Technology Law News: Common Carrier Loophole Could Benefit Online Business Behemoths

technology law common carrier loopholeThe FTC may score a win, courtesy of the Ninth Circuit. The bench opted to revisit the FTC’s case against AT&T for allegedly throttling customer data. Technology law circles are buzzing about this case because if the judges rule in favor of AT&T, the decision will create an  “oversight loophole.”

FTC v. AT&T: The Telecom Fight Over Governmental Oversight

This case began in 2014 when the FTC sued AT&T, under Section 5 of the FTC Act, over improper disclosures about data throttling practices.  AT&T’s response?  You aren’t the boss of us.

Argument: The FTC Shouldn’t Exercise Oversight of Common Carriers

AT&T argued it was exempt from liability because a portion of the business fell under the status of common carrier. As a result, company lawyers reasoned, the entire organization should be exempt from FTC oversight when it comes to disclosure issues.

The senior vice president of Public Knowledge, Harold Feld said, “[The decision] was huge because it was totally unexpected.  Nobody’s ever ruled that way before.”

Why FTC v. AT&T Is A Big Deal Internet Technology Law Case

Since 1914, the FTC has been “working to protect consumers by preventing anticompetitive, deceptive, and unfair business practices, enhancing informed consumer choice and public understanding of the competitive process, and accomplishing this without unduly burdening legitimate business activity.”

For years, the FTC’s gaze has lingered on Internet-related issues.  But if this case falls in favor of AT&T, the commission could, effectively, lose some proverbial power.  How will larger online companies avoid FTC oversight? They’ll buy a small cellphone company, and voila — regulatory-avoidance mission accomplished.

What The Future Holds If AT&T Wins This Internet Law Case

For the time being, the “common carrier loophole” is plugged while the Ninth Circuit, once again, ponders the case. However, if the court rules in favor of the telecom, it will uncork.

Interestingly, on May 18th, the FTC voted 2-1 to begin eliminating net neutrality rules. The change altered the classification of ISPs as common carriers under the Communications Act.  If officials nix the common carrier classification, AT&T will have to change their defense strategy in its case against the FTC.

Kelly / Warner is a leading Internet law firm that works with tech corporations and Internet Service Providers across the United States, Canada, United Kingdom, Asia, and Europe.

Internet Law Issue: Do Moderators Nullify Certain DMCA Immunity Protections?

online moderatorsOnline platforms that feature user-generated content filtered by moderators may have to find other ways to police content if a paparazzo emerges victorious in a current Internet law case.

Do Moderators Disqualify Websites From DMCA Shields?

The suit at the center is Mavrix Photographs, LLC v. LiveJournal, Inc. A Ninth Circuit Court of Appeals decision found that the Digital Millennium Copyright Act’s sanctuary clause, which absolves sites of “infringement of copyright by reason of the storage at the direction of a user,” may not provide legal shelter for moderated websites, in certain cases.

Mavrix Photographs — “a celebrity photography company specializing in candid photographs of celebrities in tropical locations” — alleged that LiveJournal — a moderated online journal — violated Mavrix’s copyrights.

Mavrix purports that a community within LiveJournal called “Oh No They Didn’t!” violated the DMCA by posting twenty Mavrix copyrighted images between 2010 and 2014.  ONTD’s content is created and submitted by users, but moderators retain final post privileges; first, a team of volunteer moderators approves posts; then, LiveJournal employees rubberstamp the volunteer-filtered posts.

Appeal’s Court Overturns Decision: Look At Procedures, Not Creators

The Ninth Circuit reversed the lower court’s decision.  The appeal’s bench found that the district court inappropriately focused on who created and approved the material rather than LiveJournal’s content publishing procedures.  The Ninth Circuit also found that factual questions, regarding whether or not LiveJournal moderators acted as agents of LiveJournal, still needed to be addressed.

If the court decrees that LiveJoural’s moderators are agents of the site, LiveJournal could be held liable for copyright infringement over user posts.  The court needs to determine “whether Mavrix’s photographs were indeed posted at the direction of the users in light of the moderators’ role in screening and posting the photographs.”  Moreover, safe harbor stipulations won’t apply if the ONTD moderators are found to be doing more than “merely accessibility-enhancing activities.”

If this case turns out for Mavrix, it could profoundly affect site operations for the majority of semi-moderated platforms.  In fact, many websites may choose to abandon moderation altogether, to avoid potential liabilities.

Contact An Internet Law Attorney

Kelly / Warner is an Internet law firm that works with tech companies, online businesses, and startup entrepreneurs. Our team handles everything from incorporation to IP registration to complex litigation and more. We invite you to learn more about our Internet business legal practice.

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Illinois On The Brink Of Getting A Digital Data Privacy Law

Illinois online privacy lawFederal lawmakers clobbered the FCC’s digital data disclosure law, but Illinois representatives are nursing a version of it back to health. A digital data privacy measure, if ratified, the Right to Know Act would require most websites and social media platforms to disclose what user data they collect and with whom it’s shared.

Illinois’ Right to Know Act: A Digital Data Privacy Law

Sponsored by State Senator Michael Hastings, the Right to Know Act requires Internet service providers and websites to provide either a working email address or toll-free number that people can use to request information about collected personal data and third parties that received said data.

So far, a version of the bill has passed in the House, and the state’s Senate recently voted 32-21 in favor. It now heads back to a House committee, where it’s expected to be approved.

Federal Data Collection Law Is Dead, But States Are Picking Up The Slack

A Federal Communication Commission digital privacy law, which would have required ISPs to disclose the nature and destination of collected consumer data, was scheduled to go into effect in the coming months.  But in March, the U.S. Congress killed the measure.

States, however, seem to be filling the legislative gap.

The National Conference of State Legislatures revealed that statutes similar to the one in Illinois are being drafted in Alaska and Rhode Island. Plus, about twelve other states are in the early stages of considering some form of online privacy legislation.

Not Everyone Is Thrilled With Illinois Right to Know Act

Online businesses aren’t fans of the act. Opponents argue that a dearth of actual consumer value, coupled with costly administrative excess, make this bill a bad one.

