For several years, brands have asked Amazon to help them find and punish unauthorized resellers for their violations. Unfortunately for brands, Amazon takes a percentage of third party sales within their marketplace and is hesitant to enforce seller pricing agreements and risk losing revenue.
As a result of leaks in the supply chain, resellers obtain authentic products and sell them online below their MAP pricing or attempt to violate trademark /copyrights. This makes it increasingly difficult for brands to protect themselves. It’s a concern we hear all too often among sellers,
“What can I do if my brand is threatened by an unauthorized seller?”
In the following blog post, we will address common concerns from copyright / trademark infringement to MAP violations and provide brands with the ammunition they need to protect themselves against these types of attacks.
Jump to the Section:
- Copyright & Trademark Infringement
- Minimum Advertising Price Violations
- Fraud with Commingling on Amazon FBA
Copyright & Trademark Infringement
Copyright / trademark infringement is the unauthorized use of a trademark or service mark on competing or related goods and services.
When infringement occurs on Amazon, a trademark owner may fill out a form (provided by Amazon) or file a lawsuit against the infringing user of the same or similar mark to prevent further use of the mark and collect money damages for the wrongful use.
If the mark in question is protected under the Lanham Act, an infringement action may be brought forward. In most cases, Amazon has the authority to shut down a seller, if they determine the copyright / trademark has been violated.
Typically, the success of an infringement case depends on whether the defendant’s use of the trademark creates a “likeliness” of confusion among consumers and further weakens the value of the trademark.
The trademark does not need to be identical to the violator in question in order for Amazon to shut down the seller. If the mark is similar enough to the original – and generates enough confusion among the average consumer (within the same market), it can constitute infringement.
“I think something we need to differentiate is brand enforcement vs. copyright and trademark infringement,” Sprigley Allan Head of Amazon Program Development at CPC Strategy said.
“Those are two very different things, they both allow very different avenues for attack.”
According to Allan, copyright/ trademark infringement is a concern Amazon is serious about and is getting better and better at handling.
“If you are manufacturing a product overseas and it’s under trademark and someone else purchases that product and imports it without your written authorized consent and then sells it in the United States (under your trademark) – that’s a trademark infringement. That is something Amazon can take down a seller for. Fraudulent and counterfeit products fall into the same set of headaches.”
Copyright & Trademark Infringement: Signs Retailers Should Look For
1. Supply Chain Relations
According to Allan, Amazon sellers concerned about copyright / trademark infringement should always have open communication with their supply chain relations. Brands should make sure they are in good relations with their manufacturers and take the time to have regular conversations with them.
Brands should also let their manufacturers know if they are concerned about infringement. While it may sound like a simple suggestion – leaks in the supply chain are typically the source for copyright / trademark violations.
2. Drop in Buy Box Percentage
“Performance metrics are going to be your best indicator of a violation. First indicator that there is an issue with trademark / copyright infringement is a decrease in Buy Box share because someone has come in and is offering the product in question at an artificially low price. If you see someone selling your product at below your wholesale- that’s a red flag.”
3. Negative Reviews
The last clear warning sign of trademark / copyright infringement is negative product reviews. If you start to notice customers complaining about the quality of your product (example: easily breaks, doesn’t work properly) there is good chance someone is trying to create and sell under your trademark name and leverage your target market.
Why copyright & trademark infringement is detrimental to brands
Copyright / trademark infringement can impact a brand’s functionality severely by impacting their Buy Box share, revenue and most importantly – brand reputation.
Allan cites the example of a company with a successful fitness product, that was targeted by an unauthorized seller. The product was initially manufactured in Taiwan but later moved to a different factory in China because of cheaper cost and better product quality.
The factory in Taiwan continued to manufacture and sell the fitness product illegally under the company’s trademark.
Eventually, the product’s revenue dropped nearly 25% and the company selling the legitimate product lost more than 10% of their buy box share. Negative reviews flooded in with customers complaining about broken parts and malfunctions. The issue became so severe that the company had to consider a complete rebranding of their fitness products line to escape the negative feedback.
How to Report Copyright & Trademark Infringement
Amazon provides several forms to sellers who would like to report a potential copyright / trademark infringement. This form is intended for use by intellectual property rights owners and their agents to notify Amazon of alleged intellectual property infringements such as copyright and trademark concerns.
If you are not an intellectual property rights owner or their agent, Amazon will not be able to process complaints submitted through this form.
According to Amazon’s Report Infringement page, they will not be able to enforce the following:
Detail Page Ownership and Image Restrictions
When a detail page is created, it becomes a permanent catalog page on Amazon.com that will remain even if the creator’s inventory sells out. Additionally, when you add your copyrighted image to a detail page, you grant Amazon and its affiliates a non-exclusive, worldwide, royalty-free, perpetual, irrevocable right to exercise all rights of publicity over the material.
