Tiffany Serbus-Gustaveson 0:18
Happy Wednesday everyone I am Tiffany Serbus-Gustaveson, a digital strategist with BWG Connect and we are in network and knowledge sharing group. So we stay on top of latest trends challenges, whatever shaping the digital landscape we want to know and talk about it. We will do at least 500 of these virtual events this year due to the increase in demand that are understand the digital space. And we'll also be doing at least 100 in-person small format dinners. So if you happen to live in a tier one city within the US, feel free to send us an email we'd love to send you an invite the dinners are typically 15 to 20 people having a discussion around a certain digital topic and it's always a fantastic time. We spend the majority of our time talking to brands that's how we stay on top of latest trends challenges would love to have a conversation with you so you can feel free to drop me an email at Tiffany@bwgconnect.com. And we can get some time on the calendar is from these conversations we generate the topic ideas we know people want to learn about. And it's also where we gain our resident experts such as Vorys who's with us today. Anybody that we asked to teach the collective community has come highly recommended from multiple brands. So if you're ever in need of any recommendations within the digital space, please don't hesitate to reach out we have a shortlist of the best of the best and we'd love to provide that information to you. Also note that we do partner with a talent agency formerly BWG talent. Now Hawkeye Search that we can put you in contact with as well if you have any hiring needs. First and foremost, we want this be fun educational conversation. I'll drop as many questions comments you have into the chat the q&a. If you feel more comfortable, you can always email me at Tiffany. tiffany@bwgconnect.com. And we will get to them. We started here about five minutes after the hour rest assured we're going to wrap up at least 10 minutes before the end of the hour to give you ample time to get to your next destination. So with that, let's rock and roll and start to talk about legal compliance and eCommerce. But the lawyers wish you knew the team at Vorys have been awesome long term partners in the network. So I'm going to kick it off to our panelists. If you can each introduce yourself. That would be great. And then we can dive into the information. And maybe Jackie will start with you.

Jackie Ford 2:20
Great. Thanks, Tiffany. And thanks everyone for being with us today. We're very excited. We always like an opportunity to talk about all the things that we as lawyers wish you all knew, as you delve into some of the complicated areas of brand protection here in the US and as we'll get to later internationally as well. So I am a partner in the Vorys eControl practice. And I sit here in Columbus, Ohio, and I'll turn it to Laura.

Laura Erdman 2:49
afternoon I'm Laura Erdman also partner the the eControl group at Vorys. Sitting in Cincinnati, and focus my practice on distribution management and issues related to that as they pertain to eCommerce. Kara want to kick us off next?

Kara Mundy 3:05
Absolutely. Hi, my name is Kara Mundy. I am a partner in Vorys Columbus office and the litigation group. So half of my practice is general litigation and then half is antitrust. And that is where I dovetail with you control advising brands on competition and antitrust issues that come up when they are taking their products to market. And Martha.

Martha Brewer Motley 3:26
I am Martha Motley. I'm a partner in our Columbus office and I manage all of the control litigation, as well as some general eCommerce litigation, in addition to just sort of general litigation, so you have litigation questions, I'm your gal.

Tiffany Serbus-Gustaveson 3:42
Awesome. Thank you all ladies for the intros. And just a friendly reminder questions and comments put into the chat, the q&a both have been enabled, we're going to be going through with each panelists the different topics that they have their expertise on. So we will be transitioning the presentations as we go. So this is our first presentation, and I will let Laura take it away.

Laura Erdman 4:03
Thank you guys. Thanks, Tiffany.

Jackie Ford 4:09
Thanks, Laura. Yeah, before we get in, I just thought I would give us a general overview of what we'll be talking with you all about today, kind of a forecast of what's ahead. So first, Laura will be talking with us about legal compliance issues related to warranties as those pertain to brand protection programs, and really how to how to craft compliant warranties as you're putting your programs together. And then we'll turn to Kara who has lots of information for us about Matt policies, and other types of pricing issues that arise and of course, the antitrust considerations that are related to that. We'll then turn to Martha for what happens when things go wrong. And we get into litigation and other types of disputes and what are some of the common issues that she sees there when she's working with brands? And then I'll bring us out at the end just to talk a little bit about the differences between brand protection in the US and in other countries, specifically in the European Union and in the UK, and some of the legal changes in the last couple of years that have allowed for brands to make progress in protection in Europe. So with that, I will turn it over to Laura to take us through our first segment. Jackie,