Sen. Chris Nybo explained, “Every technology company [I have] spoken to, from Microsoft to Uber, Lyft…is opposed to this bill.” Nybo also lamented, “I think it sends the wrong message.”

Another subset of politicians is also opposed to the law. Not necessarily because of reasons above, but because they think online privacy issues should be handled on a federal level.

“The federal government has a system of rules and regulations to handle internet traffic,” explained Jason Barickman, a state Senator. “I think we, as one of 50 states, (need) to let them handle those issues and not create additional burdens for our many people and businesses here in Illinois,” he concluded.

Undeterred by detractors, Sen. Hastings, the bill’s sponsor, enthused “I think this is a step forward for Illinois in terms of data privacy. It gives people the right to know what information (Internet companies are) selling to a third party.”

Questions For An Internet Lawyer?

Kelly / Warner works with online businesses and tech entrepreneurs. To learn more about our practice, head here. If you’re ready to speak with an online business attorney, get in touch.

Alibaba Counterfeits: A Legal Overview & Avoidance Tips

alibaba's counterfeit problemIf you run an e-commerce operation you know: counterfeits can be a problem. And U.S. sellers and buyers are suffering the consequences. In this post, we’ll discuss the current state of “product knockoff” affairs — specifically the “Alibaba counterfeits” issue — and then offer a few ideas on how to ebb the rising knockoff tide.

The Global Counterfeit Conundrum

Alibaba: A Collection Of Retail Sites

What, exactly, is Alibaba? An online company based in China, think of Alibaba as eBay, Amazon, and ThomasNet all rolled into one. Broadly speaking, Alibaba consists of three main parts:

  • A manufacturers marketplace where people can find assembly plants and people to make products;
  • Taobao — a cross between eBay and Amazon; and
  • Tiān Māo (“Sky Cat”) — an online retail portal that caters to a higher-end clientele.

Alibaba’s Rising Star

An international online retail force, China’s Alibaba is reportedly worth $260 billion — and climbing. The Asian e-commerce hub, having masterfully positioned itself on the global stage, is quickly amassing the power to create — and disrupt — market niches.

Knockoff Central

If you’re dealing with Alibaba counterfeits, you’re not alone. Everyone seems to be feeling the pinch — from large luxury conglomerates to single-person startups.

So, what are some common scenarios?

Massively Reduced Knockoffs

Example: Vintage Industrial, a Phoenix furniture company that employs a couple of dozen people and crafts handmade tables starting at $5,295, is now competing with manufacturers in China who are selling its exact designs for a mere $24.

Supply Chain Leaks Result In Knockoffs

Example: A jewelry maker’s plans were stolen after she went on a supply trip to China. Now, her one-of-a-kind designs are being mass produced and sold at a much lower price point around the world and online.

Bespoke Clothing Mass Produced

Example: A two-person U.S. clothier, which sewed items by hand, found identical copies of its fashions for sale on an Australian retail website. After inquiring, the designer learned that her clothes were mass-produced in Asia and sold in stores around the world.

Stolen Pictures

Product photos are another hot commodity on Alibaba — and counterfeiters regularly abscond with manufacturers’ marketing materials. Not only do swindlers swipe designs, but they also run off with promotional content.

How can you, a product seller or marketer, stop fraudsters? There’s no silver bullet. However, formally registering intellectual property can help in certain circumstances.

Why Is It So Difficult To Shake Counterfeiters On Alibaba?

You may be thinking: Why don’t business owners inform Alibaba of the knockoff problem? Well, here are some hurdles.

  • Paperwork Pile Up: As one Alibaba counterfeit victim explained, the paperwork required to formally launch a counterfeit claim on the platform is prohibitively time intensive, to the point where it’s nearly impossible for smaller companies to accomplish.
  • Scouring The Site: Since the problem is so pervasive, to effectively catch counterfeiters, companies must spend hours scouring Alibaba’s multiple sites– and most people simply don’t have the resources to indulge in the practice.
  • Unpredictable Reporting Functionality: When asked, Alibaba spokespeople have explained that the company scans 10 million images a day and has removed nearly 400 million suspect product listings over the past year. But, if you ask entrepreneurs under product attack, they’ll probably explain that Alibaba’s counterfeit reporting functionality is spotty.

Jack Ma’s Promise To Help “Make America Great Again”

Several months back, when President Trump was still PEOTUS, he met with Jack Ma — Alibaba’s founder. When the pair emerged from behind closed doors, Ma was pledging to create one million American jobs. No, his company wasn’t hiring a million American workers, but he vowed to help stateside sellers break into the rapidly expanding Chinese e-commerce milieu.

Considering Counterfeit Problems, Is It Wise For U.S. Businesses To Enter Into The Chinese Market?

But a question looms: With the current counterfeiting climate, can U.S. brands effectively launch recognition in overseas markets — especially if their products are used “as reference” for knockoff goods sold at a fraction of the cost?

Take Vintage Industrial, the Arizona-based furniture maker. Its custom-made tables start at $5,295, but a Chinese manufacturer copied the company’s designs, had them mass produced, and is now selling them for $24 a pop.

Not only is rampant counterfeiting plaguing honest sellers, but the United States Trade Representative’s office recently slung Alibaba’s Taobao on the Notorious Markets List — a directory of marketplaces — both online and off — known for trafficking in pirated and counterfeited goods.

One of the reasons Taobao landed on the list is because the USTR believes that “smaller firms have a harder time qualifying for Alibaba’s streamlined program for removing fakes [and] often encounter more bureaucracy and longer response times than larger ones.” Alibaba insists the accusation is “false,” but a spokesperson acquiesced that “there are places that our system can be improved to make them more effective, efficient, and user-friendly.”

Who Is To Blame: Alibaba v. Chinese Government

Who takes responsibility for the counterfeit outbreak? As you may have already suspected, Alibaba thinks that the “primary responsibility of protecting brands rests with the brand itself.” Additionally and controversially, the company’s founder, Jack Ma, famously placed blame on the Chinese government.

As far as Chinese officials are concerned, however, they think Alibaba could do more to thwart fraudsters.

Why Isn’t The Chinese Government Taking A Harder Stand On Counterfeiters?

You may be reading this and wondering: Why doesn’t the Chinese government take a harsher stance when it comes to intellectual property infringement — especially since the nation is notoriously strict when it comes to other Internet laws?

