Paul is an experienced attorney with nearly 20 years in complex tax, litigation and M&A matters. Paul is also a trusted resource in the eCom world, regularly quoted in the press on matters involving Amazon and eCommerce, and was the most-cited resource in the House Antitrust Committee’s report on Amazon’s business practices.

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> Here’s a glimpse of what you would learn…. 

In this episode of the Ecomm Breakthrough Podcast, host Josh Hadley engages with Paul Rafelson, an attorney with nearly 20 years of experience in tax litigation and M&A. Paul, affiliated with the Rafelson Law Firm and Seller Basics, discusses the current challenges Amazon sellers face, particularly the "purge" of resellers. He highlights increased scrutiny on invoices, rising fees, and the importance of compliance. Paul introduces Seller Basics, a cost-effective service designed to help sellers manage account health and prevent suspensions. The episode underscores the need for proactive legal strategies and compliance to navigate Amazon's evolving marketplace.

Here are the 3 action items that Josh identified from this episode:

1. Strengthen Documentation and Compliance Practices: Ensure that all invoices and sourcing documents are meticulously organized and easily accessible.

2. Proactively Protect Intellectual Property (IP): Register your trademarks, copyrights, and patents as early as possible.

3. Diversify Sales Channels and Optimize Cost Structure: Consider expanding to other e-commerce platforms to reduce dependency on Amazon.

Special Mention(s):

Related Episode(s):

Sponsor for this episode...

This episode is brought to you by eComm Breakthrough Consulting where I help seven-figure e-commerce owners grow to eight figures. 

I started Hadley Designs in 2015 and grew it to an eight-figure brand in seven years.

I made mistakes along the way that made the path to eight figures longer. At times I doubted whether our business could even survive and become a real brand. I wish I would have had a guide to help me grow faster and avoid the stumbling blocks.

If you’ve hit a plateau and want to know the next steps to take your business to the next level, then go to www.EcommBreakthrough.com (that’s Ecomm with two M’s) to learn more.

Josh Hadley 00:00:00  Welcome to the Ecomm Breakthrough podcast. I'm your host, Josh Hadley, where I interviewed the top business leaders in e-commerce. Past guests include Kevin King, Aaron Cordovez and Michael Gerber, author of The E-myth. Today I'm speaking with Paul Rafelson of the Rafelson law Firm and seller Basics, and we are going to be talking a lot about how you can protect your brand through the Amazon purge that is currently underway right now. This episode is brought to you by Ecomm Breakthrough, where I specialize in investing in and scaling seven figure companies to eight figures and beyond. If you're an ambitious e-commerce entrepreneur looking for a partner who can help take your business to the next level, my team and I provide hands-on experience, strategic insights, and the resources needed to fuel your growth. So if you or someone you know is ready to scale or looking for an investment partner, reach out to me directly at Josh at Ecomm Breakthrough. Com. That's E-comm with two M's and let's turn your dreams into reality. But today I am super excited to introduce you all to Paul Rafelson.

Josh Hadley 00:00:48  Paul is an experienced attorney with nearly 20 years in complex tax litigation and M&A matters. Paul is also a trusted resource in the Aecom world, regularly quoted in the press on matters involving Amazon and e-commerce, and was the most cited resource in the House Antitrust Committee's report on Amazon's business practices. So with that introduction, welcome to the show, Paul.

Paul Rafelson 00:01:08  Thank you so much. I appreciate you having me on. i'm really, really excited to be here. Really looking forward to our chat today.

Josh Hadley 00:01:13  Paul, I'm super excited to have you on. And for all of our listeners, I think we should all be, you know, singing your praises and grateful to you. I know you played a huge role in the sales tax, you know, the ordeal that went down, what, five years ago. Now it seems like it just started yesterday.

Paul Rafelson 00:01:28  But yeah, it started when we started about seven years ago. Seven years ago. Changed my whole life, that whole incident, you know, it's why I'm here.

Paul Rafelson 00:01:36  I would never have thought to go into private practice. It wasn't for that whole situation. It was fine.

Josh Hadley 00:01:40  Well, you saved millions of Amazon sellers from having to file their own sales taxes, complying with all the local counties and all that garbage.

Paul Rafelson 00:01:48  And all that nonsense. Yeah.

Josh Hadley 00:01:50  Yeah. Push it to Amazon that can deal with it. So. Paul. So number one, thank you. We're all excited to be on the show.

Paul Rafelson 00:01:57  You're welcome. The only problem with that is I get a little bit typecast. And now people are like, oh, you do it. You do this. I thought you were the tax guy. I'm like, you know, this was like, rooted constitutional law. Stuff it more to do. You know, it's not like I'm out there filling forms on April 15th or whatever. I don't even know what the date of taxes would do. this was very, you know, really just fundamental constitutional. But I get so typecast it I feel like, you know, it's like this is my role and it's taken me years to break out of it.

Paul Rafelson 00:02:21  But now it was a lot of fun. I'm happy. I was happy to do it. It was really interesting stuff. I mean, it was unfortunate the way they treated the sellers. I thought that was disgusting what the states were doing, what Amazon was doing. But yeah, that is for the most part resolved nowadays, I love that. So Paul, with.

Josh Hadley 00:02:34  That being said, you know, you've obviously played a big role too in the House's antitrust case. So why don't you tell me a little bit more there on that topic and kind of give me your predictions, if you can, of what you think shakes out over the next five years.

Paul Rafelson 00:02:48  Yeah, I think not a lot. I mean, I think unfortunately I don't think much is happening with this case. It's, you know, that that's going on right now. You know, I have mixed feelings about the way the FTC is handling this situation. you know, at the time, how many years ago this was, 2019, 2020? You know, we were working, you know, with a non-profit on a merchant scale, which is still around, but not really doing very much.

