We Support Amazon Sellers: An Introductory Legal Guide to FBA Business

Since our firm works with a lot of Amazon entrepreneurs, we often get asked the same questions about the e-commerce platform:

  1. What can I do about negative Amazon reviews?
  2. How should I register my Amazon business?
  3. Can I sue a competitor for leaving a bad review on my page?
  4. What can I do if someone hijacks my listing?
  5. How can I find out who wrote an anonymous review?
  6. What can I do if I suspect unfair competition?

This legal guide will answer these questions, and will also provide additional information about laws and regulations that all Amazon entrepreneurs should know. Be sure to check back regularly for new and updated content.

Need more immediate legal help with your Amazon business? Get in touch.

Online Reviews

Follow the Stars: Consumer Reviews

“In many situations, [online reviews] are supplanting the marketing department, the press agent, advertisements, word of mouth and the professional critique.”

David Streitfeld, The Best Book Reviews Money Can Buy.

Importance of Reviews

These days, the fortunes of any Amazon seller are written in the stars.

A recent study by PriceWaterhouseCoopers concluded that 88% of North Americans research products online before buying. Additionally, the cost of online advertising has nearly doubled over the past five years.

Reliance on Reviews

Modern consumers are exposed to over 6,000 marketing impressions every day, and have trained their brains to ignore them. Most online shoppers ignore traditional advertising and instead seek out the comments and reviews of other users to inform their purchasing decisions.

Amazon Sales Rank

In addition to user ratings, Amazon assigns each of its sellers an ASR, or Amazon Sales Rank. Although the inner workings of the ASR are trade secrets, we know that it serves at least two functions:

  1. As an indication of a seller’s quality and trustworthiness.
  2. As a factor in determining the SERP positions of a seller’s products.

Unsurprisingly, a seller’s ASR can mean the difference between feast or famine on the platform.

Spotting Fake Reviews

“A typical red flag [of a fake review] is that they are usually posted by someone who has no other reviews listed and they don’t describe the product or service with certain details.”

Dr. Camilla Vasquez, The Discourse of Online Consumer Reviews

Other quirks of fake reviews include:

  1. Brevity or vagueness
  2. Over-the-top enthusiasm or use of superlatives
  3. Emphasis on first-person pronouns such as “I” and “We”
  4. Disparagement of a product in favor of a specific alternative usually with a link.

Who writes fake reviews:

  1. Paid reviewers
  2. Competitors
  3. Marketers
  4. Content Writers
  5. “Brushers” placing fake orders to inflate sales

The FTC and Fake Reviews

The Federal Trade Commission is the U.S. government’s consumer protection agency, tasked with ridding the country of unfair and predatory business practices. Although its commissioners are appointed by the government, they enjoy more autonomy than other federal employees.

The FTC has a zero-tolerance policy on fake reviews, considering them a clear case of unfair and deceptive marketing.

Unfair Competition and Compliance

Common Competitor Tactics

Consumer reviews and ratings are the foundation of Amazon’s ecommerce ecosystem. While some sellers on the platform will stop at nothing to squeeze the most stars from every transaction, others choose to let the quality of their products and customer service speak for themselves.

Most of Amazon’s proprietors balance these two strategies by soliciting positive reviews in unorthodox and imaginative ways. While their techniques may flaunt the FTC’s rules at times, it is certainly possible to creatively generate favorable feedback while remaining compliant.

Nonetheless, some sellers are willing to play dirty and risk legal or social action for the sake of their sales. The most common illegal behaviors are summarized in the following chart:

Illegal Tactic Possible Legal Remedy

Posting false or unfair reviews on competing products

Deploying software attacks against competitors

Filing fake counterfeit and copyright complaints against competitors

Infringing or misusing a competitor’s intellectual property

Artificially engaging with a competitor’s online advertisements to exhaust their marketing budget

Defamation, Trade Libel, Unfair and Deceptive Marketing

Computer Fraud and Abuse Act

Lanham Act, FTC Act, State Intellectual Property Laws

Lanham Act, State Trademark, Copyright, and Tortious Interference laws

FTC Act, Unfair Competition

Repricing Software

Many popular software solutions allow online retailers to automatically adjust their prices based on the prices of competing products. While such a strategy may seem nefarious, it is nothing more than data-driven economics and is perfectly legal.