In a word: Growth.

Believe it or not, the United States Patent and Trademark Office didn’t come along until 1975. In fact, the 1790 U.S. Copyright Act expressly permitted the copying of foreign works. Why? Because when you’re a young country — or a nation in the midst of an expansion spurt (like today’s China) — reproducing foreign goods is an efficient way to spark a national economy. Think of it this way: After the Revolutionary War, many an American fortune was made recreating British products. And now, as the Chinese economy grows, a similar phenomenon is playing out.

What Can U.S. Businesses Do To Battle Alibaba Counterfeits?

Unfortunately, there’s no magic to keep product thieves at bay. However, you can do things that will throw fraudsters off your scent.

  • Vet your supply chain, thoroughly. The most common way for product plans to land in the wrong hands is via a leaking supply chain link. So, before you sign contracts or otherwise enter into agreements with overseas manufacturers, vet like your business depends on it — because it may!
  • Use U.S. manufacturers. Yes, it may be a bit more expensive, but by using stateside fabricators, not only are you helping to support our national economy, but you’re giving yourself an added layer of intellectual property protection. Looking for a U.S. manufacturer? Try ThomasNet.com.
  • Become A Job Creator. Calculate how much you’re losing to counterfeit activities. Then talk to an e-commerce consultant about how much it would cost to either a) hire an inside person who is responsible for monitoring and handling online counterfeit issues or b) work with an e-commerce lawyer who can step in on your behalf when fraudsters rear their larcenous heads.

Connect With An E-Commerce Consultant

Aaron Kelly, Raees Mohammad, and Daniel Warner are Kelly / Warner Law. A decidedly tech-friendly firm, their team works with countless online sellers and marketers — both domestically and internationally.

The Kelly / Warner team solves counterfeiting problems, sets up business structures, secures intellectual property registrations, and does just about anything an online business could need…legally speaking, of course.

To read more about other e-commerce issues, please head to the online retail section of the website. If you have questions for Aaron, Raees, or Dan, get in touch today.

E-commerce: Can It Save The Rust Belt?

can e-commerce save the rust beltCan e-commerce help save the “Rust Belt”?

In this post we’ll:

  1. Explore the current state of the E-commerce Union;
  2. Review news items that could affect the vertical; and
  3. Close with further reading links for people thinking of starting an online retail business.

Is E-commerce is the New Investment Banking? Growth Estimates Are Astounding.

Pundits have posited: Brick-and-mortar stores are going the way of the horse-and-buggy; barring a catastrophic event, online retail will be with us forever, in some form or another.

Binny Bansal, co-founder of Flipkart.com, painted the prosperous picture, explaining, “Times have changed. Today, the biggest recruiters in the premier institutions aren’t consultancy or financial firms but the e-commerce companies.”

Sound like an exaggeration? Check out these facts and figures:

  1. Analysts predict that online retail will be a $523-billion-dollar market — in the U.S. alone— by 2020.
  2. In 2016, third-party sellers on Amazon shipped over 2 billion items to 185 countries.
  3. 71% of shoppers believe they will get a better deal online than in a store (which means buyers are flocking to online retail platforms).

Societal and Marketplace Shifts Effecting E-commerce

One Million Jobs?

During the presidential transition, business luminary Jack Ma, Alibaba’s founder, tucked behind Trump’s doors. He emerged pledging to “create 1 million American jobs.”

Media outlets asked: Would Alibaba be hiring a million Americans?

In a statement, Ma clarified:

“We specifically talked about … supporting 1 million small businesses, especially in the Midwest of America. Small businesses on the platform selling products — agriculture products and America services — to China and Asia, because we’re pretty big in Asia.”

In other words, Alibaba isn’t hiring a million U.S. workers in the heartland. Instead, the company wants American businesses to sell directly to Chinese citizens via Alibaba.

Debate: Is that really the same thing as “creating 1 million American jobs”? Furthermore,  will it work?

Arguments stack up on both sides.

China is home to over a billion people (compared to about 320 million in the U.S.), and its e-commerce market is expected to reach $840 billion by 2021 (almost double the estimates for the United States). Moreover, the Chinese middle class is growing — and in the market for American goods; the conditions are ripe for small American businesses looking to expand their markets. Theoretically, there’s enormous growth potential.

Of course, there’s a counter argument.

Several analysts scoffed at Ma’s economic seduction. For starters, China’s laws prevent over-profiting by foreign entities. So, let’s say a small U.S. business takes off in China. At some point, when the profits surpassed a certain threshold (high, no doubt), that small U.S. business would be forced to partner with a Chinese entity — and relinquish a certain amount of control — to keep expanding in the region. (That said, many people think the tradeoff is worth it.)

Automation: The True Job Thief?

President Trump promised to reinvigorate the American heartland by reviving factory jobs lost overseas, and a lot of people voted for that pledge.

But, (politics aside), the pink elephant in the room is braying: U.S. manufacturing output hasn’t rapidly decreased over the past 30 years; the number of U.S. manufacturing jobs has. And that loss isn’t solely the fault of overseas plants (they do play a small roll, but not enough to fix the decline). Over the past two decades, companies invested in technology. Because of automation, a task that once took five people, may now only take two.

It’s a tough pill to swallow, but those factory jobs probably aren’t coming back — at least not the same way and in the same volume. So the question becomes: What can fill the gap? And right now, e-commerce looks like a profitable bet.

Starting An E-Commerce Business

Starting an e-commerce business may be easier than you think. It doesn’t require a trust fund’s worth of capital, nor copious amounts of official paperwork. Just create an account with an online retail platform that allows third-party sellers (Amazon, eBay, Etsy, Jet, Walmart, et cetera) and start selling.

Legal Tips For Buying An Ecommerce Business »

Of course, you’ll need to procure and promote your wares, which takes times and skill — and yes, a bit of startup capital. Also, to avoid a liability disaster, it’s wise to create a business entity for your e-commerce business. The good news: People regularly accomplish all these things on a $1,500 budget. In fact, one e-commerce legend started his company with $300; today it’s a multi-million dollar operation.

Further reading links

Questions For An E-commerce Business Attorney?

