitrust regulations while preserving brand value and protecting authorized distribution channels.

Implementing a Do Not Sell List in ecommerce allows businesses to exert control over product availability and quality, as well as manage pricing consistency. However, it is essential to ensure that such lists do not result in anti-competitive behavior or create barriers to entry for legitimate competitors. Businesses should be mindful of antitrust laws and design their distribution policies in a manner that strikes a balance between brand protection and competition.

In the dynamic landscape of ecommerce, navigating the intricacies of Do Not Sell Lists, other ecommerce policies, and antitrust law is crucial. If your business needs assistance in striking the right balance, contact Kyle D. Stroup (330.978.6549; KDS@kjk.com) or KJK’s eCommerce Group.