Laura Erdman 5:25
again, great, good to have everybody here. So you may be wondering what two warranties have to do with brand protection? Why are we why are we talking about warranty law. And as Jackie alluded to, you know, many brands today have elected to limit their product warranties to purchases from authorized sellers. And there are a variety of reasons for that. Given the marketplaces and gray market, you often have quality issues, counterfeits of sellers that aren't taking care of products well, and brands want to limit their liability for warranty claims for things that are really not within their control. One of the benefits of making that decision, in addition to just, you know, protecting quality and encouraging people to buy from authorized sellers, is that brands can leverage that difference in warranty in strengthening their legal claims against those unauthorized sellers. And so this is where it often comes into play with companies that that come to us for advice around eControl is, hey, we're trying to build a program, here were the things that I can do. And a recommendation that we often make is well, you can limit your warranty, you know, two products from authorized sellers. And so in that process, as we're going through that with the brand, that's kind of like when you take your car in and you say I hear this squeak, you know, they're not just looking for the one thing that you think it is, they're going to check everything else out. And so that's what we do as part of that. That process, they're looking at it from an E control perspective, but also just a general compliance perspective. And what we find is that brands are often surprised to learn that consumer product warranties are actually highly regulated. And there can be consequences to not complying with those laws. They're regulated at the federal level and at the state level. And the most prominent law at the federal levels. The Magnuson moss Act, was implemented in the 70s. The FTC Act, which created the Federal Trade Commission also has provisions just around generals for deceptive practices that can be applied to warranties and implicated by warranties. And then again, states also have laws, some of them are specific to warranties like in California, and others are just provisions within a state deceptive practices or consumer protection law that, again, can be implicated. And so brands really need to understand, you know, what these laws are, and how they can potentially impact their business. These rules cover, you know, a myriad of topics and a myriad of different people, they apply, of course, to the warranty, or the entity that's actually providing the benefits, usually the manufacturer, the brand, but there are also regulations that apply to sellers of products that have warranties, and it was often dealing with what information has to be made available to a consumer prior to the sale or at the point of sale. But again, these laws cover a lot of different topics, you know, everything from the substance of what has to be in a warranty, certain disclosures and again, how information has to be made available prior to the prior to the sale, you know, potentially on packaging or in manuals on websites, all of these different requirements kind of fill together to create a compliance issue for some for some brands. And, you know, these laws actually are enforced, they can be enforced by the government, you know, by the federal government, the FTC, you know, often will take action, you'll see headlines, they make a splash press release about it, here's one from last summer, where they took action against Harley Davidson and Westinghouse for some right to repair law restrictions that they had in place. And, you know, you see this again, you see that press around it, you know about it, sometimes, you know, other warranty issues that often get this kind of treatment would be something that's more egregious where like a fee isn't disclosed the consumer you know, is sort of duped into having to pay extra money to get you know, their product repaired or replaced that sort of thing. But what you don't often see our headlines kind of like this one that deal with the more technical parts of those regulations. So you're not seeing this, you know, FTC comes down on hard for brand for, you know, not including the exact precise disclosure language that's in the regulation or, you know, failing to include a toll free phone number, instead of just a regular phone number. You just don't see these types of headlines at least coming from from the government or state attorney general and So what we find is that this can sometimes create a little bit of tension in a company between those that are responsible for the brand, the marketing teams, you know, that have an idea of what they want the consumer experience to be, or how they want to position their brand, and kind of the need to include some of this legalese or disclosures and, you know, the interests of the legal team, the compliance team that are trying to make sure that, you know, we avoid risk as much as possible. And so, you know, I think, as I mentioned, those, those technical violations often don't get the attention from the government. So sort of Score one for the brand team there. But the compliance team definitely gets a point when it comes to the other type of enforcement that we see with these laws. And that's private litigation, and primarily class action lawsuits. So, you know, on the screen here are snips of a slew of complaints that an enterprising group of plaintiffs attorneys in California filed over the past few years, or find at least a dozen, where they latched on to a provision in the California State warranty law dealing with product registration and requiring registration for warranty coverage. And again, just filed a slew of class actions found brands, just really by looking at websites and materials with products to see, hey, these aren't compliant. And they've been able to, you know, establish a little practice around this going to brands extracting settlements, that sort of thing. You know, these settlements, obviously, they don't pursue, you know, litigation, the idea is to get out of it early work gets very expensive. The monetary value may not be, you know, material in a relative standpoint, but there's obviously harm to businesses that have to face these lawsuits, you know, there's time there's resources, there's the cost of defense, you know, most of the settlements, you're going to end up changing your warranty anyway to be compliant. And then, of course, you have the distraction factor, and then, you know, potential reputational harm as your brand is, in the spotlight, you're on one of these cases, so something to avoid if, if we can, we've seen this kind of technical violation pursued in other lawsuits. This is an another set from last summer where, again, a particular firm decided to sue a bunch of retailers for failing to adhere to those pre sale availability requirements. And, you know, you see this flash law 360 and other other outlets picking up these lawsuits, you know, big name retailers that are in the in the crosshairs. So how do we get, you know, from that place of tension to sort of this more loving cow, you know, green pasture in this process? How do we balance both of those interests? You know, I think the key is really, to look at it as not, versus an opportunity to, to kind of take stock of your warranty program, to bring the stakeholders on, you know, on both sides, or on all teams together and say, Okay, what, you know, what is our warranty? What do we want our warranty program to be? You know, it's amazing to me that, more often than not, brands tell me, Hey, we don't really have an owner of our warranty, you know, we don't really have one team or one person or one role that is in charge of making sure that our warranties are consistent, that we're, you know, compliant, that they're posted in the right places that the packaging matches the website, things like that. So, you know, this is a really great opportunity to just bring those people together and have those discussions. And then when it comes to kind of balancing the interest of branding versus compliance, you know, it's really just kind of looking for counsel and understanding, Hey, what are the really sort of highest risk areas where the trip wires were going to sort of the unforced errors that we can potentially avoid? You know, and then being creative about how do we get those disclosures, and maybe it's, you know, positioned a little bit differently. But you know, we have kind of a splash page that really is more on brand or more, no more focusing on those types of messaging. So just bringing the right people together, being creative and trying to manage risk, you know, the same way that you, you and your teams are dealing with lots of other issues in your in your brand. But, you know, speaking of this tripwires just thought we'd talk about a couple that are more relevant or that we see more often. The first is a recent update to California's warranty law. This went into effect July 1 of this year, in the changes that written warranties on consumer products cannot commence earlier than the date of delivery of the product. And often warranty statements will say that the warranty period begins on the date of purchase. And particularly after sort of going through COVID and all the shipping delays and just the you know the consumer experience personally with bigger ticket items where they weren't getting their products, you know, they might be buying it on day one and not getting it for six 812 weeks, you know, California decided that there should be, you know, a change in warranty law that says that those warranties don't start till you actually receive the goods. So we've counseled a number of brands on how to change their warranty in light of this law, kind of how to implement it, I think we're still, you know, feeling out with brands, sort of what what this looks like in practice, you know, how does the consumer prove their date of delivery, if it's not, you know, a big ticket item, like an appliance or something like that. So we'll see, you know, this is one of those laws where I think an enterprising plaintiff's firm probably could make some hay out of it, you know, it'd be very easy to just look at websites and warranty statements, and, you know, look for this type of language and you know, cause some some trouble. So we're definitely keeping an eye on this. The other thing that we're seeing a lot more interest in lately, both at the federal and state level, are restrictions on the call right to repair. So these are rules and warranties that basically say that your warranty is going to be void if you don't use an authorized repair center, or you don't use the brand's specific branded parts to repair your product. And the FTC has taken interest in this Congress, there was a big report issued to Congress, and then a number of states have been passing laws in this area, you're just identifying that when consumers can't prepare their goods don't have choice and you know, who they use to service and maintain their goods, you know, it's a real, real burden. And that warranty shouldn't, you know, shouldn't be avoided just on that basis alone. And then finally, wanted to raise this product registration requirements, and I mentioned those lawsuits in California. So both California and Connecticut have laws that don't allow you to require warrant or require registration, product registration, as a condition of warranty coverage, you can certainly encourage it, you know, brands have lots of reasons why they want that, that data, you know, have build that connection directly with their, with their end user customers. But simply stating that your warranty won't apply, if you don't register is not permitted under these two, two state laws. And again, we're continuing to see activity, particularly in California on this on this issue. I will leave it at that. See if we have any questions.

