It’s no secret that many e-commerce marketplaces, like Amazon, are under increasing scrutiny when it comes to regulatory requirements. Sellers are often reactive to challenges that arise, which may lead to high costs, time, and effort to rectify mistakes.
Although meeting regulatory requirements can add work to the process of launching and scaling a business, at BRANDED, we believe that taking a proactive approach toward regulatory compliance is crucial to protecting brand equity and can go a long way toward l helping marketplace sellers build trust with their customers and audience.
Read on to find out why!
What does marketplace compliance enforcement mean for you as a seller?
Whether you’re a large omnichannel enterprise or a small to medium-sized seller, you should be aware of the regulatory environment that applies to your product. It’s easier than you may have thought to get caught with non-compliant labelling and marketing on Amazon, or even to inadvertently violate a third-party’s trademark.
Let’s start with product claims. Many product categories like cosmetics, cleaning products, dietary supplements, and electronics operate in highly regulated environments, which have stringent requirements applicable for labeling and marketing of such products . The burden is on you, as a seller, to make sure your product claims are watertight.
Showcasing one example of how tricky this can be: moisturizing creams – should be a simple one, right? Perhaps not…
See if you can tell which of the moisturizer products below would need to meet regulations as an OTC drug in the US?
Did you spot it? Even though both these products are moisturizing creams, as soon as the seller includes an “SPF” or “UV protection” claim, it automatically triggers the need to meet the labelling requirements for Over the Counter (OTC) drugs as well as cosmetics. OTC compliance responsibilities go beyond the label. For example, the seller would also need to ensure that the product includes an appropriate amount of an active ingredient under the OTC Monograph for sunscreens and that the product is produced in a facility registered with the FDA for the production of OTC drugs.
In contrast, if your moisturizer is only making claims such as ‘reduces the appearance of fine lines’ or ‘skin moisturizing’, the product may be able to be labelled solely as a cosmetic and wouldn’t need to meet the additional OTC requirements.
How about if your moisturizer said something more vague like ‘prevents sun damage’? Do you think that would still count? Yes! Even a statement like that example can trigger the need for meeting the additional OTC compliance requirements.
The picture gets even more complicated when you want to take that top-selling moisturizer to a new market. Other countries adopt different approaches to regulating products like moisturizers, and what is required if the product claims to provide sun protection. Your US formula may not be lawful to market in some EU countries, the UK, or Canada where there are more restrictions on ingredients. Additionally, product testing, labeling, and notification requirements vary between countries.
Do I need to meet compliance regulations in every market that I sell in?
In short, yes! Consumers expect to see products that meet the labeling requirements for where they live. Failing to follow local regulations could, first and foremost, put your consumer at risk. Additionally, you may run the very real risk of suspension or even being delisted due to non-compliance.
At BRANDED we know it’s vital to do proper research market by market, to help ensure our brands don’t get caught up in unexpected challenges. Given the varied global regulatory landscape, there is not a ‘one size fits all’ approach.
Even though there can be EU-wide guidelines, different countries within the EU may also have their own requirements, for example, native language labeling, and sometimes country specific product registration requirements. Even the UK sometimes has different regulations depending on whether you are selling on the mainland, or to Northern Ireland. It’s a minefield of compliance, but Amazon makes it clear that the onus falls on the seller to ensure local laws and regulations are met and adhered to.
Our legal team here at BRANDED is fully integrated in our brand operations & processes, so that when we evaluate expansion into new territories, we’ve got an expert eye and a host of resources to ensure a smooth entry.
Did you realize that a cease and desist warning or an Intellectual Property (IP) infringement settlement might critically devalue your business?
In addition to product regulatory compliance, it’s important to highlight the very real risks to sellers that surround properly managing your IP assets. Breaches may result in an Amazon suspension or even a delisting of your brand!
Trademark infringements, even unintentional, can trigger these notices being served, which in turn may negatively impact the value of your brand with significant financial consequences when it comes to business valuation and cashing out.
Trademark disputes are one of the most common ways for an Amazon seller to get suspended. Sometimes sellers may not fully understand the scope of their IP protections and might sometimes make poorly informed decisions in settlements as a result.
We’re aware of cases where a cease and desist notice has been served to a seller, who didn’t realize their own manufacturer was infringing on a trademark or patent or thought their IP portfolio offered broader protection than it actually did. Even though it was completely unintentional on the part of the seller, the failure to proactively manage their IP portfolio, including relationships with manufacturers caused issues down the road.
During due diligence, BRANDED fully reviews each brand’s IP assets to understand the limits and qualifications of your IP rights. Unfortunately, without an expert by your side, it can be tempting to sign an agreement with the IP holders in the event of a cease and desist notice, but you could be signing away brand rights and agreements without fully realizing the consequences.
When a company pairs with BRANDED, one of our most important tasks is maintaining a successful and productive manufacturer/seller relationship and using our expertise to ensure that there are no unforeseen problems. We know the right questions to ask, and where to find solutions.
What would a compliance suspension or delisting mean for your business in the real world?
Why would a suspension, or a delisting really matter? In our experience, we’ve found that many sellers simply don’t realize the costs, time, and effort involved in rectifying many types of suspensions or IP issues.
Even making a small change to your product claims could mean a complete redesign of your packaging and your marketing materials. Perhaps removing one ingredient could change the performance of your product, or finding issues with your manufacturer might mean finding a completely new supplier. You could be looking at high costs, lost sales and your business valuation negatively impacted.
More importantly, if a brand has been flagged and sanctioned due to non-compliance, it can be very hard to bounce back. The pressure is on you, the seller, to prove to Amazon that your brand is compliant and is not infringing on the rights of another Seller.
Compliance can be a good thing – for good businesses.
Despite the potential pitfalls, at BRANDED we believe that product compliance is a good thing for brands! Amazon & other marketplaces are amazing platforms on which businesses can thrive and grow, and we’re excited to bring our unique mix of expertise and capabilities to our brands and products.
When customers can rely on the fact that they are purchasing high-quality, trustworthy brands and products, everybody wins. Consumer trust is, after all, paramount for marketplace sellers to succeed.
But that’s not to say compliance is a walk in the park – for any size of business. When we look to help a business grow on Amazon and beyond, BRANDED proactively looks closely at all the elements involved in ensuring our brands and products meet compliance regulations. We keep on top of the latest changes from Amazon and stay ahead of the game. Our expert legal team works tirelessly to help your brand grow and thrive for the continued success of your business.