Our firm, Kelly / Warner, regularly works with online sellers and marketers. We assist with everything from account suspension to product counterfeiting to online payment processing issues. Additionally, our team performs marketing compliance audits and handles the business formation process, step-by-step. Whatever your e-commerce legal needs, we’re here to help.

Will Trump’s Presidency Crush The Ecommerce Market?

picture of word TAX on computer to accompany a blog post about possible ecommerce tariff from TrumpA 45% tariff on all Chinese imports; that’s what Donald Trump promised supporters. Subsequently, U.S. ecommerce entrepreneurs who use Chinese manufacturers may be wondering: Are we about to be thumped by Trump?

What’s the answer? Will the ecommerce sector suffer under Trump’s administration?

(Can we be blunt? Good. Thanks.) Look, if you voted for the Republican candidate, you’re probably thinking, “Everything will be great, including ecommerce markets! Sellers have nothing to worry about!” If you didn’t cast your ballot for the real estate scion, your thoughts probably veer somewhere near, “It’s the end of the world as we know it, especially for ecommerce entrepreneurs!”

The truth, history consistently proves, likely rests between the two extremes. So, in that spirit, let’s chuck partisan rhetoric into the recycling bin and take a few minutes to dispassionately assess whether or not a Trump presidency will have a destabilizing effect on ecommerce businesses.

First things First: What’s A Tariff?

Are tariffs the same as taxes? Technically, a tariff is a type of tax; specifically, a tax on imported goods and services (in rare instances). According to Investopedia:

“Tariffs are used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers. They are one of several tools available to shape trade policy.”

Tariffs are typically a per unit charge, remitted during international custom inspections, and have three primary purposes:

  • Increase the cost of imports, to stimulate domestic demand for the same product;
  • Shift currency appreciation values; and
  • Create government revenue.

Tariffs are not one-size-fits-all measures and have far-reaching financial effects.

(Housekeeping Note: Since we’re talking about the possible effects of Trump’s presidency on ecommerce businesses, the discussion will focus on issues related to imported goods.)

Second things Second: The Current State of the Ecommerce Scene

According to the U.S. Commerce Department, for the sixth year in a row, the ecommerce sector is skyrocketing. 2015 figures show that online product sales accounted for a third of the country’s retail growth — and that number jumps significantly if fuel and automobile acquisitions (which aren’t readily available to buy online) are struck from the calculation.

Last year, online sales totaled $341.7 billion, a 14.6% increase from the previous year.

In 2015, alone, Fulfillment by Amazon sellers shipped over a billion items to more than 185 countries. As such, traditional big-box retailers, like Wal-Mart, are beefing up their ecommerce offerings to compete with established third-party retail platforms like Amazon and Jet.

Ecommerce Exploding

Why is the online retail sector growing like bamboo? In a word: globalization. Anybody who is willing to roll up their sleeves, do the research, pick the right product, and exert some elbow grease can build an online retail operation.

Some people may ask, “But how? Doesn’t it cost a fortune to get products manufactured? Isn’t significant startup capital required?”

Not anymore, thanks to websites like Alibaba.com.

Alibaba.com: The Chinese Ecommerce Site Loved By U.S. Sellers

What’s Alibaba.com?

An online marketplace of out China, Alibaba is a popular supply chain stop used by throngs of U.S. ecommerce businesses. Think of Alibaba as an online Costco; users can purchase products, in bulk, for less.

Even more enticing? People with product invention ideas can shop for Chinese manufacturing services on Alibaba. Why use overseas fabricators? Cost. Items commissioned from Asian manufacturers are significantly less expensive than stateside alternatives.

The Catch-22 of Today’s Ecommerce Environment

So, as you’ve probably already surmised, the current ecommerce setup is a classic catch-22.

Globalization, technology, and the implementation of free trade principals have fueled entrepreneurism by lowering startup costs — which, in turn, has bolstered the economy.

But then there’s the flip side.

All those manufacturing jobs, which were once manna for a stable middle class, sailed overseas, leaving economically devastated regions in their wake.

So now, as a nation, we find ourselves saddled with a Sophie’s choice: Do we hamstring the aborning ecommerce market — and subsequently small business growth — by keeping import fees to an absolute minimum? Or do we hike tariff prices in an attempt to save traditional manufacturing jobs, in an increasingly competitive global market?

The President’s Tariff Power

What’s the next piece of this puzzle? Presidential privilege. Does the U.S. President have the power to impose tariffs without legislative oversight or approval?

If this were a shock jock podcast, we’d ominously answer, “Yes.” Because technically, yes, both the 1965 Trade Expansion Act and the 1974 Trade Act give POTUS significant leeway to negotiate import-export agreements, including tariff rate hikes.

But what, exactly, constitutes “significant leeway?”

How The Trans-Pacific Partnership Plays A Role

Enter the TPP, or Trans-Pacific Partnership. During the campaign we heard it mentioned — a lot — though typically in passing.

And it’s no wonder that the candidates didn’t dig deep into TPP on the trail.

An excruciatingly complex treaty, the agreement particulars don’t lend themselves well to stump speeches. But for this discussion, let’s turn our attention to the Trade Preferences Extension Act — a provision tucked away in the TPP. Passed in 2015, the statute allows sitting Presidents to draft and present trade bills to Congress. According to the edict, Congress can then either approve or disapprove the President’s measure, but not amend or filibuster it.

Which Way Will Representatives Role?

With a majority Republican Congress, the likelihood of legislators waving through a tariff increase, in the name of job stimulation, is high.

HOWEVER — and it’s a big however — representatives of both the Republican and Democratic persuasions are beholden to donors — donors with serious commerce interests. And a sizable portion of corporate America is more concerned about keeping free trade avenues open than bringing manufacturing jobs back to the U.S.

But at this point, all we can do is speculate. It’ll certainly be interesting to see how the Congressional vote breaks if the new administration does present a trade agreement early on.

War, Emergencies, and National Security Issues Give POTUS More Tariff Negotiating Powers

Section 122 of the 1974 Trade Act also allows for a 150-day (5 month) window wherein the sitting President can enact an “across-the-board” tariff, on all imported goods, for national security purposes. After the 150 days, however, Congress must approve the measure or it becomes unenforceable.