Tiffany Serbus-Gustaveson 17:34
We did have a question about the Amazon default or D message is a pain How can we politely force Amazon to do better for brands

Laura Erdman 17:45
so I'm thinking this is probably talking about the kind of message that will appear on product listing listing pages, it's just kind of see manufacturer. So I do think that it's, you know, maybe not as helpful as it could be, but in some ways that it may actually be a good thing because prior to that becoming the default, we were seeing a lot of instances where Amazon was just taking warranty information that had been uploaded by a brand and changing it you know, they were adding language saying you know, this may or may not apply to you based on whether you you know purchase from a seller or you know, language that just wasn't coming from the brand and you know, I thought that was problematic in a different way. So, I think you know, one of the recommendations that we make often with our clients is to take advantage of the updated regulations that allow you to have your sort of source source of truth for your warranty live on your website as opposed to having to put it in the box the full terms and all of that and so if you know if the Amazon messages go to the manufacturers website or you know consult the manufacturer then hopefully they're pointing you actually to the correct you know, most up to date information there is and maybe reduces some confusion but you know, when it comes to updating pages and dealing with you know, the interface and in brand registry and cases and all that we we definitely feel your feel your pain.

Tiffany Serbus-Gustaveson 19:22
I had a question like with the source of truth. So I used to work in lighting for example, so what if you were selling a lamp on Amazon, and you had the warranty on the listing, but then you had the warranty in the box that was slightly different than what the listing said that was slightly different to what your DTC site said like, which one is the source of

Laura Erdman 19:42
truth? I mean, it's a good question and they shouldn't be different you want you want the consumer to at the time of sale have the correct information because, you know, a warranty is part of the part know what they're buying, they're buying the product plus the benefit of the warranty. So I think, you know, you'd be managing that kind of on a customer service level, they might be looking at, well, hey, this is what it said online, this is what it said on the box. You know, what are you going to do for me, and it may just be a case of finding a way to make that customer happy. But this is kind of one of those things with with the whole, bring the team together and get alignment figure out who's owning it is when you do have differences across documentation and across your website across channels. It can create some of these sort of

Tiffany Serbus-Gustaveson 20:36
issues murky, Yep. Awesome questions, comments, put it into the chat, the q&a, and we will get to them. We'll also have a portion towards the end for any questions that came along during the presentation. So we are going to transition then to the next presentation. So bear with us as we change screens here.