Other sellers can list their items for sale against pages that you have created or added your copyrighted images to. However, we do require sellers to list only against detail pages that exactly match their items. If you believe sellers are listing against detail pages that do not exactly match their items, we ask that you report the violation directly by using the contact us form.
Exclusive or Selective Distribution
Amazon respects a manufacturer’s right to enter into exclusive distribution agreements for its products. However, violations of such agreements do not constitute intellectual property rights infringement. As the enforcement of these agreements is a matter between the manufacturer and the retailers, it would not be appropriate for Amazon to assist in enforcement activities.
Minimum Advertising Price (MAP) Violations
As manufacturers grow they can develop relationships with other product distributors. Unfortunately, sometimes manufacturers discover they are being undercut by unauthorized one-off resellers which are not adhering to the Minimum Advertised Price (MAP).
In the following post, we interview Arie Shpanya CEO of Wiser to discuss the challenges retailers face with MAP violations and brand protection.
A MAP price is a minimum amount that resellers agree not to advertise below.
For example, if a backpack company sets a MAP price of $50 for its best selling item than all resellers including brick and mortar stores and Amazon resellers are obligated to advertise this product at $50 or more.
If they advertise the product at a discount of $35, the Amazon reseller would be in violation of the backpack company’s MAP agreement.
When a MAP agreement is violated, retailers can be left at a disadvantage because Amazon ultimately does not take a role in seller pricing agreements.
Typically, manufacturers require resellers to abide by MAP regulations but in the event no MAP agreement was signed – manufactures have little authority to enforce their minimum pricing.
Why do Minimum Advertised Price (MAP) agreements exist?
- Promote fair competition across all distribution channels
- Maintain brand identity and value
- Allow smaller sellers to compete with larger retailers
- Prevent underpricing
- Protect seller margins
Although MAP agreements protect seller margins, price isn’t the only concern. Brand identity is also a valued factor to retailers.
Why is it important for retailers to protect their brand on Amazon?
“The Amazon Marketplace is among the most competitive for online retailers. There is a lot of pressure to have low prices for a few different reasons. First, Amazon itself is a competitor and is generally willing to sacrifice profits for sales.”
“Second, while no one outside of Amazon knows the formula to land in the Buy Box, Buy Box owners are often among the lower prices. Since retailers are under pressure to cut prices to gain sales, brands really need to monitor their resellers’ pricing to make sure that it’s in line with the Minimum Advertised Price (MAP) policy that they agreed on.”
What are the common pitfalls retailers encounter policing their brand on Amazon?
“One issue that retailers encounter is the domino effect. If one retailer drops their prices, their direct competitors are likely to follow suit to stay relevant. They can then be undercut by a competitor, and lose sales and margins, all while tarnishing the brand of products they’re selling.”
Why is MAP enforcement critical for retailers?
“Price is closely related to brand value. When a reseller cuts the price of an item drastically, it dilutes the brand value and conditions shoppers to expect lower prices from that particular brand. It can tarnish the brand’s image and make it hard to sell at a higher price again.”
What efforts can retailers take in an effort to protect themselves from MAP violations?
“Brands need to automate the tracking process, because even with a dedicated team, there’s no way to manually monitor all items being sold and their prices in a finite amount of time. Automation also brings unauthorized sellers to light. Without the information of unauthorized sellers, it’s impossible to completely track every channel.”
“If a price has been decreased continuously, but is restored to its MAP, it can prevent future sales. The best way to solve this problem is to monitor all reseller networks and prevent MAP violations from occurring in the first place.”
How to Avoid Fraud with Commingling on Amazon FBA
In order to be received, stored at, and shipped from an Amazon fulfillment center Amazon requires retailers that sell on the marketplace using Fulfillment by Amazon (FBA) label their products for shipping.
Amazon’s fulfillment centers ask retailers to identify their products using unique product identifiers which include:
- UPC or EAN barcode
- FBA label (this can be printed from your Seller Central Account)
Amazon’s default FBA label setting is Labeled Inventory. Labeled Inventory requires a FBA label for each product you send (print from Seller Central) and identifies products you send as attributed to your seller account.
If you are unable to print labels, consider Amazon’s FBA Label Service (includes per-unit fee).
What Is Commingled Inventory?
The commingled inventory option provides the option for retailers to skip this label process by selecting the option of stickerless, commingled inventory.
Commingling inventory is essentially pooling your inventory with the inventory of other sellers at Amazon’s fulfillment center. Amazon packs, ships, and provides customer service for those products just as it does with all FBA orders. Items still need to be properly packaged by sellers for inbounding to Amazon’s fulfillment centers.
Instead of labeling each product unit, commingled inventory compiles the same product from different retailers using the UPC. Those products will be pooled together (regardless of seller) based on a barcode (UPC, EAN or JAN) for purchase fulfillment.