The ’64 trade act is also teeming with executive trade privilege. Under the statute, presidents can:

  • Unilaterally impose any tariffs “during time of war.” And no, “war,” in this context, doesn’t mean a widely recognized world war. In fact, in 1971, nearly 20 years after the Korean conflict had ended, Richard Nixon evoked the privilege, on a flimsy administrative thread, to enact a blanket 10% tariff hike. Pundits seem confident that Trump could cite U.S. Special Forces in Lybia and Syria to warrant the “war tariff.”

 

  • Levy tariffs, on specific goods, during a “national emergency.” And again, in this context, an issue of national security could be something as simple as “we’re losing jobs.” These types of tariffs usually target specific goods. For example, President Obama enacted a 35% tariff on Chinese tire imports after taking office, and China countered with its own tariffs.

So while Trump’s ability to impose economic measures, unilaterally, may be limited, circumstances allowing, he could impose tariffs (as high as 45%) by arguing that China’s actions were causing economic harm in the U.S.

But if Trump did do that, would the impact be disastrous?

Trump’s Potential Tariffs: Possible Impact

So now that we know what can and can’t happen, let’s look at the potential impact.

If Trump imposed a 45% tariff on certain goods, like electronics or steel, then the price of imported electronics or steel from China would likely rise.  Importers would then be faced with a choice: produce the goods domestically or look elsewhere. And depending on the product’s makeup, reproducing it domestically may not be possible.

Regardless, if the cost of any given product rises, consumers will be forced to choose between a) spending more on the product and less on other things, b) not buying the product at all, or c) finding an alternative.

But remember, it works both ways; if the U.S. imposes levies on a product from a specific country, and said country responds with their own tariffs, their citizens will also be faced with the same dilemma as stateside consumers. It’s the ultimate game of chicken.

It All Depends On Your Product

Bottom line: for ecommerce sellers, the potential impact of a Trump tariff really depends on the product and where its manufactured.  Targeted goods could see a hike in customs fees, which would likely be passed on to customers in the form of a price increase, and depending on the good, could lead to a drop in demand.  The scenario may be a bit nerve wracking for Amazon sellers that have private label products produced overseas and imported from China.

Diversify To Survive

In the event of a tariff hike on goods imported from China, Sellers in countries not saddled with the tariff (for arguments sake, let’s choose Malaysia) could — and would — swoop in and undercut American sellers.  Because of this, we always recommend having back up manufacturing plans in other countries (or at least get the balls rolling).

To further gird against potential fee hikes, ecommerce sellers should consider stocking up on products before the tariff lands or finding a tariff-free substitute.  Unfortunately, predicting replacement goods may require swami-like skills.

Lastly, look to expand sales in other countries.  If Brits and Canadians aren’t burdened with tariff cost concerns, they may just prove to be the perfect new sales stream.

Tying It All Together

Let’s recap.

  • Trump vowed to slap a 45% tariff on all Chinese imports as part of an economic stimulus plan.
  • Many U.S.-based ecommerce businesses use Chinese suppliers for cost-saving reasons.
  • The Executive Branch does enjoy significant trade privileges, which Trump could, conceivably, use to make good on campaign promises.
  • The only obstacle to a White House imposed tariff hike is Congress. And at this point, it’s anybody’s guess as to which way it will swing. Lest we not forget, Trump’s road to the Oval Office involved a lot of anti-establishment threats; rank and file representatives could prove to be less than enthusiastic about flying the Executive Branch’s banner.
  • Politicians must also answer to donors. And in many cases, those donors have a vested interest in keeping Sino-American trade avenues wide open.

Will Trump’s administration likely brandish its trade privileges during negotiations? Sure. They’re bargaining chips. In a way, he’d be a fool not to. But at some point, restraint will probably prevail, because neither the Executive or Legislative bodies want to be responsible for hurling the country into a Great Recession on account of an ill-considered, quickly implemented tariff hike.

Final Thoughts: Best Tactics

So, what’s the best tact for ecommerce entrepreneurs at this juncture? If you want to play it safe, consider moving monies to your shipping / import budget, regionally diversify your production, and start targeting buyers in other countries.

In the short term, the worst case scenario is a 45% tariff on specific goods from specific countries. In the coming months, as Trump continues to build his transition team and Cabinet, we’ll all have a clearer picture of the administration’s ethos and its likely impact on the ecommerce industry.

Holiday FBA Legal News: Projections, Prime, and Pirates

computer festooned in garland to accompany blog post about holiday FBA sellers newsHoliday shopping season is upon us. So, let’s take a minute to dissect a bit of ecommerce industry news…using a lawyer’s scalpel.

Holiday Prognosis For FBA Sellers = Less Than Ideal

Unfortunately, this holiday season may be a rocky one for some FBA sellers — especially neophytes.

Why?

Amazon is restricting warehouse services until December 19th. In past years, the online retailer implemented a handful of category-specific cutoffs to ensure sufficient processing time for the holidays, but this year’s blanket mandate is a first.

Why is Amazon doing it? The online retailer explained:

We are restricting shipments from new-to-FBA sellers to ensure we have the capacity necessary to quickly receive and store inventory and ship products to customers. If new FBA sellers have not completed their first shipment to Amazon before October 10, 2016, we encourage them to start shipping to Amazon after December 19, 2016. If the situation changes before December 19, we will notify them by email. We encourage sellers to continue selling on Amazon and fulfilling orders directly to customers.

In short, it’s all about warehouse capacity; unpopular products clog floors and hamstring the distribution process, which has the potential to create a perfect customer service storm, and ultimately cause a complaint tsunami to crash down on Amazon.

The announcement shocked some folks. But should it have? Perhaps not. Earlier in the year, Amazon began forcing certain sellers to reclaim unsold inventory. Hindsight being 20/20, pundits are now wondering: Did we all ignore an important bellwether?

A market analyst further explained:

Looking at the last couple holiday seasons, Amazon realized one thing that can help is better management or optimization of inventory on hand for holiday purchases. They’re looking at available capacity in terms of both third-party and first-party inventory, and clearly being more aggressive in managing what additional products are going to be sent to those DCs before the end of the year.