Dot Com Disclosures

The FTC requires any company that engages in digital marketing to abide by the “Dot Com Disclosures.” The Disclosures prohibit paid and fake reviews as “unfair and deceptive” and punishable by fines. They also require online endorsements (including Amazon reviews) to disclose all “material connections” the endorser has with the product being endorsed. However, the FTC could not possibly enforce the terms of the Disclosures against every reviewer that has connections with the product they are reviewing, so it focuses on blatant and repeat violators.

Of course, competitors can always sue each other for violating the FTC’s regulations.

According to the University of Illinois, up to 33% of all consumer reviews are fake.

FBA-Related Laws & Amazon’s History

The Lanham Act

The Lanham Act is the primary federal trademark law in the U.S. and covers registration, infringement, dilution, and false advertising. The law has been amended over the years to include trademark counterfeiting and cybersquatting as well. As with any well-worn federal statute, the Lanham Act is full of nuances and exceptions, but here are the basics:

  1. A mark cannot be registered as a trademark registration if it is:
    1. Confusingly similar to another trademark,
    2. Generic or merely descriptive of the goods or services it represents,
    3. Scandalous or immoral.
  2. It is generally illegal to use the trademark of another for profit without authorization.
  3. It is illegal to import products that infringe or dilute a registered U.S. trademark.
  4. The owner of a trademark automatically has rights to any related domain names.
  5. It is illegal to falsely or misleadingly describe a product or its origins in order to cause marketplace confusion.

Unfair Competition Torts

Unfair competition is a broad legal term that covers many different areas of law, including torts. The four unfair competition torts that are the most important to Amazon sellers are: Defamation, Product Disparagement, Trade Libel, and Tortious Interference.

From Cadabra To Amazon

Jeff Bezos, the CEO of Amazon, originally registered his company as Cadabra.com. But by the time it was launched he had renamed it to Amazon, after the mighty South American river. For one, “Cadabra” sounded too much like “cadaver.” At any rate, a name that starts with the letter “A” would appear near the top of any alphabetical list, a classic marketing strategy.

Amazon earned $20,000 in its first week, survived the dot-com bubble of the Nineties, and grew into North America’s largest online retailer.

Largest Online Review Site

As an ecommerce platform, Amazon runs on consumer reviews. It distinguished itself in the early days of the internet by allowing un-curated customer feedback, and quickly became one of the largest single repositories of crowd-sourced opinions on the internet.

Despite the prevalence of fake reviews, Amazon is still a goldmine of consumer opinion. The ability to distinguish between genuine and artificial feedback, and to defend against such attacks, are incredibly important skills for any FBA or FBM seller.

How to Make Money on Amazon

Amazon has developed from its initial niche into a vast virtual platform where anyone with an internet connection could buy or sell (almost) anything they wanted. Today there are four primary ways in which people can use Amazon to make money:

  1. Work for or partner with Amazon directly.
  2. Become an online affiliate for Amazon.
  3. Set up and manage an Amazon store.
  4. Deploy one of Amazon’s commission-generating apps and plugins.

FBA FAQ

Can Negative Amazon Reviews Be Removed?

A review cannot be removed simply because it is negative unless its author changes their mind. However, reviews that are false and damaging to you or your company may support a defamation or trade libel claim.

How Should I Register My FBA/FBM Business?

The ideal business entity for you depends on its size, strategy, and location. One of our ecommerce consultants can help you figure out your strongest plan of attack.

Amazon Marketplace Consultants

The attorneys of RM Warner understand the rules of the virtual marketplace; we work with online businesses and marketers all the time. We know how to request the removal of Amazon reviews, when a removal request likely to succeed, and what to do if it doesn’t.

As an Amazon sellers, you work hard to keep an edge on your competition. We will work equally hard to defend your business from their unfair and deceptive attacks.

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