“When you choose to commingle inventory, your products become interchangeable with the same products from other sellers for both order fulfillment and removals.” – Amazon
So if you sell Widget A, you can send that widget to Amazon where it will be included with other Widget A’s that share the same UPC. If someone purchases the widget from Amazon through you as a seller- the product sent could come from you, Amazon, or another seller whose products are included in Widget A Commingled inventory.
Commingling inventory on FBA products is an option only for qualifying products which are:
- New (condition)
- Have a scannable Barcode and match only one ASIN in the Amazon catalog
- Aren’t products which require approval (e.g. Media)
- Are not media products (e.g. books, CDs, VHS, DVDs, video games, or software without labels)
If you choose commingled inventory as your inventory setting, remember this will not apply to products that don’t qualify for Commingling. Those products will require individual labels.
Commingling on Amazon has gotten a considerable amount of flak from both sellers and consumers. Some businesses have noted that fake products can get mixed in with the bunch, which leads to negative brand perception, negative reviews, and potentially even unwarranted product returns.
Commingling has become synonymous with issues such as fraud on Amazon, but the shipping problems are more a by-product of the way the system is set up. Commingling integrates products from across Amazon and outside sellers- a system which was designed to, and can benefit Amazon sellers.
“It is [fraud] also a result of the way Amazon manages inventory in its network of warehouses across the U.S. As more third-party sellers have signed up to offer products through Amazon and use its order-fulfillment services…in essence commingling products from third-party merchants with those supplied directly to Amazon by the brands themselves.”- WSJ
In addition to products which may not be the real deal, businesses using Commingling on Amazon face the issues of products which may be:
- Different from the advertised UPC
- Come in damaged or sub-par packaging
If you decide to stop using Commingling on Amazon you may be returned product units that are from another seller as they are sourced from the commingled inventory.
Why Use Commingling on Amazon?
Commingled inventory often gets a bad rap, and sellers definitely lose a degree of control when choosing to commingle their inventory. However, there are also benefits and alternatives to using commingled inventory as a third party merchant using fulfillment by Amazon (FBA) on Amazon.
Commingling is designed to make shipping easier for retailers using FBA. It is an option for sellers who don’t have the time or resources to manage fulfillment themselves, or are shipping from a distant location which affects shipping times.
1) Commingled Orders Reach Customers Faster
From a logistics standpoint, commingled inventory allows a sellers products to be placed more evenly around Amazon’s fulfillment network so that they can reach customers faster Since Commingled products are fulfilled by Amazon, sellers can take advantage of Amazon fulfillment centers- which are strategically placed around population centers to ensure quick delivery to customers all over the nation.
If a seller’s goods were only in the Phoenix fulfillment center, for example, it’s less likely an east coast customer would receive their product on the same or next day.
2) Reduce Cost and Labor for Labeling and Fulfillment Operations
Sellers save significant amounts of time and labor investment using commingling by avoiding applying FBA labels to each product they send to Amazon. Imagine you sell 50 products using FBA, even if it only takes you 1 minute to add an FBA label, that’s still almost an hour of manual labor prior to shipping.
3) Avoid Errors with Labeling
Choosing commingling also allows a seller to not have to apply FBA labels to the products they are sending to Amazon, as the original UPC barcode will suffice. As a result, a seller can find the process of sending commingled products easier and less prone to receiving errors at an Amazon warehouse.
A Seller might consider sending roughly 20% of their catalog into FBA (this will vary based on a number of factors). If this seller sends 29% of their catalog, and the store sells a large number of products- that’s a significant number of labels for Amazon. More labels means more margin for error. How many drinks do the Barista’s at Starbucks label a day, and how many of those are labeled wrong?
Avoid Fraud with Commingling
Sellers always have the option to sticker their FBA products with FBA labels. What this does is separate a sellers inventory of a given product from the same product being sold by other sellers (and Amazon themselves).
Sellers can execute this by printing FBA labels straight from their Amazon account when creating an FBA shipment or by using Amazon’s FBA labeling service (for a fee).
Strategically, a seller could consider offering products which are most at risk for fraudulent products (take the knock-off widget, for example) as non-commingled inventory, while sending the remainder of their FBA products as commingled.
There is no “right” or “wrong” to selecting whether to commingle your inventory, but understanding the risks and benefits of each strategy will allow a seller to make the most educated choice for their product set.
In March 2017, Amazon announced they will be expanding their Brand Registry program to remove counterfeit goods from its website.
According to reports, brands will be able to register their logo and intellectual property with Amazon, so that in the event a counterfeit is flagged, Amazon will be able to take down the violating listing and seller account.
You can learn more about the Amazon Brand Registry here.
For more on brand protection on Amazon, email [email protected]