Selling on the internet: legal aspects.

Factual Questions
1

I have a shop that specializes in a niche subject. I sell mostly books. Those that are not published by us I buy straight from the publishers, and they know that I sell them online. A legitimate business in every way.

Now, I see new items for sale on ebay all the time. New electric toothbrushes, new camera equipment, new designer clothing, etc. Is this entirely legal? Can anyone re-sell anything? Or are there cases where the manufacturers have a legal right not to have their products (legitimate, non-pirated products) sold in these joints.

Let’s say I buy a legitimate copy of Adobe Indesign, brand new. Can I sell it wherever I want without breaking any (US) law? How about I sell a copy of Adobe Indesign and when a customer buys it I just go to the Adobe website and have one shipped to my customer? Is this done? Can it be done?

2

I can see no problem with it. IANAL but my understanding of UK sales laws says you can sell anything you own ( I expect US law is very similar.), unless you specifically agreed not to in a contract arrangement.

Such as a possible term in the EULA of some software. However usually the EULA says you can transfer (i.e. sell) the software to someone else as long as you’ve removed it from the computer. Even a violation of this would be under contract law not under criminal law I think. (copyright issues aside).

If you buy an electric toothbrush it’s yours and no one else can tell you what you can and can’t do with it. (well, within reason. You can’t stick it up some random person’s nose for a giggle but that’s not toothbrush specific law.)

3

For software, if you’ve not broken the seal, you may not yet be bound by the EULA anyway, since there’s often a sticker on the box saying that opening it signifies acceptance of the EULA terms - in many other cases, acceptance happens when you click that box during installation.

Most things are considered to be ‘in free circulation’, so you can sell them if they’re yours, but you might be expected to declare it to the tax man (and there are certain things you’d need to be licensed in order to sell; alcohol, medicines and I think fuel and tobacco products too).

The thing that keeps it all in reasonable check is that for most average members of the public, finding an adequately discounted source of supply isn’t too easy, so you can sell things, but it’s harder to do so competitively.

4

When I first started buying on ebay I bought a camera for nearly US$600.00. As it turns out the guy did not have that camera. He did not have any camera. What he did was auction popular cameras, then go find a cheaper one on ebay and having the seller ship to his (I, in this case) ultimate buyer. It was a risky proposition, sometimes it was not possible to find a cheaper camera, at least not right away. I started a claim with paypal when my camera wasn’t arriving any time soon. Paypal returned my money and canceled his ebay account (there were other people complaining).

Now, if I sell something online say for US$10.00, and I can get it on Walmart.com for US$8.00. Can I just have Walmart ship that to my customer and profit the difference? I wonder if anyone is doing this?

5

That’s weird. I’ve heard of something similar - it’s called dropshipping - where you sell something, then you pass the order to a wholesaler for fulfilment - it’s common on eBay for things like DVDs and I suspect a lot of the ‘make money easily on eBay’ ebooks for sale are lists of dropshippers, but it’s hard to turn a profit this way, I suspect - you’re taking the risk and paying the listing fees for things that might never sell.

But I’ve never heard of people selling things they didn’t have, then trying to snap them up cheaper afterwards for supply - sounds like a terrible idea (and I’m sure it’s against several different rules).

ETA: what you’re talking about in your last paragraph is dropshipping. Not sure if Wal Mart does it, but there are companies that do.

6

Mighty Girl, you might want to look into something called the “first sale doctrine,” which is a part of the common law of commercial law. It basically says that if you own something then you can sell it.

Of course, a contract trumps common law, so if you have entered into a contract (such as a software licensing agreement or an exclusive dealership agreement or a supplier-retailer agreement) stating that you will not randomly resell the goods, then that restricts your rights.

But, yes, basically, if you own something, then it’s legal for you to sell it.

To be more specific:

[QUOTE=Mighty_Girl]
New electric toothbrushes, new camera equipment, new designer clothing, etc. Is this entirely legal?
[/quote]

Yes (unless the sellers are violating some contract).

Yes. If you own it, you can resell it.

The only way they can obtain such a “right” is to negotiate for it (that is, enter into a contract) prohibiting such resale. But remember, a contract is only enforceable on those who are in privity.

Thus, if Acme Widget Manufacturer Corp. has very special widgets that it will sell only through licensed dealers, it can enter into a contract with Premier Retail Concern Inc. such that Acme widgets are sold only at Premier stores. Acme may specify by contract that Premier may sell Acme widgets only under certain conditions and, should there be any Acme widgets left unsold after X time, they must be returned to Acme.

However, once Customer Joe buys an Acme widget from Premier stores, he is free to do whatever he wants with it, including selling it on Ebay. There is no privity of contract between Acme and Joe, and therefore the contract is unenforceable against him.

Software licensing is a bit tricky, because the software developer takes the position that we’re not selling anything, we’re just granting licenses to use software. Generally speaking, you can sell software so long as you are not keeping any copies for yourself – one license, one user.

Generally speaking, yes, so long as there aren’t extra copies of the software floating around free for other people to use without paying for it.

It can be done unless there is some contract preventing it. You might look at the “terms of use” for using Adobe’s Web site. They might specify that any purchases made through the site must be for personal use and not retail use.

7

There are many thousands of entrepeneurs that sell thousands of dollars of items every month - and haven’t even held one of those products in their hands. There are more businesses using drop shipping services than you may realize; they generally don’t shout the fact on their Web sites. I imagine a large percentage of QVC and HSN orders are fulfilled via drop ship arrangements.

One of my companies provides drop ship services for a home decor category. Our customers (the resellers) like the convenience and reduced risk, and there are quite a few of them - but none seem to be fabulously successful, especially those that use eBay as their primary sales method.