Source

Amazon Prime In China

Prime finally arrived in a giant country obsessed with overseas products — China. The expansion could be an opportunity boon for savvy U.S. sellers.

Cheaper than its stateside counterpart, China’s Prime costs $57. Amazon cut the price to lure users in an already saturated market. But some pundits are skeptical because regional e-commerce competitors already offer free shipping packages, for less.

So, why push Prime onto an already crowded pitch? Ben Cavender, a senior analyst at China Market Research Group in Shanghai, explained:

If they can offer products and brands the other guys aren’t, this could really work for them. They have so much data about what goods are popular overseas, they may be able to anticipate what products will be popular … in China.

Source

Alibaba Is Still Fighting To Avoid The Infamous Pirates List

Dubbed “the bad boys of retail” by a U.S. executive, trade groups, like the AAFA, are practically begging officials to slap Alibaba back on the “notorious markets list” — an index of online and offline piracy souks. The threat has been lingering for several months, and Alibaba made the latest move by sending a statement to the U.S. Trade Representative, which, in part, read:

We routinely collaborate with brands, associations, and regulators to maintain the integrity of our marketplaces. Our recent USTR [United States Trade Representative] submissions describe our steadfast efforts to fight counterfeiters online and the sources of such production offline. It also reflects our very strong commitment towards intellectual property rights protection.

Source

Need Help With An E-commerce Business Issue?

Our firm, Kelly / Warner, regularly assists ecommerce entrepreneurs with routine business issues and aberrant legal matters. What do we do? Things like (but not limited to):

  1. Help people form asset-protecting businesses to avoid personal liability.
  2. Negotiate with websites, like Amazon, on account reinstatement issues.
  3. Act as counsel for enterprises involved in overseas shipping and marketing.
  4. Perform advertising and marketing compliance reviews.
  5. Handle payment processing setbacks and setups.

To learn more about us, click here. If you’re ready to talk, schedule a conversation.

Amazon Sues Over Fake Reviews: FBA News

Picture of fake dollar bill to accompany a blog post about Amazon sues over fake reviews

Amazon Does Not Suffer Fools Fake Reviews

Amazon sues over fake reviews, and actively engages courts to enforce its “zero tolerance” stance. Recently, the company filed yet another lawsuit against several phony feedback facilitators.

Amazon Sues Over Fake Reviews

In the past year alone, the online retailer has already sued hundreds of businesses and individuals who create and deploy fake reviews. (You can read about other instances here, here, and here.)

Why Does Amazon Hate Fake Reviews?

Amazon — (and the Federal Trade Commission, for that matter) — views fake reviews as an act of unfair competition. Or, in legalese, buying fake reviews violates Section 5 of the FTC Act because the practice qualifies as an intentional attempt to mislead consumers.

Amazon explained its position to TechCrunch

“Our goal is to eliminate the incentives for sellers to engage in review abuse and shut down this ecosystem around fraudulent reviews in exchange for compensation. As long as this type of abuse exists, we will continue to take enforcement and legal action against sellers participating in fraudulent reviews.”

Discount-For-Review Programs Are Also Against Amazon Policy

The news comes in the wake of Amazon’s announcement to purge the site of incentivized reviews (exception: books).

What does this mean for e-commerce entrepreneurs? In all probability, traditional advertising will make a triumphant comeback.

Is Amazon Hamstringing Startups?

In addition to investor cynicism, Amazon’s recent crackdowns have sparked a concern flame in the e-commerce industry. Is Amazon, in a way, raising the barrier of entry way too high, by ultimately forcing startups to outlay a larger initial marketing spend?

Fake Reviews v. Discount-For-Reviews: Both Are Now No-Nos on Amazon

What is the difference between fake reviews and discount-for-review programs? The former conspicuously violates Federal marketing regulations; the latter is (perhaps, it’s now more accurate to say, “was”) an enormously helpful startup marketing tool — which also spawned an entire promotional services niche, feedback facilitation.

Or, to put it simply: discount-for-review programs helped grow the online business economy.

Difficult But Necessary?

On account of Amazon’s no-holds-barred approach to exterminating solicited reviews, a big e-commerce question now looms: Do Amazon’s actions fall into the “difficult-but-necessary” category? Did company quants crunch numbers and discover that its third-party selling programs were ballooning at a breakneck — and unsustainable — speed, flooding the platform with potentially problematic digital detritus?

Because here’s the thing: Amazon is currently the top-dog, and as such, greatly exposed. It must be careful. Other online retailers are patiently crouching in the tall weeds, waiting for the perfect opportunity to pounce — and that opportunity could be Amazon’s deteriorating respectability. After all, if the platform becomes synonymous with counterfeit goods and phony reviews, the public will start to look elsewhere.

Adjust To Survive

Now, does all this news spell doom and gloom for FBA sellers? No. Surviving amounts to adjusting. Brands and marketers should consider:

  • Launching products at a low price, along with a well-executed customer satisfaction email campaign, which encourages consumers to leave reviews.
  • Readjusting budgets to include other types of “Off Amazon” marketing efforts.
  • Adding an unexpected packaging surprise. Why? Because people are more likely to leave a review if they’re delighted by an unanticipated treat. This tactic also has the added advantage of acting as a counterfeit deterrent.

Need Advice From An Amazon E-Commerce Attorney?

Our firm helps business owners overcome online review challenges, in addition to other Internet business issues, like account suspensions, counterfeiting, and intellectual property troubles.

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Luxury Counterfeit Law: Kering v. Alibaba

luxury counterfeit lawsuitAlibaba.com and a behemoth fashion company are entangled in a luxury counterfeit lawsuit. Let’s take a look.

The Cast: A Luxury Brand to Rule Them All v. Online Retail Giant

Before we get to the lawsuit, let’s establish the players.

Kering

Kering is a huge fashion holding company for sport and luxury brands like Yves Saint Lauren, Gucci, McQueen, Brioni, and Puma. (Fun Fact: Kering’s CEO, François-Henri Pinault, is married to actress Salma Hayek.)

Alibaba.com

Alibaba.com (at the time of writing) is the #2 tech company in China and a major online retail hub. Almost everybody in the product marketing industry interacts with Alibaba.com in some capacity. Like Amazon.com, Alibaba.com is an expanding Borg-like force.

