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How online marketplaces police products and sellers on their sites

January 25, 2017 06:00 AM
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With up to 5,000 designs submitted to its online marketplace each day, Spreadshirt Inc. has a robust vetting process in place to ensure designs meet its guidelines—that means the designs shouldn’t break any trademark laws, promote violence or offend a large group of people.

The German custom apparel e-retailer operates a marketplace that allows individuals and organizations to submit designs on its site that it then places on products and sells to Spreadshirt customers. Spreadshirt has an automated system online that flags designs based on tags or keywords, such as trademarked names like Star Wars, that are prohibited from the marketplace. In addition, a team of about 20 employees scan each design submitted to the site. They reject approximately 6% to 15% of designs each day based on such issues as low-resolution images to copyright infringement, CEO Philip Rooke says.

However, those procedures haven’t prevented copyright and trademark owners from contacting Spreadshirt--which launched its marketplace in 2006—to ask the retailer to remove listings. The marketplace even faced legal action from a film producer who said designs listed on Spreadshirt’s marketplace used an unauthorized trademark of several movies from the 1950s—a design that its automated keyword searches and staff didn’t flag because they had never heard of the movies. In this case, lawyers of the producer contacted Spreadshirt to remove the listings, and Spreadshirt complied, avoiding any lawsuits.

It’s an imperfect system, and policing and screening content is an issue many marketplaces are looking to resolve.

Online marketplaces host products from different merchants on their websites. Some of the larger online shopping malls have millions of product listings, and the high number of items can pose a challenge when trying to keep tabs on sellers and SKUs. It can be particularly difficult because the marketplace model allows these online shopping malls to scale rapidly. And while most large marketplaces have automated and manual processes in place to scan the items merchants list for sale, products that infringe on trademarks or that are offensive still slip through the cracks. 

One recent example involves hip-hop group Run-DMC. The group filed a $50 million lawsuit in December against a select group of online retailers and marketplace sellers, including Amazon.com Inc., Wal-Mart Stores Inc. and Wal-Mart-owned Jet.com, for “advertising, selling, manufacturing, promoting and distributing multiple products” in the group’s trademarked name without permission, according to the lawsuit filed in a district court of New York. Specifically, the lawsuit alleges that Amazon, Jet and Wal-Mart sold items from other sellers, a few of which are named in the suit, that violate federal trademark law.

Wal-Mart, No. 4 in the Internet Retailer 2016 Top 500 Guide, and Jet declined to comment on the suit, and Amazon (No. 1) did not respond to requests for comment.

Whether marketplaces are liable for listing alleged counterfeit products, or “fakes,” depends on the case, says Ryan Vacca, a professor at the University of Akron School of Law who previously worked as an intellectual property attorney.

 “Online retailers or intermediaries, such as Amazon, eBay and Wal-Mart, definitely have concerns about being liable for trademark infringement when the products they sell create a likelihood of confusion as to the source or sponsorship of the products that are offered on their sites,” Vacca says. But marketplaces have had success in avoiding liability by arguing that they’re not actually selling the infringing product and instead acting as a platform for merchants to sell their products online to consumers. And in many cases, “the courts have placed the burden of policing violations of trademark law on the trademark owner instead of on the online marketplaces.”

Marketplaces also have tried to minimize the risk, Vacca says. For example, some have sellers contractually agree to not sell items that infringe on someone else’s rights. Others, such as eBay Inc., have programs that allow branded manufacturers to notify the marketplace if they believe a seller to be listing products that violate their trademark rights. “Although nice in theory, it might not provide much practical protection for the marketplace,” Vacca says. 

For Spreadshirt, the marketplace’s automated and human gatekeeping system aims to ensure it abides by copyright and trademark laws. Rooke says: “If I ignored infringement, my business would be two to three times bigger.”

How marketplaces police products

Not every marketplace can look at all products that sellers list, especially those that list millions of products and are growing rapidly. Wal-Mart, for instance, features more than 20 million items online and has added up to 2 million items per month to its online assortment in the past year, primarily through its marketplace sellers. Even larger, eBay lists 1 billion products on its marketplaces.

One way these larger shopping malls police products is by integrating technology that looks for keywords in descriptions, tags and images that could indicate counterfeit products or sellers trying to piggyback on another company’s technology or trademark. For example, if a marketplace doesn’t allow weapons to be listed and sold, then an automated system could flag listings with words such as “gun” or “rifle” anywhere on the listing page. Or, if a seller is listing counterfeit products or brand-name products without authorization from the brand owner, then some automated systems can detect those listings based on such things as low-resolution images of the products and brand logos.

For instance, Newegg Inc., which operates an invite-only marketplace, has a system to flag listings that violate its policy. “If a counterfeit product is trying to leverage branded manufacturers’ intelligent property, the system can detect that and will flag it for review,” says Sophia Tsao, vice president of Newegg Marketplace. “For items that fall in gray areas, our content management department reviews these notifications with the seller and provides suggestions on how to optimize that listing.”

‘Unethical’ products

The “gray area” often includes unethical or offensive items that technology systems may not be able to flag. For instance, Wal-Mart and Amazon last month removed a listing for a mug sold by a marketplace seller that said “Got Retard?” on it after angry customers sounded off on social media platforms. Similarly, Amazon has been under fire for selling doormats bearing India’s flag and flip-flops with pictures of Indian civil rights icon Mahatma Gandhi—both of which were sold by marketplace merchants.

Filtering for offensive content on marketplaces is challenging, Spreadshirt’s Rooke says, because what is considered offensive can vary and be unclear. For example, marketplace merchants have submitted designs to Spreadshirt in recent months comparing now-President Donald Trump to Adolf Hitler. In some countries, it’s not uncommon to compare people or behavior to Hitler, Rooke says. But in Hitler’s home country of Germany, where Spreadshirt is based, it’s an incredibly sensitive issue and offensive to most everyone in the country, he adds. In this case, Spreadshirt is able to control what designs on the marketplace are available in which country. Meaning, it can list a design for sale on a marketplace in one country and not include the design on its marketplace in another country.

In instances where it’s unclear, Spreadshirt has an internal ethics  council composed of staff members from various departments to determine whether a marketplace design is offensive or not.

“This is a process that has evolved over time,” Rooke says. “But in general as a marketplace, we are the [platform] for people to express their views—and not to be the editor of that.”

 

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