What Is Price Anchoring?
What’s a sly way to make consumers think they’ve stumbled upon a once-in-a-lifetime, can’t-pass-up, incredible steal of a deal? Easy: advertise an inflated original price and promote the MSRP (manufacturer’s suggested retail price) as a *sale* price.
The practice is called price anchoring, but it’s against regulations.
Online Retailer Hit With Price Anchoring Charge
Excerpt from class action filing against Zulily:
Sound byte from New York Attorney General about case:
Price Anchoring Has Been Around Forever
Price anchoring is as old as marketing itself. Shop owners learned early that the mere illusions of massive sales were enough to entice customers. And back in the day, few laws prohibited the practice; but regulators eventually caught on and disavowed the practice.
It’s Fine To Compare Prices; It’s Not Fine To Lie About Prices
Comparing prices is fine. But lying about an MSRP amounts to false advertising (some people call it price scheming). According to the FTC, lying about costs is an unfair business practice.
Do You Know The Name Of A Private Label E-Commerce Lawyer?
Top-rated — yet affordable — Kelly / Warner works with e-commerce entrepreneurs.
Our team assists with:
- Price anchoring legalities;
- Business formation;
- FTC / FCC / FDA marketing compliance;
- Civil law counsel;
- Asset protection;
- International shipping;
- Account suspensions;
- Counterfeit and “hijacking” incidents;
- Intellectual property issues;
- Promotional and product governance; and
- Problematic consumer reviews.
A Little About Our Internet Law Practice
Want to know a little more about us? We’re a lean, but successful, boutique law firm that concentrates on Internet business issues.
Aaron Kelly, Esq.: Founding partner — and self-described gearhead — with a 10-out-of-10 on AVVO.com and a preeminent AV rating, Aaron love to help entrepreneurs and startups with everything from business formation to fighting against unfair competition tactics.
Daniel Warner, Esq.: Founding partner and certified egghead (he did receive one of the highest multi-state bar exam scores), Daniel Warner is the guy businesses want on their side. Exceptionally disciplined with a photographic memory, Dan is an incredible litigator who’s won his share of David v. Goliath cases.
Raees Mohammad, Esq.: Partner and academically recognized scholar, Raees is the firm’s online privacy aficionado. He’s also a corporate governance maestro and deft at crafting emerging business strategies. (Oh, and, we’re pretty sure he’s a graduate of James Bond’s little-known — but highly elite — School of Smooth.)
“Zulily Not the First Retailer Sued for Alleged Price Anchoring.” Legal Newsline. 25 Mar. 2016. Web. 25 Apr. 2016. <http://legalnewsline.com/stories/510701888-zulily-not-the-first-retailer-sued-for-alleged-price-anchoring>.
UPDATE: Amazon recently changed its policy; sellers can no longer offer discounts in exchange for reviews (in most circumstances). We decided to keep this article up for archival purposes.
Team members from BestReviews analyzed 360,000 consumer posts on Amazon.com. Their conclusion? Amazon is flooded with 4- and 5-star reviews, which raised the question: “Can Amazon reviews be trusted?” The answer: Yes, but be aware.
The team observed that:
- 66.3% of Amazon user ratings are 4- or 5-stars;
- A “verified purchase” doesn’t mean “full price purchase;”
- 96% of people who got a free or deeply discounted product gave 4- or 5-star assessments, even though they weren’t required to post high-ratings, just honest ratings.
Can You Trust Amazon Reviews?
So, what does this all mean? Does it illustrate a flaw in Amazon’s review system? Are Amazon reviews worthless?
No, it’s not that drastic.
What the results DO prove is that recipients of free and discounted goods are more likely to give a positive rating than people who pay full price. Humans emotionally connect to money because it’s associated with survival. As such, the more dollars we part with for a product, the more likely we’ll be critical of its shortcomings.
What the results DO prove is that recipients of free and discounted goods are more likely to give a positive rating than people who pay full price.
How Algorithms Can Affect
To balance the review field, Amazon’s rating algorithm gives more weight to reviews written by people who pay full price than those written by launch reviewers who likely got a free product.