Kara Mundy 20:57
And everyone. Looks good, great. Perfect. All right. Well, as I introduced myself at the beginning, my name is Kara Mundy, I am in the litigation group with Vorys. And most of my practice focuses on antitrust. Antitrust is just a fancy word for competition. And so when we talk about competition considerations, particularly for brands in the eControl space, oftentimes what we're talking about is is pricing Pricing, both person communications downstream as to what your products should be sold for to the end consumer, but also pricing considerations that you have as a brand pricing your products to your downstream distribution and making sure the pricing and promotions that you're offering comport with the antitrust laws. And so we'll be going through both of those things today. But in terms of competition considerations, the main thing that I focus on with clients, when I'm advising them on antitrust issues is issue spotting, I like to say that your antitrust compliance is only as good as your worst salesperson. Because if you have someone talking with your downstream distribution, or talking with competitors, about pricing and promotions and making offers to them, particularly on a one off basis, you are likely implicating antitrust laws, and you don't want to get yourself crosswise. So the best clients that we have are the ones that maybe not don't know the right answer, but are able to issue spot. And so that's what we're going to be focused on today is making sure that you all are able to issue spot those things that may raise competition concerns, and can kind of bubble those up to the surface to get answers. A few pieces of lingo that'll be helpful for you, you know, I talked about what restrictions you can place under downstream distribution, also pricing and promotions. But at a higher level. And I trust really breaks down into two buckets, you have horizontal relationships and vertical relationships. So for purposes of this presentation, and when we're counseling clients on brand protection within the internet and online sales, we're really talking about those vertical relationships, we're talking about how the brand interacts, both with its downstream distribution and users. horizontal relationships, on the other hand, are those relationships that the brand has with its competitors. So if you are a shoe manufacturer, it would be the other companies in the industry that are manufacturing shoes, if you are a paper manufacturer, it's the other companies that you are competing with for sales of paper. Those are the horizontal relationships that we talk about in antitrust. Generally speaking, if you are having conversations with your competitors, regarding what pricing and promotions you are offering, how you're pricing your products, or what your brand intends to do in the future, those are conversations that are kind of a red flag from an antitrust perspective. Oftentimes, what we see with respect to communications and agreements between horizontal competitors, falls under the category of per se e legality under the law, which means that it doesn't matter if you thought you were doing the right thing. It doesn't matter if there are justifications in your mind for doing that. If you are having those type of communications around pricing and promotions, with your direct competition in the marketplace. Those are the type of horizontal agreements and and relationships that are oftentimes found to be per se illegal under antitrust law. Taking those out of the mix, assuming your communications are just with your downstream distribution, those vertical relationships that you have, where it goes all the way from manufacturing the product to getting it to the end user through retail sales. That's most of what I focus on when I'm counseling brands. And we talk about what restrictions can you place on your downstream distribution and turn terms of how they price the product and other non price restrictions such as advertising, and the way that they market the product to pricing and promotions. What can you as a manufacturer do to price your product to your downstream distribution, whether that's wholesale direct to consumer or resale? And then also what are you required to offer them and types of in terms of promotions, can you offer one set of your customers, your purchasers one type of promotion and not offer it to others. So in terms of what restrictions you can place on your downstream distribution, I think the main one that companies often run into, particularly when they're talking about brand control is price. Price is an indicator of brand quality, how you want your product to be perceived in the market. And it also just affects the way your product is sold and picked up by consumers. And so the main concern that we have among manufacturers, and are the brands that we represent is, what can I do about pricing? Can I tell my downstream distribution, how to price my products? And if I do that, you know, what are the risks associated with that. And and I trust law speaks specifically to these issues. It's what's known as resale price maintenance. And prior to the early 2000s, resale price maintenance was per se illegal. So you as a manufacturer, under federal law, were not able to tell your downstream distribution, how to price products, you sold them the products, and then they were free to price them, you know, at whatever they wanted to and you couldn't dictate what that price was, in the early 2000s, there was a change in the law that said, it's not necessarily per se illegal to do that, we'll engage in a balancing test and see whether there's justifications for doing that. Now, that's under federal law, if you are selling into states like California and Maryland, it is still per se illegal to dictate to your downstream distribution, the price at which you sell your products. And so it's particularly in today's world of eCommerce, where it's unlikely that a company is only selling into certain states, you want to be particularly attuned to those state laws that although the federal law has expanded the rights of manufacturers, those state laws still have provisions on the book that make it per se illegal to do that. So when we're talking about pricing tools, short of that minimum resale price agreement, which we see on the screen, which is often you know, again, per se illegal in states like California and Maryland. What can you do with respect to controlling or influencing the price at which your products are sold? Well, here are some of the tools on the screen that companies often use. The least risky, from an antitrust perspective is an MSRP. That's mainly a Manufacturer's Suggested Retail Price. And the reason why it is least risky is because there's no agreement. And there you're not dictating resale price, you are merely making a suggestion you're telling your downstream distribution, we as the brand, know