Kering v. Alibaba.com: The Clash of The Retailers

Product Marketing Legal Overview

Let’s be blunt: More often than not, especially lately, items bearing luxury tags are made in China. Why? You know the answer: cheaper labor. “Then how come luxury items cost so much?” Again, you know the answer: brand status is commerce’s co-pilot. “So, then, where does all that luxury money go if not to the people making the products?” Bingo! Back to the luxury companies who are  trading mostly in marketing, not manufacturing.

A retail revolution Is afoot: Asian factories are growing frustrated with the disparity. After all, who appreciates doing most of the work and reaping the least amount of profits? Nobody. So, Chinese manufacturers began a “Quality Made in China” initiative in an attempt to bypass luxury marketing middlemen, like Kering. Let’s put it this way: if “Made in the USA” is about patriotism, the Chinese effort is about globalism.

Luxury Counterfeit Law Claim

So, back to the lawsuit.

In an attempt to knockout knockoffs, Kering sued Alibaba, claiming various intellectual property infringements and — rather dramatically — racketeering.

Racketeering, you ask? Here’s the argument: Alibaba allegedly collaborated with fourteen counterfeiters, by allowing vendors to sell phony products on its site, over an extended period, to deliberately cheat Kering of profits.

Alibaba insists the claims are baseless. So much so that Jack Ma, the online retailer’s founder, vowed to lose in court rather than settle. Why isn’t Ma compromising? Only he knows; but to wager a guess, it’s probably because a settlement would thrust Alibaba into an extremely vulnerable cash flow position — which could also effect U.S. online retail companies. Moreover, a racketeering conviction, in a case like this, has the power to hamstring the global market — top to bottom.

Judge Shuts Down Luxury Goods Racketeering Claim

Theoretically, the racketeering assertion is plausible; but is it practical? No way. Why? It could crush the multi-billion online retail industry — and jump-start another global recession.

The presiding judge did side-eye the racketeering claim, and ultimately dismissed the charge, explaining:

“[M]erchants weren’t aware of each other or were in intentional cahoots w/ Alibaba, required by U.S. racketeering laws. […] The fraud perpetrated by each merchant defendant could be accomplished without any assistance from any other merchant defendant.”

The Case Is Not Over: Yes, in this luxury counterfeit law case, the judged axed a racketeering charge — but the intellectual property claims persist; Jack Ma and co. aren’t out of the woods just yet.

An Attorney Who Understands Luxury Counterfeit Law

Need help sorting an Internet business issue? If so, get in touch.

Online Review Defamation: A Client Lied About Your Business. Now What?

online review defamation
Protecting your online reputation can be as difficult as winning the Tour de France…clean. So, what can businesses do when faced with online review defamation? Let’s take a look.

  • First, ask yourself: “Is the review accurate?” This can be the hardest step. If the review is negative but true, the chances of remedying the situation with a defamation claim diminish considerably. Why? Well, under United States law, legal defamation requires falsity. Does this mean you can’t combat the negative review? No, it doesn’t. You can. (We’ll get to “the how” below.)
  • Second, ask yourself another question: “Is the review fundamentally true, but grossly exaggerated?” Hyperbole, believe it or not, rarely passes the defamation sniff test. Sometimes, but not often. In the eyes of the law, reasonable people can distinguish hyperbolic speech from a false statement of fact. For example, an online reviewer condemns: “Mr. Widget’s Widgets are the WORST widgets in the world!” Mr. Widget is peeved about the review and threatens a defamation lawsuit. But the truth is, he probably wouldn’t win an online review defamation lawsuit, because “the worst company in the world,” is an exaggerated opinion and not tantamount to libel. Does this mean you can’t combat negative reviews? Again, no. (I promise we’ll get to how below.)
  • Third, if your detractor did, indeed, make a false statement of fact in an online review, you may be able to sue for trade libel or defamation. That said, most online defamation situations rarely blossom into lawsuits. Attorney intervention usually does the trick; people often — and innocently — don’t realize they’ve crossed a legal line and just need reminding to remove it.
  • If you’re confident a detractor made a false statement of fact, as opposed to a hyperbolic opinion, contact a lawyer. He or she can analyze the situation and help you work through questions like:
    1. Depending on details, should you send a letter, or use another marketing method, to squelch the effect of bad online reviews?
    2. Is the statement egregious enough to move forward with a full-fledged lawsuit? If yes, do you have enough evidence to effectively argue the case in court?

Find a attorney who will tell you, upfront, if your potential case is a dud or a stud.

To learn more about the nuances of online review defamation, click here. To read more about the history of U.S. defamation law, click here.

Online Review Defamation: Consider This Before Suing

A difficult customer or client posts a scathing review, with a low truthiness quotient, on a popular site like Amazon, Yelp or Ripoff Report. What can you, the business owner, do?

You’ve got three options:

  • Ignore the issue, letting the problem fester and grow.
  • Work with an attorney to get the offending comments removed.
  • Work with a marketing professional to neutralize the review’s negative effects.

According to this Forbes article, 88% of consumers trust online reviews as much as personal recommendations. So ask yourself: do you want to sacrifice business by ignoring a damaging review? I’m sure we can all agree: doing nothing is unwise.

So, with option 1 out of the way, which is better: working with a lawyer or a marketer?

88% of consumers trust online reviews as much as personal recommendations. So ask yourself: do you want to sacrifice business by ignoring a damaging review?

Deciding Between Marketing Fixes & Legal Solutions

Before deciding whether to deal with a damaging online review with marketing methods, legal tactics — or both — consider a few facts about U.S. defamation law.

