Part of having your own business means you’re going to make mistakes along the way. And you know what? It’s okay. I’m explicitly giving you permission to make some. There’s not been an entrepreneur in history that’s been exempt from the struggle and occasional failures of the trade. But don’t get too comfortable. There are some mistakes that have the potential to derail you before you make it out of the station. And, unfortunately, as most of us have learned when pleading with a traffic cop, ignorance of the law is no more a defense for fraud as it is with a speeding ticket.
The thing is, eCommerce arguably has least rule enforcement of any industry. Probably because these rules (and where they exist) as well as the enforcers of these rules are pretty nebulose. Among the many rules that exist, but irregularly enforced are international selling regulations, tax requirements, disclosure rules, trademarking laws.
But what benefit does one have with following the rules? While eBay frequently flies under the radar, sites like Amazon is taking preemptive movements to protect the image and of themselves and their brand ambassadors. eBay will likely follow suit (pun intended) in the coming years as these rules become more established. So, with all these rules, have you ever considered whether there might be something you missed?
Fraud is defined by the Merriam-Webster Dictionary as: the crime of using dishonest methods to take something valuable from another person. Let’s take a look and see if you’re guilty of it without even knowing.
Including the Manufacturer’s Suggested Retail Price (MSRP)
You may not have noticed, but MSRP’s have been stripped from the listings of various eCommerce sites. This all comes at the heel of a recent lawsuit against Overstock.com, where they were accused of systematically listing misleading MSRP’s on their product pages. Overstock admitted to inflating many of their MSRP prices to above the “street price” of identical products.
While it’s becoming a less common practice, even a channel gives you a place to list the MSRP, it doesn’t mean that you should. If you’re found listing inaccurate prices you may be liable for damages. While the repercussions are unclear, using inflated MSRP’s to create a false sense quality is morally (and legally) questionable and should be avoided.
Using Trademarks and Copyrighted Materials
In an effort to prevent counterfeits and protect their brand, some companies are restricting the sale of them on any eCommerce website. While few companies are as effectively protective as Walt Disney and Birkenstock over their brands and products, the best thing you can do is be aware of the rules and tread lightly when on legally shaky ground.
Etsy sellers are perhaps the most notoriously guilty of listing trademarked products, by selling handmade goods using trademarked logos and designs. But in reality, there’s a large percentage of sellers that are committing this crime without even realizing it.
For example, while it may seem harmless, copying Google images and using them on your listing is illegal.
Unless the photographer has given you explicit permission to use their material, you’re actually stealing it. While you can argue that you’ll likely never be approached by the image’s owner, pissing off the wrong person could mean a costly legal battle. And if it’s been a recurring problem and they decide to make an example out of you, your offer of taking down the picture probably won’t satisfy their thirst for blood.
You may also run into a problem selling a product when you’re not an authorized reseller.
Brands want to ensure their quality and decrease counterfeits. To do this, some brands have started requiring sellers to be authorized reseller’s in order to sell their products. You may get away with being unauthorized for a while, but if you get caught your best case scenario is them sending you an angry cease-and-desist letter.
Are unsolicited emails cluttering your inbox? If you don’t remember subscribing to any of these emails, it’s more than likely that company purchased an email list, which contained your name, of customers that met their desired target audience. Lucky you. The thing is, this is a form of fraud.
Some forms of fraud come in seemingly innocent ways. In fact, maybe the most common form of it is through email.
The CAN-SPAM Act sets national standards for email correspondence in America, but there’s also international spamming laws that you should be aware of if you plan on sending promotional material abroad. In fact, in Italy, ignoring such rules can actually land you jail time.
In addition to it being illegal, it can actually hurt your business more than it can help. Take Gmail as an example.
If Google sees you sent the same email to 1,000 of its users, and none of those clients even opened it, much less clicked anything inside it, it might just think twice before putting your email in their inbox next time. More than likely, it’ll send it right to the spam folder instead. Do this enough times, and your IP address grade may suffer (meaning no matter who you email or for what purposes, your email may go to spam). Having a poorly rated IP address can even affect incoming emails. Even worse, you might just piss someone off so much that they actually mark you as spam. Get enough of those, and no one will be seeing your emails.
So, when’s the last time you got an unsolicited email from a company you’ve never heard of and decided to do business with them? The answer is probably never. Form good business practices and value every potential client’s inbox like you would your own and don’t purchase email lists.
Listing Your Product as “New”
While eBay still has glimmers of the wild West, particularly in regards to its comparably lax rules, it’s good practice to keep a pulse on other eCommerce sites so you have an idea of what’s to come. One example of this would be the crackdown on listing practices on Amazon.
While not typical, there is one terrifying way some sellers have been notified of copyright infringement and violations of your marketplace’s terms of conditions.
Some Amazon sellers have discovered emails from manufacturers’ infringement department notifying them that they are in violation of Amazon’s Marketplace Condition Guidelines. What caught these sellers off guard is that the listings in question were for unopened, unused products listed rightfully, they thought, as “new”.
According to Amazon’s conditions, however, for a product to be listed as “new” it must still be supported by the original manufacturer’s warranty— which is usually invalidated when sold by an authorized reseller. So, in other words, most products obtained and sold through retail arbitrage are actually at risk of copyright infringement if listed as “new” (though may never be enforced).
While this seems to disproportionately affect Amazon sellers, it would behoove eBay sellers to be aware of what’s brewing in the eCommerce industry to arm yourself for future trends.
Taxes & Permits
If there’s one area of a business that’s easy to overlook a step it’s this one. With all the nook and crannies hidden within our bureaucratic system, it’s inevitable that something will eventually fall between the cracks.
Maybe one of the most overlooked requirements is a simple permit allowing you to sell your products (yes, even online). Depending on your state, it may be called a reseller’s permit, resale number, or sale and use tax permit. My best advice with is to check your individual state’s rules on obtaining and requiring permits for operating your business legally.
In addition, you should get serious about collecting and filing your taxes accurately.
eCommerce is a new industry that is going through it’s growing pains, but Uncle Sam is starting to learn the ropes and won’t take kindly on businesses that have cut corners in the past. You can learn more about best practices here.
While not having a permit and not taking your taxes seriously may not impact your business now, if you’re found in violation of either of these things you may later be subject to harsher penalties and fines than what you would’ve paid to do it right the first time.
As eCommerce matures so do the regulatory and enforcement agencies associated with it. In the coming years, we can expect to see an increase in compulsory sales tax at the time of purchase and a crackdown on counterfeits. As people find new loopholes and workarounds so will these channels find ways of closing them. So, like most things in life, it’s probably better to just do it right the first time and save yourself a lot of hassle down the road.