Could the Amway Case Be The Key To Stopping Online Sales

Lately, many Advocare distributors have expressed concerns about the sale of Advocare products on eBay and Amazon. To be honest with you, I do not blame them. What is the point of working so hard to build your business if someone is going to undermine the whole process? In this article I am going to share with you what I believe is the answer to the online sales.

 When I linked the Advocare products to my old blog, Ryan Gruenwald’s Advocare microsite popped up. Now, you tell me why his website was popping up when I clicked on Amazon products. I did write an article titled “I know who is selling Advocare Products on Amazon” that talked about Ryan and unauthorized online sales. Since then I have done some research to find out more about Ryan. It is difficult to tell if someone stole his identity or if he is actually the one doing the selling. But I also find it hard to believe he is not involved.

Ryan Gruenwald is quite the marketing scammer. Just a short look around the inner web revealed that he is involved with click ads as well as other online marketing. If you look at the previous link you will notice he claims to have connections with ADHawk Media LLC, Manta Media Inc. and others. The problem I see is that he also has his own Advocare microsite which is only provided to distributors. Maybe it does not seem relevant to you, or damaging on the surface, but it took me about 15 minutes or less to find 15 different sellers names on Amazon. I guess I should say their fake names. I did a quick search on eBay and found more people selling. If you take into consideration Ryan’s apparent love for spam marketing, and the fact that he, could be, or is, a distributor, it is a recipe for illicit Advocare sales. These people are going to continue selling online as long as Advocare allows them to get away with it. You might be asking yourself, what can Advocare do about it?

I assure you they have been in this position before. In 2013 Advocare announced on Facebook that 60 Advocare distributors were suspended for supplying products to people connected to Amazon and eBay sales. With that, 155 sellers identities were discovered, and 650 unauthorized listings were removed. Unfortunately, you will also notice on that Facebook page that someone informed Advocare that products were back on eBay shortly after. One person asked Advocare why they cannot use code recognition to mark the boxes. Or have the products removed based on trademark violation. I have to admit, I have asked the same questions. The problem I see is that it would be expensive. The reason the system works so well for Advocare is because they do not have to spend the extra money on devices to ensure people do not walk out of the store with their merchandise. Or spend money on advertising common with traditional products. With that, how do you guard against people like Ryan in a direct sales environment?

There are so many ways to obtain a distributorship. Deceptive people could hire someone to buy a distributorship, use a fake name, and use a stolen picture. Most of which would result in some type of identity theft. So, would implementing a means to attach a product to a distributor work? Sure it would! All Advocare would have to do is scan the product and the distributors name would be available. Unfortunately the distributor turnover rate is so high it would be difficult and problematic to implement such a system. There is a better answer!

Do any of you remember the landmark case Federal Trades Commission vs. Amway? I believe within that case there is an answer. One that Allison Levy could possibly use to permanently stop illegal online sales. I am not sure that they are illegal, because if they were, Amazon and eBay would have safeguards in place to mitigate the problem. I would say it is illegal for a distributor bound by the Advocare agreement. If you read this article the author claims that Levy supervises three attorneys and one paralegal. She probably should give me a call, I would be more than happy to help her out. It is really difficult to prevent illegal online sales when your company is running on fumes. Let me tell you why I believe the Amway case is important.

One of the complaints by the Federal Trade Commission pertained to Amway’s retail store rule. Amway, similar to all multilevel marketing companies, does not allow the sale of products in a retail environment. According to section 10.11 of Advocare policies and procedures, merchandise is authorized for sale in a service environment as long as the distributor is on the property when the products are being sold, distributor is doing the selling, and the distributor obtains prior permission from Advocare Legal. But that is not the same as a retail environment. I do not know of any American multilevel marketing company that allows sales in a retail establishment. You can find examples of what Advocare considers a retail establishment under 10.11.1 of the policies and procedures. But what did the Judge have to say about the retail store rule?

Several experts testified in the aforementioned Amway case, and persuaded the judge to rule in favor of Amway. A link between product demand and the relationship between face to face sales was established. Experts testified that introducing products at a retail level would diminish demand for the product, and basically would undermine the marketing strategy of the direct sales business in such a way retail stores would lose interest. Forcing companies such as Amway and Advocare back into a tradition marketing strategy competing for shelf space. The retail sales would most certainly undermine the whole direct sales concept and could lead to financial loss or bankruptcy. The court established precedence within the Amway ruling, and for the most part, I believe has been overlooked.

It is apparent Advocare is aware of the retail rule. That is why they have restricted such sales, and prevent marketing on Amazon and eBay. With the current advancements in technology, establishing new rules to ensure the preservation of the direct sales model is necessary. Back in the 70’s the internet was not a problem that the court could address as it did not exist. What I believe the Advocare legal department is overlooking is the real precedence that was set, and must be honored. In a prior article I talked about “stare decisis”, which means to stand by decided matters. Unless another case comes along and circumvents (changes) prior law, the court must honor prior decisions. In this argument I am using decisions made within the Amway case regarding not allowing the sale of products in a retail establishment. It was clear to me that the Judge recognized that any retail sales would result in injury to the company, and the distributors. With that, the retail sales restriction was acknowledge by the Judge as a necessity to ensure the company success. The safeguards not only protect the company, but the distributors that have already invested in their future. So now we need to apply that rule to the current economic conditions in a way that will better suit our generation. How do we do that?