Paul Rafelson 00:03:12  but we were actively taking on different cases, and we really wanted to have a say and have a voice in sort of e-commerce law and policy. So we were drafting documents, sort of capturing really the voice of the seller. It wasn't our voice, it was just us sort of, you know, summarizing different experiences. Sellers had the sort of mistreatment that Amazon had happened, you know, that had happened that maybe weren't as obvious, as some of the ones that had been commonly referenced, like, you know, Amazon always, stealing, stealing other people's products was commonly referenced throughout the hearings, and we just wanted to bring other insights to light. and I think we did a great job doing that, but it's just where it kind of went from there. I don't know, I don't have a whole lot of hope with the cases that are currently running at the moment. I don't know if this is the path forward for this, it'll certainly be five, ten years before anything comes of it.

Paul Rafelson 00:03:57  I think, and who knows, who knows if there's regime change, whether these cases will even continue. but, you know, it was fun to have our voices heard. It was fun to meet with the chair of the FTC, who was the chief counsel at the time. We can and really be able to share the Amazon stories and represent the Amazon sellers, and we put our foot forward for what's really going on. I still think to this day, Amazon sellers are missing this number, this huge opportunity to build a lobby. I think a lot of our problems stemmed from the fact that we didn't like what I tried and in my defense, I wasn't the one who was supposed to do that. I was supposed to do the actual lobbying part, like working with lobbyists and stuff like that. But we tried to raise the money to put a lobbying force in Congress that represents our interests. We just haven't done it. And I think we missed out on that. I think that's the biggest root of our woes as Amazon sellers.

Paul Rafelson 00:04:44  I think we know, you read on LinkedIn about these issues, people complaining every day. It's like if we just had this lobbying force, like, I don't know how to I sound like I'm being a dead horse, but that's just how the game is played. You know, we need our own representative lobbying force in Congress. some just sort of, you know, solidarity among Amazon and e-commerce companies to, to, to represent small businesses, whether the issues are how Amazon treats us, whether the issues are, you know, why is it still cheaper to ship from China than it is to ship across the country? Why are they getting, you know, these companies, Teemu and Amazon, they're all trying to compete against us and kill more American businesses, things like that. We should be addressing Congress. But it's, you know, and it's like, what would that take? 30, 40, 50 grand a month for a nice, healthy lobbying effort? with top lobbyists, you know, knocking down the doors of Congress, you know, speaking on our behalf.

Paul Rafelson 00:05:26  It doesn't seem like a lot of money in the scope of our market size, but it's just it's been an absolute, really difficult to get people to kind of align on that. We had a big meeting. I remember in 2021, maybe 2020, we had a big town hall whenever clubhouse was popular. and the vast majority of influencers just didn't think it was a good idea to do this. And it's like, we're just not going to get anywhere. So I'm ranting a little bit, but it touches a nerve because I really think we just do so much better. You know, all the issues we're going to talk about could be better handled if we had our own law enforcement Congress.

Josh Hadley 00:05:59  I like that I couldn't agree with you more. So yeah, you know, Paul, maybe there's a chance for us to resurrect it. Maybe this will resonate with sellers. And, it's time to, you know, turn it on. Because our audience is seven figures plus Amazon sellers. You know, we all go in, you know.

Paul Rafelson 00:06:14  We don't want to die. But I'm happy to do my part. But the lobbyists, I got to say, you know, you've got to pay these high powered lobbyists, but we should have them. I think it's time to change the game. That's how you level the playing field between us and Amazon. The only thing Amazon is afraid of is the government.

Josh Hadley 00:06:26  Yep. All right. So Paul, on that note, let's just let's dive into those issues that figuratively would be easier or more manageable, possibly if we had some lobbyists behind us. But we talked about briefly before we hit the record button that there is a true purge going on at Amazon. Tell me what that is.

Paul Rafelson 00:06:43  Yeah. So I call it The Purge. It is. And this comes from the seller basic side, which is, you know, separate from a law firm. We have a whole account health program, called Seller Basics. And it's like you pay like whatever, 100 bucks a month or whatever, and anything happens.

Paul Rafelson 00:06:54  Your Amazon account, you know, we do the Amazon process and that's we have a whole account health team that's just running through cases all day. And, you know, especially among resellers, it just seems there's a purge among resellers. I've seen one. I'm seeing many, many resellers exit the business. Like. And these are people that I've known for years, in wholesale arbitrage. You know, they're some of the top people. They're scaling back, they're exiting. They don't know one minute they're free to sell, you know, millions of dollars of this brand of sneaker a year. And then all of a sudden Amazon says, nope, can't do that. Then the fees go up, then, oh, we don't like your invoice. Sorry. we've accepted that invoice for ten years, but now we need you to trace. Well, no longer accept the receipt from Walmart. We need you to trace the products to their original source. Direct the manufacturer. If you can't do that, we'll shut your account down.

Paul Rafelson 00:07:33  You'll never get it back. I mean, there is, There is a purge. There's something going on in Amazon. I don't know if it's a combination of factors that Amazon is trying to just clean up their sourcing and just have more direct sourcing. I don't know if it's because there's a stolen goods problem. Now is not just about authenticity. Last summer there was a big to do over a major supplier that a lot of soldiers were working with out in California, got raided by the California Highway Patrol. It turns out stolen goods. So, tons of sellers were getting hit with these stolen goods. even if their goods weren't stolen, just by virtue of using invoice from this company that had stolen goods on their premises. Amazon. Shut them all down. not easy to come back from. but there's just there's something going on at Amazon where they are just, you know, really purging the wholesalers and retailers. I think with the private label, you know, brand owners, The Purge is more in the form of fee erosion, right? Just constant margin erosion.