how we want our products to be marketed and sold. There's no monitoring required. The downsides is it's difficult to control. I mean, I think human nature as we know that making suggestions, as opposed to telling people what to do, you're going to get less compliance. Moving from there, we see a lot of companies do what's known as a minimum advertised price policy or math policy. And the reason why we like this from an antitrust perspective is that it allows brands to gain some control or influence over how their product is priced in the market. But it avoids the two kind of telltale signs of a problematic agreement under antitrust law. One, it's not an agreement, it's a policy. And two, it's on advertised price, not resale price. So in order for a consumer or someone in your distribution to claim a Resale Price maintenance violation, under both federal and state law, there's going to need to be an agreement on price. And with math, you don't have either of those things when you're talking about advertised price, not the price at which the product is sold. And it's a policy, not an agreement. And so we see a lot of companies adopting that policies because they do give them the opportunity to influence the price that's ultimately charged to the consumer without running into those antitrust pitfalls that create risk. When we're talking about other non price considerations that will give a brand influence over how their product is marketed. We see a lot of advertising restrictions, channel controls placed on your downstream distribution, trademark use restrictions and then exclusive dealing arrangements with your downstream distribution. These all implicate to potentially implicate antitrust law, because they may influence the price at which the product is sold or may influence the way it is sold and marketed to consumers. And it may restrict the ability of certain people to either be in your downstream distribution network or get a hold of a product in order to sell it. These are what are known as non price, vertical restraints, and relatively speaking, you know, relative to price controls, or other per se illegal agreements under antitrust law, these do carry a lower risk, and But oftentimes, we'll counsel the clients on the risks associated with these. And usually those risks can be mitigated when the company is implementing these types of controls properly and uniformly. Where we run into issues is where you have advertising restrictions for some of your resellers, but not others, or you place channel controls on Amazon, but other websites. And you'll have resellers ask those questions of the brand or try and raise issues. And the easiest way to lower your antitrust rights with respect to implementing these types of controls, is to make sure that they are uniformly enforced. So that kind of talks about how you have tools to influence the way your product is marketed and sold to consumers particularly price. Now, I want to talk about the other main antitrust law that we deal with in the eCommerce space, which is the Robinson Patman. Act. And that deals with how you price your products to your downstream distribution, how you as the manufacturer, or the brand, are selling those products and what promotions you're offering in conjunction with those sales. And so for the Robinson Patman act to apply, it requires the seller to treat all competing customers in a proportionally equal manner. So if you have three wholesale accounts that you sell two or three distributors that you sell through, or you have a mixture of distributors that you sell to and then you also sell to retailers who are then selling to end users. With respect to those groups, are you treating them fairly? Are you giving them all the same price for the product? And are you giving them or offering them all of the same promotions and that at baseline is what the Robinson Patman act is looking at is in some say outdated law was passed in the early 1920s With the rise of, of, you know, supermarkets and department stores where a lot of the mom and pops were being pushed out. And so a way for the federal government, at least they thought to regulate that was to make sure that the mom and pop on the corner was getting the same price was able to buy that product for the same prices as the major department store. And as we've moved through the century, and eCommerce has has grown and taken a foothold. We'd see this law kind of being ill fitting for what is going on in the marketplace. But the fact of the matter is the law still exist and applies and the FTC has taken up a renewed enforcement of it. And that brings me to what's the risk? What are the risks if we're not following the Robinson Patman act if you have differential pricing for your downstream distribution, or you're offering promotions to some retailers and not others. One there are exceptions to the act. It's not strict liability. There are situations in which you are able to offer a differential pricing and promotions. One of the common ones is volume discounts. You can tell your downstream distribution, if you buy more product, we will price it lower. There's a risk with enforcement. Like I said, this law has been largely dormant, there has not been an Robinson Patman Act case brought by the FTC or the DOJ since the 1980s. That is changing. We know there are at least a handful of active FTC and DOJ investigations under the Robinson Patman act. Currently, there has been media coverage regarding requests for information that companies have gotten with respect to the apps and we know from speeches that the FTC has made recently in public forums that they are preparing to file suit are preparing to file enforcement actions with respect to the act in the near future. So we'll be seeing those. There's also business and customer considerations. Finally, a lot of companies say we can be compliant with the act, we already have this pricing structure in place, or, you know, we're giving special pricing to this one person but no one else knows about it. What's the business risk associated with this? And this is why I like to advise clients in this areas because we can one tell you what the law is. But also, our advice is on a risk spectrum. Whether you choose to be strictly compliant with the laws or take on more risk knowing that it's really bad for your business to do it a different way. Those are decisions that you all have to make it as the brand. What is the company's tolerance for risk? And what can they do to get to lower their antitrust risk, although it may not, you know, be able to be mitigated entirely. So those are the considerations that we have largely with respect to antitrust, in the E control space and and with brands going to market particularly online. And now I'll turn it over to Martha to talk about. Once you have created those risks, oftentimes, they end up in litigation, and you end up with my thoughts.