Amazon Doesn’t Care If You Give Away Free Products In Exchange For Honest Reviews
(This policy has since changed.)
You’ve probably seen the words “honest review” in an Amazon post. That usually means the author got the product for free or at a deep discount.
Yes, it’s against Amazon rules to pay for fake reviews outright. It’s fine, however, to give away free products in exchange for honest reviews.
An Amazon spokesperson explained that the company “does not allow compensation or incentive for reviews” except “when sellers provide a [free or discounted] copy of the product, in advance, in exchange for an unbiased review.”
Yes, it’s against Amazon rules to pay for fake reviews outright. It’s fine, however, to give away free products in exchange for honest reviews.
Amazon Explains Why It Loves User Reviews
When communicating with the BestReviews team, Amazon expressed its love of consumer feedback, explaining:
Got Review Issues? We Can Help.
We’re review physicians who revive businesses hobbled by damaging feedback. How do we do it? Well, strategies are detail specific, and everyone’s case is different. Let’s talk about your situation and develop a plan that will get you back on track.
Agarwal, Kriti, and Rafe Needleman. “Can You Trust Reviews on Amazon?” Can You Trust Reviews on Amazon? 14 Mar. 2016. Web. 25 Apr. 2016. <https://www.yahoo.com/tech/can-you-trust-reviews-on-amazon-174800847.html>.
The Federal Trade Commission slapped retailer Lord & Taylor for flouting marketing guidelines. Remember folks: use promotional hashtags.
The Social Media Campaign That Got Lord & Taylor in Trouble
Product: A paisley dress from Lord & Taylor’s Design Lab collection.
Marketing Tactic #1: Shelled out money — and a free dress — to 50 fashion influencers in exchange for posting a picture of themselves wearing the same paisley dress on the same day.
Marketing Tactic #2: Ran a paid (“native advertising”) article in Nylon magazine.
Problem With Marketing Tactic #1: Most of the participants neglected to include promotional hashtags (i.e., #ad, #sponsored, #paid) with their posts. In the end, the lack of proper disclosures amounted to unfair and deceptive marketing, in the eyes of the FTC.
Problem With Marketing Tactic #2: According to reports, the Nylon article wasn’t sufficiently marked as paid content; nor was it presented as part of the social media blitz.
Punishment: The FTC publicly forbade Lord & Taylor from “misrepresenting that paid commercial advertisements [are] from an independent or objective source.” The consumer agency also announced plans to monitor the brand’s marketing efforts temporarily. Why no fine? Well, this is the first high-profile cases of its type; it’s the warning shot.
Consider Yourself Cautioned: From now on, the commission will likely dole out severe fines for not tagging social media marketing posts.
FTC’s Warning: “The use of influencers right now is huge for brands. We are just emphasizing through this case and other investigations that we’ve had that when companies are paying consumers to help promote their brands, that that needs to be made clear to consumers; that advertising should be identifiable as advertising.”
How Did The Social Media Campaign Work Out For Lord & Taylor?
How did the promotional event work out for Lord & Taylor? The paisley dress flew off digital shelves. Sold out. Which raises the question: Are FTC fines sufficient deterrents? Or, do the potential profit gains outweigh the risks associated with ignoring marketing regulations?
For its part, Lord & Taylor has assumed a conciliatory stance. Company spokeswoman Molly Morse rationalized to USA Today:
Got Questions About Promotional Hashtags? Need Online Marketing Legal Help?
Marketing rules and regulations are piling up. Are you sure you’re following all relevant laws, regulations, and industry guidelines? You could be slapped with a hefty fine if caught operating outside regulatory bounds.
We’ve reinstated suspended accounts; registered trademarks, copyrights, and patents on behalf of clients; set-up profit-friendly, asset-protecting businesses for people new to the private label niche; performed FTC, FDA, CPSC marketing compliance audits; gotten defamatory consumer reviews removed from the Web; helped sellers shake counterfeiters and listing hijackers.
Give us a call today. Let’s fix your problem.
