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The legal implications of doing the Amazon wholesale model
This is one of the guest posts written by Nicholas Orosz, who tells us about the legal implications of having a website online these days. If you only sell FBA wholesale on Amazon, this article might not apply to you, but if you sell in any other capacity online, including FBA private label on Amazon, you’ll appreciate his suggestions. Below this post you will find his social media credentials to be able to contact him personally. You can find another guest post from him here.
The good legal news for FBA Wholesalers is that not much of the internet marketing legal headaches concern them.
Most of the potential headaches that internet marketers need to get concerned about, frankly, do not really affect an Amazon FBA wholesale business. This is a definite plus point in my opinion and underlies just how simple this concept really is.
But you are not dealing with customers (Amazon does that for you), you are not running advertisements and sales pitches, and making claims for your products. You are not even producing sales materials and you are certainly not relying on testimonials. You are not taking email addresses on a landing page and you are not, therefore, holding data on individuals. You may not even be placing cookies on your site.
Your products are run-of-the-mill “boring unsexy” products. You are simply competing with the Buy Box on an existing sales page on Amazon. All you are effectively doing, is coming to the party and adding yourself as one of the potential sellers on a sales page that has already been prepared.
So if for example, you are selling printer paper on Amazon, you are not necessarily saying it’s a whole lot better than other printer paper. There will be a limited amount of technical information that you will have gotten from the supplier – size and thickness for instance. You will be relying on the marketing materials and photographs already placed on the listing page. So from a legal point of view, that is nothing complicated about being added to the Buy Box. It’s an extremely simple concept.
In running your FBA wholesale business, you will essentially be running a real business and to that extent, you will need to be aware of basics of Business Law, Contract Law and Corporate Set up – no different to any other business really.
CAN-SPAM stands for Controlling the Assault of Non-Solicited Pornography And Marketing and is a law that establishes the rules for commercial email and commercial messages, gives recipients the right to have a business stop emailing them, and outlines the penalties incurred for those who violate the law.
Perhaps the most helpful practical help I can give you from a legal perspective in such a short blog post as you begin your journey embarking on a FBA Wholesale business, is to point out the importance of not sending out spam.
Once you have established your basic infrastructure your job is to contact a huge number of suppliers to get hold of their products lists, and then to analyze them. It is a numbers game and you will be writing by email to hundreds of suppliers. It is essential therefore that you have a legally compliant emailing strategy.
If you are sensible and mail similar looking emails to a limited number of suppliers at any one time and space them out, then you should not have any problems here. However, it would be foolish to email blast 1,000 identical emails out to 1,000 different suppliers at the same time. You would find that a significant number would not be delivered, and this would just not make sense from a purely practical point of view. In any event, even if they were all delivered you would probably not be able to deal with the replies in a timely manner, if you received half as many replies as you’d like to get.
CAN-SPAM’s Basic Rules
The CAN-SPAM Act of 2003 promised to provide remedies against annoying and unsolicited bulk email known as “spam”. But as is so typical of legislation that starts out with limited objectives, CAN-SPAM reaches much further than just regulating unsolicited, bulk email which is why you do need to be a little careful.
The initial rules simply make good business practice for a FBA wholesaler:
- header information (identifiers such as To, From, IP Address) must not be materially false or materially misleading;
- subject lines must not mislead the recipient about a material fact regarding the email’s contents or subject matter;
- return email addresses must contain a functioning email address that the recipient can use to request no further messages.
Your emails are not unsolicited advertisements but rather genuine business inquiries to the supplier. They should be happy to receive inquiries – you are after all looking to buy from them, and your job is to get their attention and appear to be professional. You are not trying to sell to them. If you were then you would need to be aware of:
- requests to unsubscribe: if a recipient requests unsubscribe from receiving additional emails, emails matching the unsubscribe request must be honored within 10 days with a mechanism that is available from a single web page and that operates with a single click; and
- contents: the email would need to (i) clearly and conspicuously identify that it is an ad, (ii) provide clear and conspicuous notice the recipient may unsubscribe for additional emails, and (iii) contain a valid postal address for the sender (this may include a valid post office or private mailbox address).
When you are sending out “transactional or relationship message” emails to “facilitate” a previously agreed-upon commercial transaction, you are only required to comply with the header information requirement.
Three surprising CAN-SPAM issues
(1) The rules do not just apply to bulk emails.
Although much of the publicity surrounding CAN-SPAM focused on regulation of unsolicited bulk email, there is no actual minimum number of emails for CAN-SPAM to apply; CAN-SPAM can even apply to a single email.
So, if a single email relates to the business of an individual or entity, it’s a “commercial” email and CAN-SPAM applies, and the email is subject to all 5 of the basic rules, plus the “designated sender” rule.
(2) The rules do not just apply to unsolicited emails – especially if they are newsletters.
The Federal Trade Commission (FTC) has made it clear that CAN-SPAM may apply to emails that are solicited. The FTC stated in regulations issued in 2008 that the FTC would view email newsletters that were subscribed to (or solicited by) a person to fall within the definition of a “transactional or relationship message” if the newsletter consists exclusively of informational content or combines informational and commercial content.
So, even if the email newsletter is solicited by the recipient, CAN-SPAM applies; however, as discussed above, as a “transactional” email, the sender is required to comply only with the header information requirement and the “designated sender” rule.
(3) Even business-to-business emails may be caught within the CAN-SPAM rules.
The FTC made it clear in 2008 that emails sent in connection with what most businesses view as “business-to-business” relationship emails, may also be regulated as “commercial” emails under CAN-SPAM.
Such emails could include mortgage lenders sending emails to brokers with the latest interest rate information. The FTC expressly rejected a request by business leaders to add a “business-to-business relationship message” category to the “transactional or relationship message” category discussed above. So this means that “business-to-business relationship” emails are subject to all of the basic rules.
Frankly, this determination by the FTC regarding “business-to-business relationship” emails seems to defy reason, logic and basic business practices, but the FTC considers it to be the law. So as you can see CAN-SPAM compliance is something of a minefield. But if you are sensible and apply good sound common sense to your emails, and do not blast out too many at a time, then you should be fine.
This blog post is, of course, meant for educational purposes and should not be construed as specific legal advice.
Lawyer, Author and Human Rights Advocate
Nicholas studied law at Pembroke College, Cambridge, England and had a career in corporate law that cost him numerous sleepless nights over yet another corporate contract. He is the co-author of Tibet: The Position In International Law and the highlight of his legal career was being approached by one of the world’s great spiritual leaders for advice on legal matters. He is currently writing a book about the uses of the law. He is raising his two sons and helps people who want to make a living online avoid the legal pitfalls of the internet. You can find his website here.