Paul Rafelson 00:08:20  Right. just upping the fees, upping the fees, while at the same time trying to create a new marketplace that's, you know, where they can bring in the stuff from China even cheaper. just making it, you know, really trying to squeeze. It's almost like from a private label perspective, Amazon views the seller is like the middleman, right? I don't think there's anything new. Right. And the middleman, that's extra cost. So if you can cut the middleman out, you can bring the cost down and voila, prices are lower. And Amazon is not unlike Walmart. You know, their priorities, their customer, not the priority is the customer's perception that prices are low, right? People are Prime members because they believe they're getting access to great deals, good products at a low price. and Amazon, I think that's their priority, is going to be always to the Prime membership. They have to make sure Prime membership feels valuable to a consumer, because if they lose that, that's a big problem.

Paul Rafelson 00:09:07  so they're just squeezing and squeezing sellers more and more. and there's definitely a double standard. You know, sellers in China definitely get away with more than sellers in the United States. It's just the fact they just get away with it more. How? I don't fully know, but I know what they do. I don't know how they're getting away with it, per se. We can all speculate on how that's happening, but it's happened. Yeah.

Josh Hadley 00:09:25  So on that note, you know, Paul, there's one thing that really resonated with me when you spoke at Billion Dollar Seller Summit in Hawaii earlier this year and you talked about, you know, kind of, you know, coming, going at these overseas sellers that have been counterfeiting, knocking off IP for years and really us not having a whole lot of defense around that. Would you mind maybe diving a little bit deeper into those strategies? And how can private label brand owners really protect themselves from these, you know, overseas sellers, especially when there is so much margin erosion happening? You've got, you know, competitors that are just driving down prices in addition to fees going up.

Paul Rafelson 00:10:02  Yeah. So it's it is something that's been been a problem for years And people have they invest money in intellectual property, they have a trademark, they have a copyright, they have a patent, maybe a design patent, maybe utility pad, you know, copyrights, fairly cheap trademarks, fairly standard patents can be very expensive to obtain. But then it's like, okay, well, now you have this thing, but what do you do to enforce it? And so maybe you have this cool patented product, maybe you have these cool copyrighted designs that you've integrated into your product and someone's ripping you off. What do you do about it? we copyright you can try to report it through the brand registry. It's almost impossible to get them to do anything. If they do something, there's this sort of federal law called the Digital Millennium Copyright Act that allows the person to file a public notice and, you know, their backup online unless you file a lawsuit. So, I think people are averse to filing lawsuits, but what we've seen is, you know, there's opportunity there.

Paul Rafelson 00:10:54  working with different litigators. We have found that when you're dealing with infringers overseas in China, when you're dealing with, you know, you may think, how do I sue them? They're in China. Well, we can actually sue them here in the United States, in federal courts. Right. We can bring a case in federal court here in the United States. And what we can do, is basically file the case sort of in secret under seal and basically order to get a court to order Amazon to freeze any money associated with those particular sellers. And then from there, you know, there's still a court case that has to go on, but in some cases they'll forfeit. In some cases they'll be a negotiation. Sometimes it'll be full of court cases. but you're freezing the funds and you're getting the court to order the listings down. So it's a way to police your listings through the courts to get Amazon to do what you want, what Amazon won't otherwise do because Amazon will always listen to a court.

Paul Rafelson 00:11:44  That's the case, right? If you have a court order, Amazon is going to do what the court order say. It says in most cases. Right. so this is a way for people who have, you know, you have IP, you have well-established IP, you have IP, you have valuable IP and you're like, I'm tired of just being ripped off by all these imposters. How do I enforce this? This is how you do it. You go through the court system, you file these lawsuits, and, you know, it's great. People are so impressed with what? You know, you can go after 100 studies. There's $100 doing this at once. You go after 100 at a time. it's just a matter of, cost benefit, like, if it's worth it to you. Right. but I don't think a lot of solvers know that, you know, there's other ways Amazon tries to offer IP enforcement, but it's just it's just it's weak the systems are not strong.

Paul Rafelson 00:12:27  and they're inconsistent. So this is a way to get consistency of outcome. If you have a good case, you're probably going to get a court order. I can't guarantee what your outcome could be, but you know you're going to get that court order. You're getting the court to order Amazon to take down those listings. you're going to be able to freeze funds and then, you know, use that as a basis to continue litigation. The benefit of freezing funds is like, you know, now you're in a dispute with the seller in China. Your money is being held by Amazon. You get a spreadsheet, say how much money is being held by your seller that you've sued, and then that starts the negotiation and or court case. But you know, they're in a tough spot because their money is locked down. until this case gets resolved in most cases. So the really, really fun cases to bring like, like working these cases a lot and I think more and more sellers, especially 17 figure sellers who are just like, I'm tired of seeing my margins, you know, being eaten away by imposters.

Paul Rafelson 00:13:09  This is a great way to strike back and, and really take ownership of your IP and no longer be beholden to Amazon's inconsistent systems that seem to be not so great for the domestic US seller.

Josh Hadley 00:13:19  Yeah, Paul, I love this strategy. And we actually had somebody on the podcast that does exactly that. so we can tune back and go listen to that episode. the gentleman's last name was here, let me pause. I'm going to pull up. No, it was, Molson. Molson Hartz brothers.

Paul Rafelson 00:13:41  Yeah. He does. Yes. He does this stuff. Yes. With his, what's it called? named after? yes. It has a scientist's name. Right. It's Edison IP. Edison. Yep. Yep. Yeah.

