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July 22, 2020

Five Reasons Why Your Unauthorized Seller Enforcement Strategy Is Not Driving Meaningful Results

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We regularly hear from companies that are engaged in unauthorized seller enforcement but are failing to drive commercially meaningful results. Here are five reasons why your current strategy is holding you back:

1. There Is No Legal Basis For Your Enforcement Tactics:

As a threshold matter, it is imperative to understand that, as a general rule, there is nothing wrong with buying and reselling genuine products. This is often referred to as the first sale doctrine. In most instances, there are specific exceptions to the first sale doctrine that brands must establish to legally overcome this rule and have a viable basis on which to effectively enforce against unauthorized sellers. Without such a foundation, enforcement will ultimately be ineffective.

2. You Are Relying On Gimmicks (That Can Quickly Backfire):

Many companies try various tactics like asserting that products are counterfeit if sellers fail to engage, or other attempts to game the marketplace’s reporting systems. Many times these tactics are baseless (leading to legal actions against the brand or its enforcement vendor by the targeted reseller) or contrary to the marketplace’s policies (leading to the brand’s suspension or other punishment). There are no takedown tricks or one-off tactics that will deliver sustained, commercially meaningful results over time.

3. You Are Relying On Scare Tactics That Are Promptly Ignored By Sophisticated Resellers:

Some companies bombard sellers with messages or letters asserting that the seller is “unauthorized” and demanding removal of product. Without the necessary legal foundation, stating that a particular seller is “unauthorized” is typically meaningless. Just about all sophisticated resellers know this and confidently ignore such communications.

4. You Are Focused On The Wrong Metrics:

Many companies erroneously focus on the percentage or number of unauthorized sellers removed. However, these are vanity metrics that often have little-to-no correlation with what really matters commercially. Simply removing large numbers of small sellers with a few products will not meaningfully impact the percentage of sales captured by your authorized seller(s), drive sales to authorized sellers or increase brand equity. Brands must be able to lawfully target and remove the large, truly disruptive sellers (which are those most likely to ignore baseless threats) to drive meaningful commercial improvements.

5. You Fail To Address The Root Cause Of Your Brand’s Unauthorized Sales Problems:

Brands engaged in ineffective enforcement tactics often find themselves playing a never-ending game of whack-a-mole. Without an adequate legal foundation and a robust, legally-backed enforcement process, brands often have no basis to compel sellers to disclose product source information, or otherwise to identify the true cause(s) of the diversion problem. To truly resolve your brand’s unauthorized sales problem, diversion sources must be uncovered and steps taken to mitigate the causal issue(s) involved. For more information on diversion diagnostics and root cause identification and corrective actions, please see our whitepaper (here) or our book, Controlling Your Brand in the Age of Amazon (here).

About Vorys eControl:

Vorys eControl has worked with hundreds of leading manufacturers and brands to help solve their unauthorized sales issues, resolve channel conflict and protect brand equity. We provide end-to-end online sales control solutions, including monitoring and data analytics, foundational policies and procedures and legally-backed enforcement, both domestically and internationally. You may download a free copy of our ebook on stopping unauthorized sales here. To discuss your company’s current enforcement strategy, please contact Daren Garcia at dsgarcia@vorys.com or 513.723.4076. You can also contact us by clicking here.