Tiffany Serbus-Gustaveson 35:38
So thank you so much questions, comments, put them in the chat as we move along?

Martha Brewer Motley 35:43
Well, I'm Martha Motley, I manage our eControl litigation, we have a group who's dedicated to doing exclusively controlling eCommerce litigation. So I like to think we know what we're talking about. So I have three things that are the things that I wish you knew, from a lawyer's perspective. So the number one thing is, you may be unnecessarily and unintentionally increasing your risk. So from where I sit, I see people who were involved in litigation, and I see a handful of common things that lead to litigation that are very avoidable, and they're easy to avoid. So number one is using third party vendors to set out takedown letters, there are some third party vendors who are great. And then there's other third party vendors, who will give you the greatest sales pitch you've ever seen, and sell you the sun, the moon and the stars. And what we find out is that those folks do things that are completely unethical, and underhanded and sneaky, and they create unnecessary litigation risks. So to give a couple examples without revealing any client confidences, we'll see third party vendors who pretend to the members of the brand team, and they will send out letters and say, Hey, we need to know your source, because we are trying to figure out if we want you to become an authorized partner. And of course, that's not true. They will do things like send letters that say, if we don't hear from you by this Friday, with your source information, we will assume that you're selling non genuine product. And then they'll submit complaints to Amazon saying that the product is counterfeit. And of course, that is also not true. Nor is that a reasonable inference to make from somebody simply not responding to a letter. Those are things that lead to litigation. The other thing that those third party vendors don't know, because they're typically not lawyers is that when they do these risky things on Amazon, it starts a countdown clock to Amazon threatening to destroy the sellers inventory that they might have in FBA. So one of the ways that the sellers can turn off that countdown clock is by filing a litigation. So that's, that's what I see. That's what comes to me and it's a lot of it is these third party vendors who are doing sneaky or underhanded things. So if somebody comes to you, and they say, I have an 80% success rate and getting sellers taken down from Amazon, or I have a direct line to Amazon, and I can just call them up and tell them what they need to do. They don't and I would really encourage you to probe into what those strategies that they're employing, actually entail. Sort of along the same lines, although it's not intentional, it's bad brand registry takedowns. So a lot of what we see is well intended e-comm folks who think that they're doing the right thing by submitting brand registry takedowns. Because of course, that's the only way to get Amazon to pay attention to bad listings. And they'll think, well, gosh, the last three that I submitted, I submitted as product not as described, but to try something a little different. What if I call this a counterfeit, when in fact, it is not a counterfeit, and what they'll find out is that Amazon responds quickly when they say it's a counterfeit. And the sellers respond quickly, often with lawyers, when they say it's a counterfeit. So even though it feels like these brand managers are doing the right thing, and they're trying to do the right thing, and it may also feel like they're just yelling into the void, when they're communicating with Amazon, it can have real consequences. And it doesn't matter from the sellers perspective, whether it was an intentional attempt to call something a counterfeit, that wasn't or if it was simply somebody's elbow on the keyboard hit the wrong category. It can still generate litigation which lands on my desk. The other thing that we'll see is these folks, either the third party vendors or sometimes the brands themselves when they engage in their takedown strategy, they'll choose bad targets. So here are Vorys. We have a robust database. I don't even know how many 10s of 1000s I don't think we've hit 100,000 yet, but we have a lot of sellers in our database who we know and we know if they're represented by counsel, we know if they have litigated before. We know the implication of sending them takedown letters and can advise the clients on that as opposed to just blanketing the earth and letters and crossing your fingers that something good is going to come from Mmm. So those are the things that we see that are the most risky behaviors that lead to litigation. The number two thing I want you to know is that litigation doesn't always need to be scary, right. So I think folks think about litigation in terms of getting sued directly. But what we've done in our control cases across the country is initiate a lot of proactive litigations, where we are actually litigating under a variety of topics, so we can engage in counterfeit litigation affirmatively on behalf of the brand, or trademark litigation or breach of contract lawsuits. So litigation can be used as a tool that have some really effective impacts. There's a whole series of different allegations that we can bring, depending on whether a brand has set up the appropriate underlying legal strategies and claims. There's a lot of quivers in the, in the tool, mixing my metaphors, there's a lot of different options that you can have, if you've set up your underlying strategy appropriately. So when I'm talking about this, what I'm talking about is the offense of litigation, defensive litigation would be another thing we can help you with, that's when you get sued if you're engaged in risky conduct. The third type of litigation that we deal with is predatory litigation, we're well aware of who all these folks are, and their counsel. And so we know when we see John Doe lawyer come across our desks, we know that the reason he has filed the litigation is because he thinks it's an effective tool to get a brand to come to the table to talk about partnering. Now, in my mind, I don't think that suing someone is a great way to get their attention to partner with them. But we do see that type of litigation. And of course, we know the players and we know how to advise you on if that's what's happening, or if it's something else where you've engaged in some risk, and we need to try to mitigate that risk. If you do want to sue someone, I don't want this to be a sales pitch. But I would hope that you would call us because we have litigated the most II control litigations across the country, we can audit your program to make sure that you're set up for success. So looping back to what Kara and Laura were talking about, we can make sure that your warranty looks good, that your MAP policy looks good, or your MSRP program has set up appropriately, we can help you pick the right target so that we're not engaging in this risky litigation where we pick the wrong person and unwittingly step into a big messy fight, we can pick the right jurisdiction because the jurisdictions and as Kara alluded to are different across the board, when it comes to for example, the the antitrust concerns, warranty concerns are a little bit different. And just sort of the nuts and bolts of the claims that we would plan on asserting can be different. And we have choices there. We'll pick the right claims. And we can pick the right remedy. So we can ask people to stop selling, we can ask people to disclose their sources. There's all sorts of carrots and sticks that we can talk about when it comes to doing proactive litigation. The third thing that I want you to know is that you can't eliminate all risk. So if you get sued, this is me. I'm that dogs sitting there and how and it's fine. Don't panic, call Vorys. Because again, we know the players, we know their strategies, we know what they're going to do next. We know why they've done it. We have relationships with a lot of folks, if there's things happening on Amazon that are tricky, we can help navigate those because we have some inroads with Amazon as well. So the third most important thing to know is don't panic if you get sued, just call us so I will cede the floor to Jackie.

