June 16, 2016

How to Prevent Grey Market and Diverted Goods From Undercutting Your Prices on eBay


Let’s say your brand is sold on eBay.com. To monitor your products, you frequently check eBay. You notice that there are regularly many products listed on the website for much less than your MAP prices.

Unfortunately, there is no magic solution to fix this problem. Instead, we recommend that brands implement integrated enforcement systems to thwart unauthorized online sales.

Regardless of the actual volume sold or displayed eBay, a brand that is concerned with its products being impermissibly sold should utilize a monitoring service. A good price monitoring service can find sellers and list them based on price, volume and location. This is the most scalable way to stay on top of the marketplace.

By identifying the offending parties (even if just by user name or email address), this is a good starting point. From here, you can begin implementing a graduated enforcement system. Using such a system requires a commitment to stopping the unauthorized sales, and it is efficient and cost effective. No one wants to waste unnecessary resources – especially if there is a large volume of sellers or products.

A good starting point is sending “electronic” cease and desist letters through the messaging platforms on the relevant websites. These letters should lay out the legal claims the brand has against the unauthorized sellers, as well as demand removal.

From there, the brand and its enforcement team can track the removals and can further investigate the remaining sellers. For any remaining sellers, the brand and its team can determine their identities through subpoenas and/or cyber investigations.

Once a seller’s identity is known, the company’s attorneys can send a cease and desist letter to his or her actual address. In the letter, they can explain that the sellers have been identified, face liability for their unauthorized practices, and that the company is prepared to file a lawsuit. This usually results in most sellers removing their existing products.

When the process is unsuccessful, the brand’s attorneys can use additional legal tactics. For example:

  • sending the actual draft complaint that they are prepared to file;
  • actually filing a lawsuit;
  • getting a temporary restraining order to freeze the seller's PayPal account (if using eBay, for example); or
  • getting the seller to transfer his or her domain if selling from an independent website.

The key is having a system to do this efficiently and start with the least costly enforcement tools and going up the ladder as necessary.