I bought a large number of an item you’d use when camping or boating (to sell at an outdoor event this past summer) from two online retailers. I did not buy from the manufacturer because they had a year long non complete clause in their contract (15 pages long) saying you could not sell the same type of merchandise from other manufacturers. Because I bought from a retailer, I paid a bit over wholesale for this product (it retails for $10, I paid $5.50). Sales at the event were terrible and for the past three months I've been trying to get rid of the remaining inventory on eBay.
Last week I started receiving emails from the manufacturer saying that "technically" I'm not authorized to sell the product based on signed agreements they require for their retailers. They demanded to know who I bought the product from, asking me how much inventory I had and telling me I needed to up my eBay price to match the minimum price their retailers agree to in contracts. I’m selling for the same total amount as
other eBayers - just a lower item price and higher shipping.
Knowing the manufacturers tendency to attempt to control the market by ridiculous contracts, before I ever bought the product I checked with both retailers asking them if they had a contract saying they were not allowed to resell the product to other retailers. Both said they did not have a contract limiting their sales. Since both of the retailers have been selling this product for some time, it’s possible the manufacturer has this clause with some but not all retailers. Since the manufacturer is so difficult to work with, I did tell both retailers that I would never divulge where the product came from if the issue ever came up.
That being said, the manufacturer said they are going to eBay to have my account suspended for selling “pirated, illegal” merchandise. When I hear the word ‘pirated’, I typically think of things like software, movies and music. Is my item pirated because I did not purchase it from the manufacturer??? Can they legally try to control the market like this just because I didn’t purchase from them?
Please advise ASAP.
1 Answer from Attorneys
As a Franchise Attorney I can tell you manufacturers have an absolute right to control who distributes their products. If you are not an authorized distributor, you can be in legal trouble, including, but not limited to, trademark infringement. This happens increasingly on sites like eBay. Consider yourself lucky have not (at least not yet) received a letter from them demanding thousands of dollars. Consult with a good business or franchise attorney in your area for specific advice.
Mr. Franchise - Kevin B. Murphy, B.S., M.B.A., J.D.
Franchise Foundations, a Professional Corporation
Related Questions & Answers
Is it legal to operate a regular US LLC for customers from the US and at the same... Asked 9/07/10, 11:27 am in United States Wyoming Business Law
I am a senior in high school interesting in majoring in business. I would like to... Asked 8/20/09, 11:01 pm in United States Wyoming Business Law
Work related Can a company legally cut an employees hourly pay ? Asked 4/13/09, 1:03 pm in United States Wyoming Business Law
Legality and ethics Your friend has been telling you that she knows someone is a... Asked 3/14/09, 2:27 am in United States Wyoming Business Law
Business sale I set up an LLC to purchase a Curves franchise. Now I am selling that... Asked 2/24/09, 2:35 pm in United States Wyoming Business Law