Malcolm, H. (2016, March 16). Lord & Taylor settles FTC charges over paid Instagram posts. Retrieved April 18, 2016, from http://www.usatoday.com/story/money/2016/03/15/lord–taylor-settles-ftc-charges-over-paid-instagram-posts/81801972/
Alibaba is at a crossroad. The path it picks could profoundly affect the company’s future. Why should sellers and marketers care? Well, if Alibaba’s *health* declines, it could impact the e-commerce ecosystem.
Alibaba E-commerce Update: Counterfeits and Government Skepticism
What should you know about Alibaba’s current position?
- Many U.S. officials want Alibaba on the Notorious Markets List because of alleged counterfeit goods on the site. This latest warning isn’t the first time a counterfeit outbreak has hurt the platform. Before its IPO, Alibaba was on the List; but cleaned up its act, and got removed in 2012.
- Ostensibly in response to U.S. concerns, Jack Ma — the Mark Zuckerberg of Alibaba — has promised to scrub the site of scammers and insists he’s never “missed any meetings relating to [Alibaba’s] anti-counterfeit team.” Another show of commitment? The company hired a slew of new employees to work on the Alibaba e-commerce counterfeit problem.
- Ma hinted at an Internet-wide strategy, specifically mentioning JD.com and WeChat. Choosing rodents as an allegorical vehicle, Ma explained, “If before we were huffing and puffing to chase down and kill mice, now what we’re going to do is annihilating [sic] the environment the mice need to survive.”
- Alibaba allegedly partnered with law enforcement officials to arrest 75 suspected *e-commerce criminals.* In other words, the platform isn’t necessarily a privacy stronghold. Be aware.
- Another interesting tidbit? Whispers indicate that Chinese officials could be “turning against” Alibaba over some tension between Ma and China’s President Xi Jinping. You can read about it here. Will the beef affect Alibaba’s platform? Believe it or not, there is a chance — albeit slim. But, China’s current administration has shown a Napoleonic appetite for Internet control. Watch this space.
We Solve E-commerce, Marketing & Private Label Business Problems
Do you sell things online?
- Are you dealing with an account suspension at Amazon, Etsy, eBay or another e-commerce portal?
- Has someone hijacked your listing on Amazon or another open catalog website?
- Have counterfeiters latched onto one (or more) of your products?
- Is it time to formally protect your products with intellectual property protections?
If you answered yes to any of these questions, we can help.
Our firm has carried many sellers and marketers over professional obstacles. We also handle mundane — but critical — corporate governance, business, and intellectual property legalities.
Our goal is to ensure that the people with whom we work are profitable, protected, and compliant.
If you want to read more Alibaba e-commerce updates and other online retail legal news, head here.
Lopez, L. (2016, March 21). There are signs that China is turning against Alibaba. Retrieved April 18, 2016, from http://www.businessinsider.in/There-are-signs-that-China-is-turning-against-Alibaba/articleshow/51502849.cms
Custer, C. (2016, March 14). Tech in Asia – Connecting Asia’s startup ecosystem. Retrieved April 18, 2016, from https://www.techinasia.com/jack-ma-lays-alibabas-brutal-strategy-war-fake-counterfeit-goods
Let’s take two minutes to review the latest Arizona Internet law headlines.
Arizona Revenge P-rn, Take Two
After a false start, Arizona now has a revenge porn law. The State Legislator passed a similar statute in 2014, but it was ultimately deemed unconstitutional and excised from the books.
Arizona’s Failed Revenge P-rn Law
Loosey-goosey language killed the state’s first revenge porn law. Under it, anyone who published images with any nudity — and without consent — risked a criminal record.
What’s wrong with that, you ask? Well, people worried that the vague wording created a loophole that gave legislators leeway to censure controversial images (example: the infamous abu ghraib photos, which did include nudity).
Under the new Arizona revenge porn law, plaintiffs must prove ill intent on the part of the defendant. The law was fast-tracked to the Governor’s desk and the statute is already in effect.
The New Parameters
Under the new iteration of the Arizona Internet law, plaintiffs must prove ill intent on the part of the defendant. Immodest pictures released in service of the public interest won’t be subject to Arizona’s revenge p-rn law.
In extreme cases, revenge p-rn felons may land a 2-year prison sentence. Most first-time offenders, however, will walk away with probation.