Josh Hadley 00:13:54  Edison. Edison IP. I'm trying to figure out who I was. It was Hilton Heart.

Paul Rafelson 00:14:08  Yeah. Yeah yeah yeah yeah. My heart. Yeah. So which is rather. It's a brother, right? It's Hilton the brother. Correct.

Paul Rafelson 00:14:16  Right. Yep. Yep. Yeah.

Josh Hadley 00:14:19  All right, let's see.

Paul Rafelson 00:14:21  Did you know that bike wasn't mine?

Josh Hadley 00:14:23  Yeah I saw he was on. Yeah, he was on.

Paul Rafelson 00:14:26  It was pretty funny.

Josh Hadley 00:14:27  He was one. You need lobbying.

Paul Rafelson 00:14:29  I know he's good. He's good. We've talked about it before. Ages ago. But we just. We need money like we need. We need a real lobbying firm. Like, probably one from each side of the aisle, at least, you know. But we need to do it that way. Yeah, he would be great. Yeah.

Josh Hadley 00:14:42  All right, let's go back into this. Okay. So 18 minutes. Okay. yeah. So Paul, we actually had somebody on the podcast. It was Hilton Hart from Edison IP. And we went into the weeds of this exact strategy that you're talking about. And in fact, Hilton acquired a brand. And because he saw so much IP infringement and trademark and copyright issues, where he opened up one of these court cases, Wright sued hundreds of sellers all at the same time, froze their assets in the US, basically, you know, got default judgments to where, you know, these overseas sellers aren't going to show up in court.

Josh Hadley 00:15:15  So you basically get their money. Yeah, or maybe not. But his case was like most of them didn't show up in court. He got a default judgment, basically paid for the business just from that last judgment.

Paul Rafelson 00:15:26  Now that's right.

Josh Hadley 00:15:27  You've got you've got some more to add to this. And that was going to be my question is like how does this work and who do you go to. Like do you yourself create these cases Paul or yeah.

Paul Rafelson 00:15:35  Was there like litigators depending on the jurisdiction you're in, we'll figure out a plan. We work with litigators. You know, we're lawyers. Obviously we may file, you know, but I like to work with I'm not a I'm not a courtroom lawyer. That's not my jam. So that's not a, never mind drop. A silly word to my mind is 8:00, right? It's late where I am, I apologize. It's not my John. Excuse me. I was trying to run my Philly lingo, for a second where I grew up.

Paul Rafelson 00:15:57  I'm not. I don't love being caught. Like, that's not my jam. I like relying on litigators who love to be in court. Good for them. but no, it's something we facilitate. We work these cases all the time. there are a lot of fun. but sometimes, you know, if you hit a, you know, it's like, if you go to if you go, if you go for the vein, you get a deep one, you get you get, you get a real, you know, gusher of a vein. Right? There's a lot of money. You freeze, you know, you freeze millions of dollars of a seller in China, they're going to lawyer up. So, and that happens sometimes, right? So sometimes you do find yourself actually going through litigation, trying to defend the case and make arguments that, you know, this doesn't, you know, they'll say the money doesn't relate to the product, so they'll try to get out, under, Rupa Mexicanos, an old Supreme Court case, that could potentially limit how much you can freeze.

Paul Rafelson 00:16:40  They'll, you know, they try to get really sweaty. So, I mean, sometimes you really do have to litigate. Sometimes you have to go into appeals. You know, these cases, depending on the default judgments, are nice, but if the dollars are big, you tend to see, you know, and that's how any court case is, right. That's how we sort of measure anything we look at. You know, when I have clients call me up and they give me these scenarios to say, like, I, you know, whatever got in this dispute with my three people and as a result, I lost 15 grand. Can we sue them? And the answer is yes, you can sue that. Do you want to sue them for 15 grand? Like do you want to? Because the amount of money you are going to spend in litigation, cause right, is going to probably exceed 15 grand fairly quickly before you even get in court. so it sort of again becomes sort of cost benefit analysis.

Paul Rafelson 00:17:16  But if you freeze big dollars, yeah, you will see lawyers show up and, you will have to defend this case or, you know, we do defend the case like we have to, you know, or prosecute the case. I should say, we have to do that. So it's it's, it's not always as easy as just getting a bunch of default judgments. It just depends. But, you know, the lawyers are happy to do it. You know, if the dollars are there in the case it is strong. you know, we're happy to go after it and, you know, take on the fight. We like those cases. So, I'd rather, you know, I think from the lawyers, they'd rather have a bigger pot. because that works out to fight over than a small pot. Not to fight over. so, no, I mean, it's, you know, so, yeah, it's not always as easy as a default judgement, but, you know, if you have 100 sellers, you know, maybe, you know, 80 of them will be default judgement.

Paul Rafelson 00:18:00  Small, small, small, small. And then you'll have like 10 or 15. That'll be big. Or, you know, sometimes you'll have 10 or 15 that really just one seller with multiple accounts. So there's all sorts of crazy stuff you see when you're doing this stuff with Amazon. And it's not just Amazon like you can go to, you can sue Alibaba to try to stop at the source, probably not to get any money from Alibaba because they're going to say we're in China. You cannot jurisdiction you know. So there's like different avenues, but you can certainly stop use the court order process to to try to stop the channel, the different channels of wherever this is coming from.

Josh Hadley 00:18:27  Yeah. Love that Paul. That's a rabbit hole in and of itself. But I think you see a lot of other issues that sellers are facing. What are some of the other issues that you see sellers facing right now that you know can help protect their brand, their assets, and how do they play smart to stay ahead of the game for the next five years?