I believe there are a couple ways of accomplishing the aforementioned. Implementing a new law that would prevent the sale of certain multilevel marketing merchandise from markets such as Amazon and eBay is a good start. Where in that Amway case did you read that the no retail sales pertained to just distributors? I think the intent was to provide products to the end user, not to sell inventory to a storefront. The same can be said about Advocare products. To protect the integrity of the marketing system, sales are directed towards end users as well. Implement one simple law that protects multilevel marketing products would be a simple solution, and could have a beneficial effect on the multi level marketing industry. Not to mention would be a reasonably quick solution. Although I do realize that some companies would still have trouble guarding against such sales, I do not see Advocare as one of them. Advocare is a trademark, and all products are labeled with the Advocare name. If they are not, they easily could be. Let me give you an idea of what I am thinking.

Advocare can encourage the creation of a new law. The law would prevent the sale of multilevel marketing products on any unauthorized website or retail. All sales would have to be authorized by the multilevel marketing company. The law would not prevent the resale of the product to other people (face to face), as long as the person does not fall within the scope of inventory loading. Meaning, you will not be able to sell your friend a ton of product for resale. I think you get the idea. Anyone that buys the products would be notified that they cannot sell the product online or in a retail environment.  But I am not sure that Advocare would have to encourage the implementation of a new law, although I would suggest them trying.

The Judge in the Amway case made it clear that retail sales should be prohibited, but he was ambiguous at best. We know he was referring to the decision as it related to Amway and their distributors. We know that he established that any retail sales would be injurious to the industry as a whole. What can we ascertain from his ruling? Meaning, what was his intent? As I aforementioned, the internet was not a problem, so controlling sales made to retail stores was as simple as going into the store and finding out who was selling the products, and then terminating their distributorship. That is not so easy anymore with the internet. Was the Judge’s ruling intended to prevent retail stores from legally selling products without the permission of the company? I believe it was, but was there a law implemented after the ruling? Do multi level marketing companies really need a law?

There are limitations to the trademark infringement laws. For example Advocare can prevent the unauthorized use of their personal logo and any other Trademark protected documents from being used by anyone. Without making this too complicated, there is a law that affords us the right to resell merchandise. It is referred to as the “First Sale Doctrine”. I provided a link to the 2013 federal case that does an alright job of summing up the complex law. If you feel your legal reading comprehension capabilities are good you can read the U.S Code yourself. I would have to guess most lawyers do not understand it. I mean seriously, anytime something starts with notwithstanding the provisions of section 106(3), and does that multiple times in a small paragraph, enough said. So where does that leave us? On one hand we have Advocare that has control of all distributors and how they sell their products. We have case law (Amway) that confirmed the importance of keeping products away from the retail environment. Federal case law has assured Americans the right to resell any merchandise legally purchased. There are so many legal questions that arise from such a conversation.

You might be thinking that the First Sale Doctrine only covers distributors that purchased the merchandise from Advocare. Or that the policies and procedures prevent the sale of Advocare products online from a third party. Unfortunately, once you sell the product to a customer as an authorized distributor, they have exclusive rights to do whatever they want with it. They can give it away, or sell it on eBay, and there is nothing you can do about it. According to your policies and procedures, you are supposed to stop selling to those type people. As you can see the answer is not as easy as you would think. If you actually read the case that the 2013 First Sale Doctrine was based on you would probably do a stinker in your pants. Here is a quote from the following website:  

“The U.S. Supreme Court today settled a long-simmering debate over the Copyright Act by holding that publishers can’t prevent the resale of books they produce overseas in U.S. markets.
The decision in Kirtsaeng v. John Wiley & Sons is a victory for Supap Kirtsaeng, a student who was fined $600,000 for importing Wiley textbooks from his native Thailand, where they were cheaper, and selling them in the U.S. It’s also a victory for libraries and retailers like eBay, who argued the “first sale” doctrine — giving owners of published books and recordings the right to sell them to whomever they want — should apply to imported works as well as U.S. publications.”

As you can see, the student bought the books from overseas and sold them here, and was still protected by the First Sale Doctrine. I have my reservations regarding buying from another country and selling here. I mean seriously, is buying with the intent to resell for profit what the Doctrine was implemented for? Or was the intent to allow products to be sold at some point in time after the products were used, because you received the wrong one, or just because you decided not to keep it. Was it seriously designed to protect people that purchase large quantities for resale? Better yet, does it circumvent the fact many companies such as Advocare do not allow any retail sales online other than authorized websites. Unfortunately there are no easy answers.

I believe the best way to handle the unauthorized online sales of Advocare products is to encourage the implementation of a new law, drawing from the views of the Amway case. The precedence has already been set, and all that needs to happen now is transitioning from the traditional view, to one that accommodates technological changes. I believe with the increase capability to reach other countries via the internet, the possibility of suffering financial injury could be greater than what the court could have ever imagined in the 70’s. 

 I am not a lawyer, but I would like to think that I have the ability to come to a logical conclusion. Everything in law seems to come down to either a duty of care owed to someone, or foresee ability. Advocare owes the distributor a duty to protect them from harm that they know or should know could hinder their ability to be successful. With that, is it foreseeable that not trying to implement a new law would lead to further damage and would worsen over time? 

The Amway Judge has set a precedence that would lead a reasonable person to believe his intention was to prevent unauthorized retail sales. By doing so, he acknowledged that doing otherwise would be injurious to any direct sales company, and could lead to its demise. If Mrs. Levy is as good as they say she is, that should not be a problem. Or Advocare could make all customers sign a document ensuring they will not sell products online or they will be held criminally liable.

That is it for now, please let me know what you’re thinking!