The law was fast-tracked to Governor Doug Ducey’s desk, he signed it, and the statute is already in effect.
Arizona Wants To Become A Sharing Economy Stronghold
A group of State legislators want to make Arizona a “sharing economy” (e.g., Airbnb, Uber) stronghold. The State Senate recently waived in a measure that disallows towns, counties and cities from banning short term rentals. Or, in more colloquial terms: a law that would allow people to operate Airbnb businesses without much hassle from local authorities who may be a smidge more hostile about short-term rental properties.
The Pro Sharing Economy Argument
But state officials want to grow the state’s sharing economy. The increase in “hotel tax” revenue would boost government coffers; and by voting for the bill, politicians can legitimately position themselves as “small business-friendly;” plus, the new rules would likely increase affordable accommodations in Arizona — and by extension tourism.
Nay-Sayers: Airbnb-Type Rentals Can Ruin A Suburban Neighborhood!
Not everyone is thrilled with Arizona’s push to grow its sharing economy. State Sen. John Kavanagh, the lone legislative dissenter, is Team NO because he fears tourists may disrupt the suburban force. Kavanagh explained the other side of the coin:
But Kavanagh doesn’t seem to have a lot of support on the issue; the majority of officials voted in lock-step with a vision Governor Ducey painted during the State of the State address:
The Senate recently waived in a measure that disallows towns, counties and cities from banning short term rentals. Or, in more colloquial terms: a law that would allow people to operate Airbnb businesses without much hassle from local officials who may be a smidge more hostile about short-term rental properties.
The so-called “Airbnb Bill” has yet to be signed into law; it’s currently making its way through the approval process.
An Amendment For Arizona’s Crowdfunding Bill? (Great For Startups!)
Last year, to energize Arizona’s startup economy and stimulate job growth, state legislators passed a crowdfunding bill. Its weakness? The law limits investment to Arizonians.
But that may soon change! The Arizona Small Business Association (ASBA) is lobbying for an amendment that permits out-of-state investments.
Senator David Farnsworth is marshaling the bill through Phoenix. Essentially, the proposal seeks to expand the current crowdfunding law by permitting:
- Limitless numbers of unaccredited investors;
- No individual investment cap;
- Debt and equity investing;
- Investor-friendly liquidity provisions; and
- Favorable SEC reporting parameters;
ASBA CEO Rick Murray explained why the crowdfunding amendment would stimulate the state’s startup economy:
But that may soon change! The Arizona Small Business Association (ASBA) is lobbying for an amendment that permits out-of-state investments for crowdsourced ventures.
An Arizona Internet Law Attorney Can Help Solve Your Startup’s Challenges
Need an Arizona Internet law attorney? Kelly Warner has been working with startups, entrepreneurs and tech companies for nearly a decade. We’re not a group of armchair lawyers that only read about the emerging business ecosystem. Instead, we’re lawyers and programmers; attorneys and early adopters; legal eagles who know the difference between black hat and white hat marketing.
Head here to read what people like you have to say about lawyers like us.
If you’re ready to solve your Internet law issue, we’re ready to listen and provide cost effective, profit bearing, protective solutions.
Baker, D. (2016, March 12). Arizona Gov. Doug Ducey signs bill criminalizing ‘revenge porn’ Retrieved April 11, 2016, from http://www.azfamily.com/story/31455001/arizona-gov-doug-ducey-signs-bill-criminalizing-revenge-porn
A. (2016, February 18). SB-1425 boosts state’s equity crowdfunding law | AZ Big Media. Retrieved April 11, 2016, from http://azbigmedia.com/ab/sb-1425-complements-states-equity-crowdfunding-law
Banchiri, B. (2016, March 11). A new law in Arizona would protect Airbnb and similar sites. Retrieved April 11, 2016, from http://www.csmonitor.com/USA/USA-Update/2016/0311/A-new-law-in-Arizona-would-protect-Airbnb-and-similar-sites
The Amazon FBA program is an excellent starting point for people new to the private label selling niche. Sure, Amazon grabs a percentage of each sale, though the benefits far outweigh the fees.