Paul Rafelson 00:18:45  Well, that's a great question.

Paul Rafelson 00:18:46  so obviously, you know, having your property in order is key. you know, one of my pet peeves with brands, especially somebody who does a lot of M&A, who helps our clients is one of our favorite things to do is we help our clients and we're not brokers or lawyers. You work with brokers. You work with people like you who help companies grow. I don't know anything about how to help Toby grow. It's not my jam, my John. what we do is we. When you're ready to sell, help them go through that transaction process. Make sure the terms and conditions are safe. when you sell a business, one of the things you have to promise is. And you have to make a series of promises, you probably know this is representations and warranties, but you've got to make promises about condition of your business. One of the most fundamental promises you're probably gonna make is about your ownership of assets. I can't tell you how many times I see this. This drives me crazy.

Paul Rafelson 00:19:24  you go out. Especially Amazon sellers are guilty of this mistake so many times, you know, they went out, they created a brand. Brand registry. Okay. That was product one, right? And there's product two, product three product four product byproducts, whatever it was all these different offshoots, variations, different names for those. And they never went back and registered those brands. They never registered those trademarks. And then one day they go to sell their business. And it's like, do you own that? Like so like think about it in real world terms. Think about cereal. Right. You've got Kellogg's. Right. That's sort of the umbrella. The umbrella. You've got Cocoa Krispies, you've got Rice Krispies, you've got corn, Apple Jacks, you've got all the columns. You know a lot about cereal, apparently. Frosted Flakes right. Each one of those products is a brand, right. So if you have different variations, you're gonna be cool little names or different products that you're giving, you know, but you only went and registered your trademark, that one brand.

Paul Rafelson 00:20:08  It creates issues. So do IP checkups, like just go get your IP checkup, go register your copyrights. If you're hiring people on Fiverr for the love of Pete, get the assignment of rights. Get the document saying this is yours, right? They are the author, but you own it, right? Make sure you know where they're getting their stuff from. If they're creating content for you, checking with them, like where did you get that from? Did you get that picture from Shutterstock? If so, do you have a license for that? things like, like little things like that. People mess up and it can just be such a pain when you're trying to exit in the middle of trying to exit. And it's like they start raising questions about stuff like that. so, you know, as you get to be a 7 or 8 figure seller, it's time to deploy some legal hygiene. I think it's just so important. yeah, it cost a bit of money, but it's not a lot of money.

Paul Rafelson 00:20:45  And it's really, really important. It can save you time. It can increase your valuation at the end of the day. So there's something compliance with laws. this is a big one with Amazon. Amazon is super paranoid. I don't know if you saw a consumer product safety Commission is finally doing what we always said they should do, which is they. They're holding Amazon responsible for dangerous products. Amazon's taking that serious like over time right. When we first started out with Amazon, you know, going all the way back to when I was an Amazon seller, like 2003, 2004. you know, it was a marketplace, right? It was clearly a marketplace. And Amazon kind of leaned on that. We're just a marketplace excuse to get out of accountability for what they were doing or for what was happening on their platform. I should say you could pretty much sell or do anything they didn't care in the early days then. But now the whole court view of Amazon, the whole legal view of Amazon has shifted in many areas, not just the consumer product safety, but the courts have seen this where they're saying like with sales tax, you know, this Amazon, this is really your store.

Paul Rafelson 00:21:33  So you're kind of responsible now for what happens to the customer. Right. The customer gets hurt injured using a product I don't care if it was so-and-so seller. Right. That's why we all have to show our insurance now. but it's getting worse and worse. Amazon is feeling more and more accountable for the content on their platform for the safety of the product and platform. So, compliance is at an all time high compliance inquiries, any, any suspicion of dangerous products. Amazon is shutting you down and they're looking for compliance documentations or looking for safety testing. So I mean, it's just a lot more complex to be on Amazon today than it ever was. And, people just need to be aware of that. If you have a product that is, you know, a little risky, you may want to make sure you understand your compliance obligations. I can't say how many clients come to me and they don't even know this is not a pesticide. Well, according to what you wrote, it is a pesticide.

Paul Rafelson 00:22:23  According to this, it is about, you know, it's like it's just people really don't understand what their products are. This is not making disease claims. It literally says cures this disease on the back of your product. It is making disease claims. So understanding your compliance obligations, you know, understanding your industry. It's just, it's still amazing to me that people make millions and millions of dollars selling products that are regulated, and they don't actually know the regulations that they're subject to. That's a little scary. Learn your industry, learn your regulations. Otherwise you're going to find yourself in a really tough situation.

Josh Hadley 00:22:48  Yeah, I think Amazon you know earlier this year they did that crackdown on supplements and wanted the testing. Right. And now it looks like it's going to be the same thing for you know safety product testing. You know, csrc like having those actually be tested and uploaded to products. Like, where else do you see the puck going with Amazon and the different things that they're going to require of sellers moving forward?

Paul Rafelson 00:23:09  That's the hard part is like, you know, I just think it's going to get more, I think.

Paul Rafelson 00:23:15  I worry about this purge, right? Like, is it gonna get to the point where Amazon's just gonna put their foot down and say, you know what, we're just gonna, you know. I don't know I mean they have to keep prices low. So they need sellers in China. I don't know, it's they're going to have to take more responsibility. And it may be there may be a purge of just saying, look, you need to know your stuff. And maybe they're going to start choosing which sellers can sell on the platform even more. I don't know. It's I know that sounds ridiculous, but it's like at some point the pressure just builds and, I mean, it does feel like they're trying to, you know, just the fees alone, right? What I'm hearing about what the fees and the costs of what it costs. I mean, people are more than ever wanting to get out of Amazon and move to TikTok and move to Shopify, like, you know, is Amazon trying to streamline the catalog? I don't know, just are they just tired of it? Is it too much? I don't think they can keep up with the workload.

