Dale Silverman of Streetwize Accessories described his experience of tackling substitute sales of car, leisure and travel equipment. He said: “We noticed companies advertising our products at impossibly low prices; below cost in some cases. We started making test purchases to see what was being supplied and were staggered to discover that up to 90% of the products advertised online under our brand name were substitutes. The more we investigated the problem, the more shocked we were by the scale of it. I dread to think how much we were losing in sales before we began to take legal action. As soon as we got our solicitors involved, we started to make real progress. It is an eminently winnable battle and the more companies that take action, the sooner we can put a stop to this problem.” Elliot Peckett, managing director of fancy dress company Smiffys, echoed this point and told the assembled business owners that substitute selling was costing his business an estimated £10 million a year in lost sales. With such staggering losses, it is no wonder that the substitute sellers have caused many internet businesses to admit defeat.
The brand owners strike back
Unfortunately for the unscrupulous sellers who have built their businesses on the brands of others, the tide is turning.
Frustrated by the flaws in the systems of online sales platforms that allow substitute sellers to operate with impunity, some British brand owners have turned to technology, with Leicester I.T. firm Williams Commerce developing new software specifically designed to target this kind of problem.
Armed with this innovative new ‘scraping’ software, which monitors online sales, and advised by solicitors who have pioneered the approach to tackling substitute selling online, a growing number of companies have decided to go on the offensive, notching up high profile wins and heralding the start of a brand owner led fightback.
Ian Fisher of Bonnington Plastics said that the money he has spent on the development of the software and issuing claims against the rogue businesses ripping off his Kingfisher brand was “the best quarter of a million pounds I’ve ever spent.”
He continued by offering a stark warning to his fellow brand owners: “It’s us and them. Either legitimate businesses like ours unite against these substitute sellers or there will be no future for any of us. The longer we let this practice go on, the more damage it will cause to our brands, our business and our customers. Many of the companies in this room are competitors, but this is bigger than any of us. This is a problem we all face, and we need to work together to fight it. This is a fight for the future of internet retail.”
The union of British brand owners All of the businesses represented at the seminar, and countless others who form part of
GCU November 2015
Combating substitute products is a particular online challenge, with consumers often getting a poor performance while not realising that the product they’ve purchased isn’t genuine
an ever-growing network of companies co- operating to tackle the threat posed by substitute sellers, have been trying to take action to protect their brands for years. Their isolated actions have often failed to yield any sort of result, with expensive legal bills adding insult to the injury of lost sales. The companies shared a sense of frustration at the refusal of online sales platforms to address their concerns, with some major sites also complicit in the infringement.
Several of the companies represented said that they had made trap purchases from Amazon itself, and had been supplied with substitute products. However, their protestations to the Internet giant had fallen on deaf ears, and there was a general sense of exasperation regarding Amazon’s almost complete failure to prevent IP infringement on its site.
One supplier added: “On the face of it, Amazon have good procedures in place when it comes to reporting IP infringement, but the people reviewing the reports don’t seem to know what they’re doing, and substitute sellers are allowed to continue unimpeded. Amazon’s systems make it so easy for substitute sellers and there doesn’t seem to be any desire on Amazon’s part to tackle this kind of practice. Essentially, as long as Amazon get their cut of the sales price, it doesn’t seem to care what is being sold or whose rights those sales violate.”
Many of the companies that attended the seminar are now working together and sharing their knowledge to tackle common enemies. An informal brand owners union is emerging; a union, it is hoped, that will one day have the power and resource to force even the largest online sales platforms to address the loopholes that allow substitute sellers to thrive. Sites like Amazon and Alibaba are already embroiled in high profile litigation relating to IP infringement, with companies like cosmetics brand Lush and high end watch manufacturer Multi Time Machine Inc. leading the charge. The tired old excuse that such sites are merely platforms for internet retailers and are therefore not responsible for the epidemic of IP infringement they have helped to spread appears to be wearing thin, with courts minded to back David against Goliath. Off the back of the success of its first seminar, Bonnington Plastics is working with a number of household name companies and specialist IP lawyers to organise a second event at the end of the year, with plans to develop a ‘Brand Owner’s Charter’ and create a formal body to protect and promote the interests of British brand owners.
Life for the substitute sellers and the sites that facilitate their infringements is about to get a whole lot harder. The union of British brand owners has entered the Battle for the Buy Button.
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