Authorisation certificate from brands to sell online – Mandatory?

The short answer is no, but the reality is a bit more complicated. The CCI has ruled that brands can decide who can sell their products; it’s unlikely for more than a handful to take this route, though.

Large brands have a confusing relationship with e-commerce. On the one hand, they can benefit from strong growth; but on the other, many sellers are offering huge discounts on their products. Heavy discounts makes it difficult for them to maintain their desired profit margin on those items that need servicing while under warranty. Moreover, it dilutes their brand value. You may recall Toshiba and Lenovo issuing loud warnings to consumers against buying heavily discounted products. Then Sandisk even said that it was going to control its online distribution channel by only allowing authorised sellers to sell its products. So what does this mean for online sellers?

What does the law say?

Nothing, really. No one really anticipated a situation in which a company would not want its products to be sold, perhaps. But most probably, it’s because it’s a matter to be settled between the sellers, distributors and the brand. The law does take exception to misrepresentation, though. Therefore, if you’re selling Sony products online and your website is dominated by Sony logos, which may lead a buyer to think that the seller is the company, authorised sellers or Sony itself would take exception. You would then need an authorisation certificate or risk a law suit (if you are towing such a line, do register your business to avoid having to repay the liabilities yourself). But if you’re buying original products from a Sony distributor, the law places no requirement on the seller to obtain an authorisation certificate. It’s up to the company itself.

Up to the Brand

So up until the e-commerce wars in India, brands had good control over pricing as overheads were more or less the same for all. This has now changed, with sellers operating online and discount support from large e-commerce players. Some brands have, therefore, tried to put a stop to this by withdrawing warranties, but now appear to have changed their mind (and was unlikely to begin with).

In one well-known case, Sandisk had Snapdeal take the seller Ambitious Marketing off its platform as it was not an authorised seller. The matter then reached the Competition Commission of India (CCI), which ruled that it was prudent for brands to control the distribution channel and disallow sellers it had not authorised from selling its product. However, the brand doesn’t seem to have a problem with any non-authorised sellers other than Ambitious Marketing. Even now you can find over 20 sellers of Sandisk products on Snapdeal, a fact that has been pointed out by Ambitious Marketing, too. So it’s unclear what the motivation was behind this matter. Therefore, you shouldn’t really let just this one case confuse you.

How should online sellers view the situation?

• Buy original goods from a distributor of the brand.

• If you are not an authorised seller, don’t misrepresent yourself as one.

• Remember that brands do still have the right to control their distribution channel, but are unlikely to take this step.

This is a guest post by Hrishikesh Datar, founder of Vakilsearch, India’s leading online legal services provider for businesses and individuals. Vakilsearch is a web portal that provides documentation services, business and intellectual property registrations, including copyright and trademark, tax filing and accounts-related services.