Tiffany Serbus-Gustaveson 43:47
Great cartoon, by the way. Is home. Yes, I will in the chat as we get to our final presentation.

Martha Brewer Motley 44:00
Looks like we have a comment from someone who has been sent the exact pitches from the videos I was referencing. Yeah, they say they have 98% or 99%, I would encourage you to probe and ask them what is it that you're doing that gets you to that high level of success? Because if I had to guess it's doing things that are a little bit sneaky or under underhanded or Not to disparage there are some good ones out there. We can help advise on those too. And there's some that we partner with but a lot of them are you know sort of buyer beware. We

Jackie Ford 44:29
often describe ourselves as team Vorys Like Hashtag team Vorys and this is like a perfect example is this exactly.

Martha Brewer Motley 44:37
And it's just give me a little like your poll when you want me to do that. Okay, I'll see

Jackie Ford 44:41
if I can do that around this. And I'm wearing this you know, headset No, I am not actually an airline pilot. I just find that I hear better and you know, I'm not as distracted by noises down the hallway. If I wear a headset, so we just have a few minutes left, and I want to because I know we want to get everyone on their way. And before their next scheduled call, or meeting, but I wanted to take a few minutes just to talk about international marketplaces. And you know, we've been talking all day all afternoon about, you know, what are the things the lawyers wish you knew. And the things that we really wish you would know about international is that it's a very different system in other countries. But it is not impossible to get control, as long as you're careful and thoughtful and methodical about it. So obviously, we have Amazon and other marketplaces all over the world, we want to go to the next slide. It's Amazon is by far the biggest marketplace in Europe, which is what I'll be talking about today is how you can get control in Europe and the UK specifically, there are many other marketplaces, obviously eBay, Allegro ball in some parts of the world. eBay, for example, is a big player. But what we see in these marketplaces on the next slide is that they're expanding very rapidly and globally. And of course, you all know that. And you're familiar with this cycle that we see in the middle here, of what happens when you have this exponential growth. And you're trying to manage that not only in the US, but in scattered jurisdictions all over the world. And you end up with the types of problems that we see over here to the right, both in Europe and in the US. So what is the challenge that we face? And how do we fix that? So in the US, it looks sort of like this, we start with this optimal distribution method, we looked at Channel foundations, and foundations to manage those channels, monitoring and then looking for diversion sources. But in the EU, and in the UK, we really focus very heavily on this top part of the model. And that is what is the distribution method that's permissible, that allows us to have control without running afoul of European competition law. In the US, we tend to build a lot of those programs around trademarks and warranties. But in Europe, it's a different type of system. And the gold, the gold standard is what is known as selective distribution. In the US, when you create an authorized seller program, the basic model is you're in until you're out, right. And so we work with authorized sellers, and they're selling to others that may or may not be authorized to sell online. But in Europe, you create a club, you create a closed system. And the idea with that selective distribution is that you're out until your hands you can only be pulled in to that system by an affirmative act of the brand. So again, it's this idea of a members only distribution system, where you have the brand, and it's chosen distributors who can sell to each other and can sell to other specified members. But they can't sell to anyone outside of this closed systems, you're basically like building a moat, around this structure that you've created and others cannot come in. And from a legal perspective, if those other sellers do start selling your brand, say on the Amazon marketplace in France or Germany, they are engaging in tortious interference, because they're interfering with that contractual relationship you've built within this closed system with the other selective distribution members. So one of the advantages of a selective distribution center system, it really incentivizes greater reseller investment, because the resellers who are in that system know that you're making an investment in the brand, and brand equity and potentially, and ultimately in pricing that's going to help them be successful in selling for you. You're protecting that brand image and value because you can build the criteria for the selective distribution system in a way that's consistent with what's important to your brand. So, for example, let's say you're a pet brand, and you really don't want your products being sold in, you know, garden stores or hardware stores, you want them in pet specialty images, and have those pet specialty images around them. You can specify those types of criteria so that the resellers are entities that are actually familiar with your your vertical, you can prevent quality problems and negative reviews because you have better sellers and just increase your sales really across all channels. So this the basics of the law of selective distribution. It's a fairly complex series of laws under European competition law. But just to give you a brief overview, what's known as the vertical block exemption, or the VBar allows selective distribution systems as essentially a safe harbor or an exception to what would otherwise be prohibitions under European competition law to any types of arrangements that would be anti competitive that would limit which parties can resell your product. And as a result of updates made to the VBar in June of 2022. There's a broader Lane essentially for brands to create these programs. So the basics are that you're creating a closed network from the brand to its end users, you're controlling all the steps along that way. Your network is only open to authorized resellers who meet your precise criteria, you are free to develop that criteria as you see fit. authorized resellers are prohibited from selling to unauthorized resellers. Your customers are also prohibited themselves from selling online. It can include absolute or partial marketplace bans. So you can say to your members, you can't sell on any marketplace, or you can only sell on the following marketplaces. And they're implemented through policies or agreements depending on the particular characteristics of the selective distribution system. But it's important to do it in a very precise way that's compatible with European competition law. So that then gives you further legal rights that you can enforce against those resellers who jump on your ASINs without authorization. You have to permit in a selective distribution system, free sales between distributors and wholesalers that are within the SDS, the products in the SDS must be available only through the SDS. So basically, anyone who's selling your product needs to be part of the SDS. Again, you need an enforceable agreement. As a practical matter, change management is key. And we see this in the US as well, when you're putting these selective distribution systems in place in Europe, or you're doing an authorized reseller program in the US often involves, you know, internal change and changing the incentives, for example, for your sales teams, to make sure that they're going to be compliant, or, you know, we don't want them chatting with your pricing, as Kara was saying, with their various customers they work with that may require some relationship changing. So change management is key. And retail pricing must remain at the discretion of the reseller, there is no permissible version of a MAP policy in Europe. So you can't have that as a component of the problem of the program. And finally, it has to be real. And this is something I think we all see all of us on this call when we're working with clients is they sometimes think, Oh, I just need a piece of paper, and I put the piece of paper in the file. And now I have a you know, a protected program, that's going to give me the right to take down all these sellers that are annoying me on Amazon and other marketplaces. So again, it cannot exist only on paper, it has to be real and fully implemented. So I know that we are approaching time, I'm just going to say here that, you know, marketplace restrictions are are like the ones you would have in an SDS are outside of what European competition law refers to as hardcore restrictions. So for example, you couldn't have a restriction that said, you know, you can only sell at, you know, X price or above or something like that. These types of limitations, if they're created in a very carefully structured way, allow you to have this type of control, you can decide, again, whether you want to prohibit marketplace sales, reserved them to yourselves, or have a, you know, exclusive third party seller or something of that nature. And you can require your distributors to flow down those marketplace resale policies. So I'm going to stop us there just in the interest of, again, making sure that we are we don't go over your time. But we just wanted to give you that introduction to let you see what the European program can look like what some of the complexities are. And if you're working on programs in the US, and you want to extend them elsewhere in the world, just to be aware of, of these types of issues, but also the opportunities that some of these recent changes in European law have opened up for us.