Paul Rafelson 00:24:05  so that's what kind of concerns me. And, you know, but we see it. I mean, so we have the seller, basically the account health side of our business and, and, you know, all day, every day, people are calling us up, setting up cases and having issues because the products are suspended, because, you know, there's these compliancy things that they didn't know. And now they're finding out. And Amazon's like, you know, too bad. So sad. So I don't know what I would do but all the more reason in my opinion to say like if you're in an industry like you don't understand your complaints, just get to know like B be on the top of your game. Be a prime example of like the good side of it. Don't be just like the one that's hurting by. If you're doing 70 figures like it's time to get up, it's time to get the game. Really understand what you're doing. yeah. You know, but the day, the days and the days of tricks and, you know, are over.

Paul Rafelson 00:24:52  Like, you know, if you're playing games, it's just like, it's just it's like you get one shot these days, right? Like it's very hard to come back from Amazon now in the suspension space when you when you've genuinely like tried to shoot the system like, you know, before you could be like, oh I didn't know starch fine by was a problem. I didn't nobody told me, I'm so sorry. I'll never do it again. Like now there's like, there's just no forgiveness, right? So like, if, God forbid, you do something intentional, right, that like, they perceive as intentional intentionally, you know, or even not intentional in the sense that maybe you didn't know it was a bad thing, but it was a bad thing, right? is there just. No, this is no coming back. Amazon is not the not in the second chances move right now. I think I'm saying that all this probably the theme of this podcast for me is like there's just the second chance.

Paul Rafelson 00:25:32  The second chance train has just been left leaving the station.

Josh Hadley 00:25:36  So with that being said, then, like Paul, what issues do you see sellers coming up against? Like, you know, Amazon seems to go through different waves of suspensions and account bans and stuff on different things. You know, search, find, buy was a big push. You know, review manipulation I think is always a push with the FTC up. Amazon. Yeah trying to figure that out. So what else are you seeing people getting suspended for and what's the course of action to come back.

Paul Rafelson 00:26:01  So I guess the lack of documentation, things like that. Again, Compliancy stuff you can come back from that. Usually if you have the Compliancy documentation, you know, that's fairly easy to fix. I'll tell you something. I'm seeing that there's sort of this game going on in the reseller world. It's kind of cute, as we call it. It's sort of like creative bundling. I don't even know about this, but it's like, let's say I want to sell, I don't know, give me a product.

Paul Rafelson 00:26:23  let's say I want to sell, you know, five bags of Doritos. Okay. But I don't want to sell them the Doritos. Let's say I want my own private listing. So what a lot of sellers were being taught and coached about years ago was go file a trademark and create a trademark. Call it like, you know, Paul's bundles or Paul's Paul's creations. Okay. And then you brand register that, right as like a curation box company. Right. And then what you do is you create a listing on Amazon, not for Doritos, but Paul's creations. Okay. And then you sell your Doritos five packs, whatever bundles. Right. Well, this is like massive like you can go on Amazon and see people doing this everywhere. And Amazon is cracking. Like Amazon is cracking down on this massively. Right. Like I've heard from inside Amazon that this is a priority issue. Meanwhile, there are sellers that are making tons and tons of money. There are nine figure eight figure sellers, I don't know, maybe nine.

Paul Rafelson 00:27:09  I don't think it's nine figure eight figure sellers that are doing this. Okay. But Amazon is coming down and those right now it's sort of slow. It's a trickle. We're seeing little cases but people aren't coming back from it. Like Amazon is just again no forgiveness here. Like they feel like you were you know arguably there's a legal argument that this is sort of like reverse passing off because you're trying to pass off somebody else's product and you have to bring a product. Amazon's just having none of it. But just saying, like, unless you have a letter of authorization from like Doritos saying you can do this, we're not interested. Like we're shunning. We're not just defending, listening, we're shutting you down. So it's it's, you know, and that's an example of something where like, I know it's a retail example, but it's kind of interesting because they're creating frameworks. It's interesting because it's like everybody's doing it and it's like you almost think it is allowed, because the level at which this is happening on Amazon today is insane.

Paul Rafelson 00:27:53  But I've heard it from Amazon executives that they are, they are they're done with it. Like they want to crack down on this. And so those who do get caught with it, I get seen accounts apparently suspended and there's no coming back. and it's it's it's it's great. yeah. Invoice invoices are huge right now. Sourcing is massive. Amazon wants to know everything's coming from. Especially if you're reseller. like I said on the third, on the private label side, it's compliance is always the things compliance, safety making sure that your bullets and your what's on your listings, you know, a proper aren't overstating not violating the laws. What you're saying and not saying, you know, except curative claims, things like that. Thankfully, I have a whole team who deals with the health stuff. The basics. I don't have to deal with it on a day to day basis. I thank God, thank God for my team who does that because they're very good at what they do. I would drill a hole in my head if I had to do account health stuff all day long, I would lose my mind.

Paul Rafelson 00:28:41  So it takes a certain strong person and I might be that strong. And in my case, our leaders joy. And I think every day that she's doing what she does because she's so good at what she does and she has the patience of state to deal with it, because I would definitely support it.

Josh Hadley 00:28:55  Yeah, I hear you. Paul. anything else you think that our sellers need to know about to protect their brand, protect their assets on Amazon right now?