8

Here’s a somewhat relevant thread from the past. It studies first sale in relation to doughnuts, and includes mentions of trademarks that may be important.

9

[QUOTE=Mighty_Girl]
Or are there cases where the manufacturers have a legal right not to have their products (legitimate, non-pirated products) sold in these joints.
[/QUOTE]
As people have said, if they own your product, they can sell it. And you the manufacturer can’t stop them.

But manufacturers can try to make it harder for them to do that. They call it the 'grey market’, trying to imply that it’s similar to a black market and somehow semi-illegal. But attempts by manufacturers to limit re-selling can backfire on them.

For example, this used to be a big thing in the camera business. Stores would buy brand-name cameras overseas, import them, and sell them for less than the manufacturers suggested retail price. So camera makers started saying that their warranty would only apply for the original purchaser from an authorized dealer, and refusing to provide warranty repairs on ‘grey market’ cameras. That got a lot of backlash from camera buyers, who got upset that the camera maker was not standing behind their products. These customers complained loudly, and bad-mouthed that brand to all their friends. Also, many camera hobbiest owners upgrade regularly, and re-sell their old camera. Suddenly, these cameras were no longer warrantied by the maker. This contributed to a drop in the resale value of this brand of camera. Both of these led to a bad word-of-mouth for the camera brand, and thus decreasing sales. Since the camera market was very competitive, most camera makers dropped such unfriendly policies eventually.

10

I’m not familiar with the camera business, but I am familiar with e-commerce. :slight_smile:

As t-bonham mentions, some manufacturers refuse to honor warranties unless the product was purchased from an authorized reseller. So while you can legally sell pretty much anything you own, what the customer may be getting is something less than the comparable product from a different seller.

11

Random vaguely-related anecdotal story: I used to work for a genetics company, and one of our main lab procedures was the miniprep, which basically filters DNA out of bacterial cells. It’s somewhat time consuming to do it manually, so the owner bought a bunch of used machines on a lab auction which process the minipreps automatically. Use of the machines depends on certain reagents and also disposable filter tubes. But the manufacturer refused to to sell us the reagents and tubes unless we signed an expensive annual contract to maintain the machines.

12

[QUOTE=Brainiac4]
As t-bonham mentions, some manufacturers refuse to honor warranties unless the product was purchased from an authorized reseller. So while you can legally sell pretty much anything you own, what the customer may be getting is something less than the comparable product from a different seller.
[/QUOTE]

Isn’t there some type of consumer protection angle that would prevent manufacturers from getting out of their warranties?

13

[QUOTE=Balthisar]
Isn’t there some type of consumer protection angle that would prevent manufacturers from getting out of their warranties?
[/QUOTE]

Not if “buying from an authorized dealer” is an explicit condition of the warranty. There’s nothing illegal about making such a limitation. A seller doesn’t have to offer a warranty at all (and can disclaim most implied warranties as well). If a seller chooses to offer a warranty, then he or she is free to choose under what conditions, so long as it is disclosed at the point of sale.

[QUOTE=jackdavinci]
Use of the machines depends on certain reagents and also disposable filter tubes. But the manufacturer refused to to sell us the reagents and tubes unless we signed an expensive annual contract to maintain the machines.
[/QUOTE]

I believe that this is a common practice for certain kinds of high-end equipment in many industries.

14

[QUOTE=Balthisar]
Isn’t there some type of consumer protection angle that would prevent manufacturers from getting out of their warranties?
[/QUOTE]

I think if you look into it, it is not so much a case of getting out of the warranty as it is honoring the warranty that the camera (or car) was sold with.
Large international companies have different policies and prices for their products that vary from market to market.
::: reaches into ass for an example::: Cannon might sell a camera in Asia for $500 with a 90 day warranty. That same camera might sell in the US for $800 and have a 12 month warranty. You buy the gray market version and it breaks in 6 months… Sorry sir you unit is out of warranty.
If you are a foreign diplomat serving in the US, you get to drive a car that is legal in your home country. So a Volvo in Europe has a 12 months /12,000 warranty. A Volvo sold in the US has a 48 month/ 50,000 warranty. So the car you bought in Europe from Volvo Cars Europe has a 12/12 warranty. The same car that I bought here from Volvo Cars of North America has a 48/50 warranty. I will have paid for that warranty in the purchase price of the car. You warranty will not “grow” when you bring your car over here.

Also the first sale doctrine is not 100%. There are some items that you cannot resell, and there are some items that it may be illegal for someone to buy. For example try reselling some Vicoden that you had prescribed, and let me know how that goes. :smiley: There are also some items that may require permits or licenses to purchase, such as Freon (r-12). Legal to buy if you have a license.
Some out of country sales are also not permitted, and there are some sales, where you are required to promise not to resell to certain other parties (Look up Toshiba illegal exports)

15

[QUOTE=acsenray]

[Quote=jackdavinci]
Use of the machines depends on certain reagents and also disposable filter tubes. But the manufacturer refused to to sell us the reagents and tubes unless we signed an expensive annual contract to maintain the machines.
[/QUOTE]
I believe that this is a common practice for certain kinds of high-end equipment in many industries.
[/QUOTE]
Yes, some companies try it (others seem to manage to keep customers buying the annual maintenance contracts because of the quality of the service).

This usually lasts until some other company begins selling those reagents & tubes. (Then the OEM’s try to claim that generic consumables will void the warranty, or they try to get patents on the containers that hold the consumables (inkjet printer makers are busy trying to do this on their ink cartridges), or they put encrypted chips in them so generic ones won’t be accepted (another thing inkjet makers are trying).)

This happened on the early laser printers – you had to buy a maintenance contract on them.