Tiffany Serbus-Gustaveson 53:49
Awesome. Thank you so much, Jackie. Quick question about the MAP policies in Europe. So are they not a thing? And if they aren't, what is the

Jackie Ford 53:58
equivalent? There is no equivalent. There really is not an equivalent because the European law is extremely strict on this, that there cannot be an agreement on price. And there cannot be even something like a MAP policy, which as Kara was saying, in theory is not an agreement. It's a unilateral statement by a brand. It is not an agreement. But even that level is is impermissible in Europe. So the way that you do that is by you know developing a really tight and well constructed network of select distributors who are all incentivized you know, for their own for their own benefit to price in certain ways. Awesome.

Tiffany Serbus-Gustaveson 54:41
Then we have 30 seconds seconds left here. What is the best way to get three P sellers removed if you shouldn't use brand registry complaints?

Kara Mundy 54:49
So I will take that one. I'm not suggesting not to use brand registry I'm suggesting proceed with caution. So if something is not a counterfeit if you haven't done a test by and confirmed that it's a different product composition or it's been manufactured in a way that is inconsistent with what your brand does. You should not call it a counterfeit. If you don't have trademark policies in place, you shouldn't say that something is a violation of your trademarks. If you don't own the trademark, that's another risky thing to do a brand registry takedown in that regard, there are some that are perfectly fine to use like product, not as an offer. And if they are offering to 12 packs, and what you receive in your test buy is 130 Pack. That's something that's different from what's being offered. So you can do brand registry takedowns. There's just certain things that are riskier than others. And that's what I would suggest you avoid.

Tiffany Serbus-Gustaveson 55:40
That's it real quick math. Is it in Latin America or Canada? It doesn't exist

Martha Brewer Motley 55:47
in Canada and Latin America, I can answer that. and Canada does allow for math, they have similar laws to the US as compared to Europe, which is much more restrictive. But we work with Canadian Council when our clients are interested in implementing a MAP policy, either in Canada or in Mexico or Latin America, to make sure that we have local counsel on the ground, they're betting those intricacies and the differences in the laws. So each Latin American country is different. None of them I believe are as restrictive as what we see in Europe. And Canada is is closer to the US in terms of what they allow. But with respect to those types of considerations. If you are looking to implement a map outside of the US, you'll want to do that with the advice of local counsel. Got it.

Tiffany Serbus-Gustaveson 56:48
Fantastic Intel. Ladies, thank you so much for all your expertise, your time we definitely encourage follow up conversation with the Vorys team. They have been long term partners and friends at the BWG network. We greatly appreciate you and thank you all for attending today for hanging tight and and we went over time a few minutes, but it was definitely worth the time well spent. So definitely have a rest of the week. It's Wednesday, tomorrow, Thursday, and we're almost to the weekend. So take care see you on another event. And thank you so much for watching. Bye bye. Thanks, everyone.