  • Thanks to a high-profile legal scuffle between a preacher and pornographer, satire and parody aren’t legally defamatory. Consider: did your detractor cloak disdain in satire or parody? Yes? Then you’re probably better off working with a marketer. (Chill Tip: In cases of satire and parody, consider laughing it off. Humorlessness and hyper sensitivity are not qualities consumers easily tolerate.)
  • Is the statement an opinion? If yes, then it’s not defamatory under U.S. law. Comments like, “I hate this product!” or “John Doe is the WORST dentist I’ve ever used!” are opinions.
  • Does putting “In my opinion” or “IMO” before a false statement of fact automatically make said statement an opinion? No. IMO is not a legal shield that confers defamation immunity on all who use it.
  • What happens if an anonymous user posts a scathing review? You may be able to uncover their real identity. Click here to read more about the process.
  • What does it take to win a U.S. defamation lawsuit? It’s difficult, but possible. In short, plaintiffs need to prove that contested statements are about them, in addition to falsity, harm, and a level of negligence. For a state-by-state defamation law analysis, go here.

You Have Options. Don’t Wait, Act. Solutions Are A Phone Call Away.

If your business has suffered because of an inflammatory review, and you’re ready to fight back, let’s talk.

Our team has helped hundreds of individuals — and businesses– pluck defamatory content off the Internet. And note, a lawsuit isn’t always nececcary to remedy an online review defamation issue.
Who are we? Kelly / Warner — a group of attorneys, with strong marketing connections, that excels at fixing online defamation problems. To learn more about us, head here.

Reclaim your reputation — and revenue flow. Get in touch today.

Yelp Defamation: Is The Site Required To Remove Defamatory Reviews?

Yelp Defamation

Yelp! (“Yelp”) isn’t happy.

A California judge ordered the review site to remove a defamatory posting. Yelp, for its part, felt the decision defied Section 230 of the Communications Decency Act and appealed — but lost.

Will the ruling affect future Yelp defamation claims? Will business owners be helped or hurt by this turn of events?

Let’s review the case and discuss the potential implications for SMBs.

Background Summary: Business Owner Sues For Defamation Over Yelp Review

We live in the Age of Online Reviews, so it happens all the time. A service provider clashes with a client. Eager to share his displeasure with the world, said client (under the altruistic auspices of “warning others”) takes to Yelp and posts a scathing — often hyperbolic — negative review. Within days, the target’s inquiries come to a grinding halt.

It’s every business owner’s worst nightmare, and it happened to an attorney a few years back — so she sued for online defamation.

Who won?

To shorten a long story, the client failed to appear in court, which triggered a default win, and the judge ordered Yelp to remove the defamatory review.

Yelp’s Position: Forcing Content Removal Defies Section 230 of the CDA

But Yelp didn’t want to remove the review.

In its defense, the review website argued insufficient governance, maintaining that Yelp wasn’t party to the lawsuit, and subsequently not subservient to the court in this matter. Yelp also reasoned that the removal order contravened Section 230 of the CDA, which gives immunity to websites dragged into lawsuits involving defamatory user content. Or, to put it another way, it’s the law that stops users from suing, say, Facebook (or even Yelp) over another user’s post.

Now, please don’t read us wrong: you CAN sue individuals who post libelous statements, but not the social media platform on which the contested statement sits. (Section 230 applies to most social media sites. The rules, however, vary for blogs, news sites and other informational platforms that can legally be deemed “the publisher”).

Excerpt From Yelp Defamation Removal Lawsuit

“Yelp’s claimed interest in maintaining its site as it deems appropriate does not include the right to second-guess a final court judgment establishing that statements by a third party are defamatory and thus unprotected by the First Amendment.”

Why Doesn’t Yelp Want To Remove Defamatory Reviews?

Why is Yelp against weeding the site of defamatory posts? In its estimation, removing content is a free speech quagmire, so the company spares no expense in defending removal requests.

A spokesperson for the review aggregator explained:

“The ruling undermines the free speech and due process rights of consumer reviewers and the online platforms that host their content. In a single jumbled ruling, the court managed to contravene and contort longstanding precedent concerning the First Amendment, constitutional due process and Section 230 of the Communications Decency Act.”

Section 230 of the Communications Decency Act, or CDA, says, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

Court’s Reasoning: Asking Yelp To Remove Defamatory Review Doesn’t Have Anything To Do With Section 230 In This Case

According to the court, the removal order wasn’t legally damaging, and therefore fell outside the Section 230 sphere. In other words, since Yelp wouldn’t face imminent legal injury by deleting the defamatory post, the removal order doesn’t interfere with the CDA.

And on a technical note, according to the ruling, Yelp allegedly filed its protest motion too late.

Who Can I Talk To About My Yelp Defamation Issue?

Dealing with a defamatory Yelp review? We can help. Our team has assisted countless small- and medium-sized business owners overcome setbacks related to damaging Yelp reviews. Not every case requires a lawsuit. In many instances, we’ve been able to rectify the situation without filing a claim.

Contact us now. We’ll discuss your situation, (even vent about Yelp if you want), and then start formulating a plan — that’s both effective and budget conscious — to reverse the damage done by Yelp defamation.

Native Advertising Rules Are Now In Effect (And The FTC Is On The Hunt)!

native advertising law

Don’t Let The FTC Decimate Your Profits

A quick reminder.

Native advertising rules are now in effect!

At the end of 2015, the Federal Trade Commission published native advertising (promotional content designed to mimic editorial content) guidelines.

Before the release, websites profited from native advertising blocks that fell under headlines like “Promoted Content” — basically, headers that disguised links as internal links. Or, to put it another way, click bait.

However, despite the regulation’s release, Adweek recently reported that about 70% of websites using native advertising are flouting FTC guidelines.

So, what happens if officials catch you snubbing online marketing rules and regulations? Well, they can sue you, fine you and make you pay.

Native Advertising Startup Opportunity Alert!

Another interesting tidbit to pop out of Adweek’s piece? Experts estimate that portions of the native advertising niche will generate as much as $53.4 billion by 2020.

Put Me In Touch With An Online Marketing Lawyer, Pronto!

Unaware of the new native advertising guidelines? Click here for a summary. For those in a rush, the gist is this: Make sure native advertising is distinguishable as advertising.

Are you sure you’re 100% FTC compliant? If not, get in touch. We may be able to help you avoid an FTC investigation — and subsequent fines.

Article Sources

Swant, M. (2016, April 8). Publishers Are Largely Not Following the FTC’s Native Ad Guidelines. Retrieved May 31, 2016, from http://www.adweek.com/news/technology/publishers-are-largely-not-following-ftcs-native-ad-guidelines-170705