What are the important takeaways of Amazon’s seller terms? Let’s review four legal tips for FBA sellers — specifically focusing on accounts.
Legal Tips For FBA Sellers #1: Don’t Manipulate Reviews
“We have a zero tolerance policy for any review designed to mislead or manipulate customers.” ~Amazon.com Terms of Service Agreement
Why the hard line when it comes to review integrity?
User feedback is essential to Amazon’s marketing magic; reviews meaningfully engage consumers and serve as sales copy. In fact, Amazon is so concerned with review reliability that its algorithm doesn’t allow for multiple product reviews, from the same household, on any ASIN. That’s right, if your spouse loves the couch-2-fridge 3000 and you hate it, only one review can be posted from the home IP. Moreover, (and allegedly), some people purport that an Amazon algorithm can pinpoint parties tied to a particular seller or brand.
Amazon is so concerned with review reliability that its algorithm doesn’t allow for multiple product reviews, from the same household, on any ASIN.
The Big List of Amazon Review Dos and Don’ts
- Amazon doesn’t like it when people pay for praising product reviews. The company even has a history of suing fake review services and individual reviewers;
- Don’t buy fake reviews that trash competitors’ products;
- Do have reviewers disclose if they received free products in exchange for a fair review (we can draft an adequate disclosure for you);
- Do encourage buyers to leave reviews, but don’t direct them off Amazon.com.
Friend & Family Reviews
Does that mean friends and family, who genuinely like your product, can’t leave an honest review? Of course not. They can share opinions – good and bad. Technically, yes, the ultra-cautious could tell friends and family to disclose their relationships in reviews. But really, it’s unreasonable to disallow people from posting; after all, they have free speech rights, too. In fact, many peoples’ first reviews are solicited from people they know.
Just don’t pay people to write fake, glowing reviews — it could get you kicked off the site.
Legal Tips For FBA Sellers #2: Whiners Don’t Live Long and Prosper
The FBA space is growing by digital leaps and branding bounds; so is the number of complaints fielded by Amazon’s seller performance department. With that in mind, consider presenting questions and concerns in a concise, easily digestible way . And above all, provide evidence; doing so makes Amazon’s job easier — and may speed your case in the long run.
Don’t drone on — and on — about a personal beef or how something or someone is unfair. Instead, clearly delineate your issue and explain how it breaks Amazon’s rules. The less emotional your appeal, the better; stick to a “just the facts ma’am” approach.
Legal Tips For FBA Sellers #3: Don’t Bribe Customers For Good Reviews
Is it OK to offer deep discounts in exchange for reviews? In the past, yes. Now, no.
Updated in 2016, Amazon’s TOS says that account holders can’t offer free products or discounts in exchange for a fair and unbiased review. Full stop.
Legal Tips For FBA Sellers #4: Amazon Holds A Lot Of The Cards
Here’s a simple but essential reminder: clicking the “I agree” box, is the equivalent to signing a contract that says, “Yes! I agree to play by Amazon’s rules.”. So, if Amazon makes a decision related to your account, like not choosing to use all the supplied keywords, don’t complain to Amazon that it’s being “unfair” or “impinging on your rights.” You agreed.
Now, that doesn’t mean you can’t work with the company to resolve issues, but don’t go into negotiations with guns a-blaze.
What’s Your Plan If Amazon Suspends Your Account? Work With An FBA Fixer.
The best way to avoid account suspension is compliance – compliance with both FTC and FDA guidelines, in addition to Amazon’s rules. Are you 100% positive your operation is on the up-and-up, regulations-wise?
Who are “we”? Kelly / Warner Law. Our mission is simple: affordably support online entrepreneurs using legal, technological, and marketing tools.
We help private label online sellers and marketers:
- Navigate the account suspension process;
- Shake off hijackers and counterfeiters;
- E-commerce business formation;
- Review your account for compliance with Amazon’s rules;
- FTC / FDA / FCC / Shipping compliance;
If something goes awry with your Amazon account, you don’t have to go it alone. Protect your investment and work with one of our FBA fixers. Guidance from an ecommerce attorney probably costs less than you imagine – and it may ultimately put more money in your wallet.