Paul Rafelson 00:29:05  you know, I think it's it's key to just, again, you know, understand your IP, if you're dealing with infringers, you know, consider if there are possible structures that might be more advantageous to you. and then, I mean, I would say it's just, you know, really the schedule, a checkup, you know, do the legal hygiene, make sure your business is in order from a legal perspective because that stuff matters. There's still a market. People are still selling their businesses. You know, they're not aggregators anymore.

Paul Rafelson 00:29:29  The very few left. But, you know, there's still a market. People can still sell their businesses. It's not the craziness of 2021, but there is a healthy market out there. and, and so you should be thinking about valuing, you know, how to build value and how you might want exit one day. So, you know, I think IP is everything, right when we go through an M&A deal with Amazon seller, an e-commerce company, I mean, like 90% of the deal is going to be valued in the in the intellectual property, especially the trademark. So take care of that. I think that's the most important thing. keep in mind that proposition 65, that California warning rule that's still alive and well, and it's actually Amazon slightly more at risk from that than they ever were. So if you're not familiar with California's Proposition 65, I think we have a video on our website somewhere that we did a long time ago, but certainly read up on it. you're not exempt for the trick.

Paul Rafelson 00:30:13  With this thing, you have to understand, most important thing to understand is that just because you're under ten employees does not mean you are exempt from practicing, because it's not actually you who's getting hit. It's Amazon, and Amazon is coming down on you through the indemnity clause in your contract with Amazon. So it's basically happening is people are hitting Amazon with these 65 cases. And Amazon's lawyers will then reach out to you and say, I need you to take care of this, settle this case on our behalf, or else we're going to freeze your 3040 grand, your money until you do. And if we don't? Then we'll use the money to pay for our defense or settle it ourselves. So, it's a real thing. So take, you know, keep in mind the prophecy. Five stuff. and just, you know, keep your ear to the ground, keep your compliance in order and the and pray and and pray and maybe look to expand to different channels because I, I don't know Amazon.

Paul Rafelson 00:30:56  It's been a rough year for a lot of people, a lot of people I've known since the beginning, since 2017, when I started this private practice, people who were big sellers, people who were in the game for a long time are just kind of ready to throw in the towel. It's definitely this is probably the darkest year I've seen in the Amazon space. And that's why that's why we call it The Purge, because it feels like a lot of people just thrown in. It had enough, you know?

Josh Hadley 00:31:15  Yeah, yeah. Paul I think that that is, you know, good foresight and good warning. to people. I remember distinctly telling my friend back, and, you know, this is 2017, 2018 saying, hey, I think that this like being able to create some fictitious UPC code or buying UPC codes off the internet somewhere and just putting and coming up with just exactly what you were doing, like people were teaching at the time, like, go take this product that's doing well, go bundle it with this product and you'll make millions of dollars, right? Just create some stupid UPC code.

Josh Hadley 00:31:43  And I'm like, there's no way that this lasts for a long period of time. Like eventually Amazon is going to and this is my prediction. Amazon becomes just as difficult as it is to get into big retail stores, right? Imagine all the checks and balances that you have to go through to get your product onto the store shelf of Walmart or Target, right? They're going to make sure your compliance documents are intact because they know their butts on the line. And so I think that ultimately Amazon is going to get to that point. Now I think Amazon is always going to want innovation. So Amazon's always going to kind of give preference or a lot of love to brand new products or ideas. But I think that getting those products on right. You may it may require that child product safety certificate before you can even list the item on Amazon. Right. And right now it's kind of like, well, you can get it up on Amazon then if you start generating sales, then you could then spend the cost to go get the certificate.

Josh Hadley 00:32:38  I think that over the next 5 to 10 years, the script gets flipped. And it's like before you can even list this product, we want the safety product certificate, we want prop 65. We want everything documented. What are your thoughts on that, Paul I think that's that.

Paul Rafelson 00:32:49  That's kind of I think I was probably beating around the bush, but I think you said it for me. I think I was kind of a little afraid to say that. But it's actually I think 100% there's, there's something like that is happening for sure. Like, like it has to be like they're just they're tired of they're just not putting up with any of it anymore in terms of like people trying to cut corners. except for China. The problem is China. I can't reconcile China with China. And so like they let China like all day long. Yeah. And so they're still willing to like they're still willing to like, cover for them. But I mean, as far as the Americans, you know, and the, you know, in the Western countries, it seems like they're like, that's the double standard that they don't understand.

Paul Rafelson 00:33:23  but yeah, I think you're 100% right. I think that will limit who's in their store. I mean, I had this prediction with the antitrust saying that that Amazon might actually just call themselves a store and, try to use that as a defense of this antitrust stuff, because in a way that has been their line of defense, if you read their responses to a lot of the accusations. You know, a lot of the accusations with the with the antitrust subcommittee and, you know, saying Amazon, you compete against sellers. Well, doesn't Costco compete against its suppliers when it sells Kirkland. Right. Are you a Costco guy? Right. Or even a customer. Yeah, right. Like, doesn't, doesn't Costco use data regarding what Duracell sells when they're looking at their batteries, what batteries to sell? I mean, all retail does this. Doesn't Costco have create private labels based on what top selling products. You know, this is basic, basic, store brand marketing, which is totally, totally allowed.

Paul Rafelson 00:34:09  and this is sort of what they're telling the antitrust committee, it's like, this is all stuff that is normal. You know, if you call Amazon a marketplace, a lot of what the FTC says sounds pretty salacious. But if you look at Amazon as a retail store, like any other retail store, maybe they're a consignment based retailer, and that's really what it is. It's FBA is a way to sort of consign inventory. if you look at it from that perspective, it's like they're not unlike any other store. And so why should they be treated any differently? And, and if it's not considered competing and sellers when Costco sells Kirkland brand, you know, fabric softener and a blue bottle that sits right next to the snuggle snuggle, snuggle bottle. You know, if that's not if that's not a violation of anti-competition laws and why should why should it be Amazon? So you see that kind of argument because the type of thing is interesting. We'll see how that plays out. But it's not a good look.

