Anyone who is tempted to enter into agreements with other online sellers to set minimum prices should pay attention to the story in Wednesday's Newsflash
. Former Art.com employee David Topkins faces a felony charge for allegedly conspiring to fix prices of certain products (posters) on Amazon.
According to the announcement from the Department of Justice on Tuesday, Topkins entered into a plea agreement in which he agreed to pay a $20,000 fine and to cooperate with the ongoing investigation.
The story is a tale of caution about business partnerships as well. Topkins' company Gotham City Online (GCO) had sold its poster business to Art.com in 2012, which hired Topkins and GCO's other two principals, Jonathan Garriss and Adam Hersh. The three business partners allowed Art.com's poster business to operate on the same servers that hosted their own ecommerce business.
According to court documents in a lawsuit filed by GCO, the relationship between its principals and Art.com's legal counsel was "frequently, if not predominantly, adversarial in nature."
Art.com abruptly terminated Topkins, Garriss and Hersh on January 28, 2014 - Hersh claims Art.com accused the three of "wrongdoing" to justify firing them and as a pretext to hold back what he says was $6 million Art.com owed them.
Finally, while the accusations between Gotham City Online and Art.com fly back and forth, some of the allegations are noteworthy in that they explain how a merchant "could" deceive shoppers.
"One form of false advertising by Defendant is its fraudulent "last chance" and "sale extended" sale promotions designed to deceive consumers and entice them to purchase Defendant's products on a false deadline at a supposed (and often illusory) discount. Defendant emails consumers that they have a firm deadline to take advantage of a "sale" price, even though Defendant and its senior executives have no intention to adhere to that deadline. The sale "deadline" is then "extended" according to a pre-planned schedule. This allows Defendant to send another email to consumers about the sale and to create two "last days" to drive sales."
"Defendant also intentionally hides promotions from customers who have purchased gift cards or daily deal discounts in order to prevent these customers from maximizing the return on their investments,... For example, Defendant runs promotions on third-party sites such as Groupon, where a customer can purchase a $50 discount card for $25. But when the purchasing consumers click through the promotional website links in order to redeem their purchases, Defendant's site technology hides current site-wide promotions and sales, which are often a better savings for the consumer than the promotion they just purchased."
The allegation states that one employee was a "staunch proponent of these deceptive practices in order to minimize the impact of the Defendant's discounting programs and to drive up revenue."
It's a good time to examine your business practices - and business relationships - to make sure you aren't crossing any lines or putting yourself at risk.