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

Discounts For Honest Amazon Reviews Is Fine; Paying For Bogus Reviews Isn’t

Amazon Reviews Legalities
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
Amazon Reviews

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:

“We believe that all reviews, positive and negative, help customers make informed purchasing decisions. The fact that customers received the product at a deep discount or for free does not preclude them from having an opinion on the product that can be helpful to other customers. Customers indicate that the content of many of these reviews are incredibly helpful. These reviews often provide additional factual information, videos and photos of the actual product in use, and the reviewers often answer follow-up questions.”

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.

Article Sources

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>.

Use Promotional Hashtags In Tweets, Posts & ‘Grams

promotional hashtags social media legalitiesThe 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:

“A year ago, when it came to our attention that there were potential issues with how the influencers posted about a dress in this campaign, we took immediate action with the social media agencies that were supporting us on it to ensure that clear disclosures were made.”

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.

Our firm helps online marketing and e-commerce entrepreneurs — in addition to startups and established businesses — with Internet law matters — big and small, routine or litigatory.

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.

Article Sources

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 E-commerce Update: 5 Things To Consider When Strategizing

Picture of Alibaba banners outside new york stock exchange to accompany article about Alibaba e-commerceAlibaba 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.

Article Sources

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

Arizona Internet Law Update: Revenge, Sharing & Crowdfunding – Oh My!

Arizona Internet law update
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:

I didn’t move into a neighborhood to have the house next door to me turned into a weekly rental property […] We had a problem in Fountain Hills where people were renting houses and they were allowing individuals through services like this to rent them for the weekend when there are big golf or other events in town. And a whole bunch of people come and they party at the house, they arrive on Friday and they leave on Sunday.

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:

Arizona should be to the sharing economy what Texas is to oil and what Silicon Valley used to be to the tech industry.

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:

With the success of the Arizona Crowdfunding Law, this legislation would be right in line with what we are trying to do here for Arizona businesses. Getting this on the books would help to make Arizona look even more attractive to the underwriting community, thus increasing business being conducted here in our state.

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.

Call, message or stop by; our Arizona Internet law team is here to help.

Article Sources

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

E-Commerce Law: Is It Legal To Pay For Online Reviews?

graphic of search bar juxtaposed against a line of e-commerce entrepreneurs to accompany a blog post answering the question is it legal to pay for online reviews

Is It Legal To Pay For Online Reviews?

You can make money with an e-commerce startup. Amazon, eBay, Etsy – even Walmart – have incredible platforms for outside sellers. Even better? The latest holiday spending figures proved anxiety about Internet shopping has gone the way of the dinosaur.

Bottom line: there is e-commerce cash-money to be made.

But (there’s always a “but”), as more folks dive into the product marketing pond, competition is stiffer than the Queen’s Guard.

So, how are some sellers standing out from the pack? They’re buying reviews! Which raises the question: Is it legal to buy online reviews?

Let’s discuss.

Online Review Truth #1: Fake Reviews Can Get You Sued

Reviews are a vital cog in the e-commerce model. Every platform — and entrepreneur — leverages user reviews to sell, sell, sell! Think about it: when you see a product without feedback, do you buy…or hop to a similar product with reviews?

So, what’s a newbie to do? Is it legal to buy online reviews?

Brass tacks: e-commerce platforms are serious about review integrity, and they actively work to stomp out phony reviews. Not only are feedback algorithms used to scrub “bad” posts, but some platforms, like Amazon, actually sue paid review services and reviewers.

Are you thinking, “No problem, I’ll just use a paid review service overseas?” Well, you may want to reevaluate, because foreign governments are also cracking down.

The risk of permanent account expulsion increases, exponentially, if you use fake review services. The danger is real; you may get burned.

Online Review Truth #2: Disclose Material Relationships

What’s the easiest way to avoid review-related suspension hassles? Disclose, disclose, disclose!

If Aunt Bessie buys your organic sea-kale weight-loss lollipops, genuinely loves them, and wants to shout it from a mountaintop, she can certainly spread the sea-kale gospel via online reviews. BUT,  don’t PAY Aunt Bessie to write a review. (Update: Offering consumers free products is exchange for an online review is now also frowned upon by Amazon. You can read about the rule change here.)

Now, will you be tossed in the clink if friends and family don’t divulge their relationship, to you, in an online review? Of course not. Let’s be real: how will anyone know if user “Liv4Cats54” on, say, Amazon, is your relative? But know that disclosing the relationship is, technically, part of FTC guidelines. So, if the commission catches you in its web — or you become entangled in a marketing-related lawsuit — the issue of non-disclosure COULD arise and work against you.

Online Review Truth #3: Don’t Ghost Write Tons of Reviews for Your Products

Is it legal to pay for online reviews? Not really. Is it legal to write your own reviews under aliases? Again, not really.

For e-commerce platforms, reviews are both a blessing and a curse; a blessing because they engage audiences in a meaningful, profitable way; a curse because an outbreak of corrupt reviews has the power to crush a site’s credibility – and ultimately tarnish the brand.

So,  what’s the lesson? Don’t write a ton of fake reviews for your products. Websites use algorithms that sniff and snuff out certain faux-views. Best to avoid them altogether.

Online Review Truth #4: Don’t Sabotage Competitors’ Listings

One night, you’re sitting at home, stewing in a cauldron of frustration. Your ecommerce gamble is not working out nearly as well as you planned! You need to attract more customers!

You forget to ask yourself, “Is it legal to pay for online reviews or post fake ones?” And then, in a moment of weakness, you screed-type some nasty feedback on a competitor’s listing. Your rationale? Well, if I trash competing products, more people are likely to find me!

This type of thinking is wrong thinking. Being a rogue, fake-review-dispensing troll will bring you 99 problems, and a possible FTC sanction IS one.

Fake reviews fall clearly into the “unfair and deceptive marketing” strike zone. And depending on the circumstances, you could be sued for trade libel — and lose.

Befriend An E-Commerce Lawyer

You’ve vested a lot in your e-commerce business. Protect your efforts by teaming up with an experienced attorney with a nuanced understanding of:

  • E-commerce account appeals;
  • The online private label market niche;
  • Online marketing regulations;
  • FTC and FDA guidelines; in addition to
  • General e-commerce law.

Our focus areas (FTC compliance, review defamation, online intellectual property, et cetera) line up perfectly with what Internet businesses need to grow and earn.

We’ve answered the question “Is it legal to pay for online reviews?” Interesting in learning more about Internet business law? Yes? Then head here.