Part Whatever of our ongoing series How Not To Do Business brings us the story of a high-end audio device manufacturer badly misunderstanding how the Right of First Sale works. Velodyne, a Silicon Valley-located company, recently decided to take a very aggressive stance against an Amazon reseller who purchased a pair of earphones and resold them for a profit.
The full thread at Amazon's forums uncovers a lot of useful information during the 136-message sprawl but it all begins with a threatening pseudo-C&D email, loaded with legal threats that aren't actually legal and a strident mangling of English that suggests Velodyne's bogus legal threat division is outsourced.
Reseller 20YearsUSAF posted this to kick off the thread:
This is a notice to inform the entity “20YearsUSAF” dealer and seller on Amazon.com and other internet selling locations to be discovered, of our engagement representing Velodyne Acoustics Inc, a privately owned company located in Morgan Hill, CA.
We are forthwith enlisted our services to protect price integrity by seeking public fractures and selling contract terms and illegal selling of products by unauthorized distributors and dealers on the internet in the USA and overseas. [ed. note: wat]
This is a notice of legal prosecution for illegal selling of Velodyne Acoustics, Inc. products and goods. You will be pursued and prosecuted unless you withdraw all products for sale by Velodyne immediately as of 9/13/14. “20YearsUSAF” selling will cease and desist for 2014-2019, under this name or other alias names or entities to be discovered by our agency. Discovery of “20YearsUSAF” using other alias identity to continue selling after this notice will compound fines and may incur mandatory jail sentencing of offenders. Continued unauthorized selling under this business name or alias name, as identified through discovery and witnesses, will put this business and its owners at risk of fines and legal prosecution.
Continue selling carries the penalty and minimum of $250,000 fine.
Sock and Bruster Internet Policing Services Inc. LPC, Legal Prosecution and Collection Agency
First off, there is no such thing as "illegal selling" of Velodyne products. Anyone can resell anything they purchased from Velodyne, which is what this seller did. What seems to be the issue (uncovered later in the threat) is that 20YearsUSAF bought one deeply discounted by Velodyne at its site and flipped it to turn a profit. Nothing illegal about that. (A forum member notes that similar notices have been sent to ebay resellers.)
The legal threats following that are for remedies that don't exist. Counterfeit goods may be illegal but reselling legitimate products isn't. Velodyne can't ban anyone from selling its products for a half-decade. It can prevent unauthorized resellers from listing themselves as "authorized" but that's it. The fact that the reseller is an Amazon reseller means it's up to Amazon to delist, ban or otherwise prevent 20YearsUSAF from using its platform. Velodyne can provided evidence why it should take this action but it can't just declare this in an email and consider it done. Needless to say, there are no "compound fines" or "mandatory jail sentencings" awaiting 20YearsUSAF.
Finally, "Sock and Bruster" is completely made up. This company does not exist
Velodyne clearly doesn't like unauthorized resellers. It has a whole page
on its website discussing this as well as a list of blackballed resellers it's uncovered that aren't actually authorized. 20YearsUSAF now heads that list. It's perfectly fine to restrict warranty coverage, etc. to only authorized resellers. What's not acceptable is declaring that anyone who hasn't signed an authorized reseller contract is forbidden from reselling items they purchased from Velodyne. As long as they're not misleading customers about their authorized/unauthorized status, there's not a damn thing Velodyne can do about it.
Here's where issue #2 comes into play. 20YearsUSAF listed this item as "new,"
which would lead buyers to believe it was still covered by the manufacturer's warranty. According to Velodyne's terms, only sales by authorized sellers receive that coverage. It's a problem, but one that should have been taken up by reporting the listing to Amazon rather than deploying the email nuke as the opening gambit. (20YearsUSAF has pulled similar listings and other forum members have told him/her to use "like new" in the future for goods like these, even if unopened, because many companies will not honor a transferred warranty.)
The next email 20YearsUSAF received was shorter but it wasn't any better.
"Since you bought the headphones from Velodyne, then you are an authorized dealer who signed a contract on selling policy. You are using an alias to hide your identity to perform illegal activity, and will be prosecuted as such. With the new laws, we finally have the clout to clean up these sales. There are new laws in place and more laws coming soon to protect Manufacturers from unauthorized selling.
My advice is to find another way to make a living, quickly."
The tactics shift. Now Velodyne is accusing the Amazon seller of violating a contractual agreement by selling headphones under a fake name. It references "new laws" but doesn't cite anything and, again, makes claims about "unauthorized selling" that really don't have anything to do with the issue at hand -- the right of first sale. And then there's the little threatening dig at the end.
It also seems to imply that simply purchasing
an item from Velodyne enters you into a resale contract, which obviously isn't true. There's nothing about it in the Terms and Conditions
Velodyne says you agree to when purchasing its products.
Finally, 20YearsUSAF received another email, this one much more conciliatory.
I am trying to make a go of a company that supports the livelihood of 80 employees. If our prices are undercut on a regular basis, then we lose integrity and retail stores will not put us in their stores to sell.
Velodyne is a small company, not like Sony or Bose. We don't have millions of dollars for marketing and our costs are high. Retail stores are going out of business and what we have left is selling online from our home grown website. This is our hope to sustain the business.
I'm glad you are not an unauthorized seller making a business out of selling Velodyne online.
It sounds like you work hard and I appreciate you writing back.
Even amidst the call for sympathy, a sense of misplaced entitlement remains. "If our prices are undercut on a regular basis" makes no sense when the buyer purchased headphones Velodyne itself offered at a reduced price
. If that price doesn't make Velodyne money, then that's Velodyne's problem. Someone reselling it at a profit (thanks to the discount) doesn't take money away from it. Velodyne already gave up that money when it agreed to sell X product at Y price. It can't look at someone else's good fortune and decide that because the reseller made more money than it did, the reseller must be doing something "illegal."
A response from Amazon
further settles the issue:
Greetings from Amazon Seller Support, Thank you for writing to us. I understand from your correspondence that another seller named Velodyne has asked you to remove the listings of their products which you are selling on Amazon.com. I would like to inform and assure you that as long as there is any copyright/trademark notice brought to Amazon's notice by the brand owner/manufacturer, all sellers are free to list whatever products they wish to on Amazon.com.
The only condition is to ensure that the products they are selling are exactly the same products that the listings had been created for. In this case there has nothing wrong been done from your end. Therefore there is absolutely no need for you to delete the listings.
Velodyne's decision to shoot first may end up hurting it more than an authorized dealer buying at wholesale and reselling the products under aliases would. Deciding to ride out the gut instinct that it was being abused by a contractual partner only served to make it look foolish and vindictive, especially when the legal "remedies" listed had no basis in reality. We're used to seeing bogus legal threats in which the threats themselves are bogus. We don't often see bogus legal threats where the potential punishments are conjured out of thin air and the laws that don't exist are quasi-cited in support.
If this isn't the case, and Velodyne just doesn't like people reselling goods at a price higher than it sells them for, then it should probably exit the retail business -- or at least stop offering price breaks it can't afford.
If Velodyne has the suspicion that one or more of its authorized sellers are violating their contractual agreements, it needs to keep it to itself until it has enough supporting evidence. Then it needs to realize that outside of counterfeit goods, its legal remedies won't include jail time or anything outside of civil lawsuits. By rushing to judgement, it has made potential purchasers wary of dealing with it -- not just for potential interference in perfectly legal resale, but in terms of any negative reviews that might be greeted with similar threatening emails.