Paul Rafelson 00:34:51  A lot of a lot of sellers aren't happy about the theme of the thing. Amazon's version of the fact that Amazon's sort of creating a a TMU type competitor where they're going to be basically facilitating shipments from sales direct from China. you take advantage of the packet mail system that I don't know. I think that's taking off a lot of people.

Josh Hadley 00:35:08  If there is one thing that needs to be repealed, it's that it's stupid, which we could have done. Right. Ship and stuff below $800 and not have to pay the tariffs like that is. And how we're also subsidizing the US Postal Service is subsidizing all of that. Why is that?

Paul Rafelson 00:35:24  China is still considered a developing country under the old system? This is what we need our lobbyists for. This is the first thing I would want to tackle. If I had lobbyists set up in Congress. We'd be all over, you know, lobbyists and PR, you know, 50 grand a month across top sellers entire, just top lobbyist, a nice PR firm.

Paul Rafelson 00:35:40  You know, it shouldn't be hard. I mean, I don't think anybody in America is really a fan if they understood it is really a fan of this. it's just nobody really knows. Congress is so asleep and obviously uninterested in issues like this right now, but we gotta make them aware it's our job, you know, we got to spin it. it's costing American businesses and jobs. So we'll see. We'll see.

Josh Hadley 00:36:00  But I agree. Well, Paul, with that being said, despite this year being somewhat of a purge, right. And maybe a dark year for a lot of Amazon based sellers, here's what I would say in terms of my words of encouragement, which will lead into our three action items. I'd love to give the audience three action items, to be able to walk away from every podcast. So action item number one is look at these. I guess all the regulations, the increase in fees, the hardness that is becoming Amazon as a good thing. and to shift your mindset to say, okay, this is hard, but hard is good.

Josh Hadley 00:36:35  Because guess what? If it means I have to go through this, that means my competitors are going to have to go through this as well. And here's what we do know. Most people are lazy. Most people, when the going gets tough, they want out. And Paul, you talked about this. You've seen more people than ever, even big sellers being like, I'm out. I don't want to deal with this anymore. So for those that are willing to lean in, right, maybe there's going to be reduced competition down the road for you, right? Maybe there are brighter days ahead. But lean into the harness. No matter what life throws your way, those hard things can produce really good fruit down the road. Action item number two is going to be Amazon if our prediction comes true. Paul. In the next 5 to 10 years before you can even create a listing on Amazon, you need to upload your prop 65 certified certificate. Make sure that you check the box that says like, yes, this has the sticker.

Josh Hadley 00:37:23  You need to have your child product safety certificate already attached before you upload the product. You also need to have if you're doing supplements to the product testing report before you can even publish it, right? If that's where we're going, then it is going to be ten times better for you to start getting your ducks in a row right now. So make sure that you're already ahead of that game, because I think that's where a lot of people have gotten their they're in the crosshairs right now and listings have been taken down because, you know, they were never doing product testing on their supplements. And then all the testing labs got backed up, and they couldn't even get a test done in time before Amazon's deadline. So then their listing goes down. It's like, well, no duh. Like, you should have been testing this stuff in advance. So if you have your ducks in a row, there's going to be no need to fear. So if you're prepared, you shall not fear. This is one of my favorite sayings.

Josh Hadley 00:38:09  All right. Action item number three is this. We talked about being prepared from compliance statements. But be prepared for your intellectual property. From trademarks to copyrights to patents, both utility and design pads. Protect yourself. And that was the story you shared at Billion Dollar Seller Summit, which I loved is guys like go. There are resources in ways that you can fight these knockoffs, right? If people are copying your design or if people are copying your product, like there are ways for you to protect yourself. Amazon's Apex program, I've heard, is pretty good with utility pads, but outside of that, you may have to use Paul's strategy to, you know, file a copyright lawsuit against 100 different sellers. And the advantage is that you could freeze their assets and actually do something about it. Those sellers just can't ignore the legal notice, like you can actually freeze their funds and you can get their attention. So my encouragement to you and to all of our sellers is this: if you let the overseas sellers continue to manipulate, undercut you, hijack you, create counterfeits, create derivatives off of your products, and if you don't do anything about it, guess what they're going to do? They're going to keep doing it.

Josh Hadley 00:39:13  But if we all get together and we do this ourselves, if you're willing to sue somebody, you send a very strong message to them and they're going to go somewhere else. Well, if all of us continue to sue everybody, guess what happens? Their culture has to change to stop copying everybody else. So but that only happens when the mass is actually committed, which goes back to the whole lobbying efforts. Also, we're preaching to the choir here.

Paul Rafelson 00:39:33  That's great advice, great advice. And if anyone ever has any questions about suing, you know, shoot me now. Let's talk. I mean, it's it's it's, it's so important. The culture does have to change. It really does. And, you know, they're not very popular in China. They're not very apologetic about this stuff and not very empathetic when they call it so. I agree with you. The culture does have to change there too, and we've got to send that message pretty clearly. We're not doing a good enough job here. You know it is.

Paul Rafelson 00:40:00  It is ten times harder to be an American business, it seems, than it is to be a business. And that's what we need to tell. Our country is not the same. It's going to change. You know, we've got to change the culture here to remember, and get Congress fighting for America. American businesses are not giving overseas businesses advantages because they don't have to comply with the same rules we have to comply with despite selling our markets.

Josh Hadley 00:40:19  So. Agreed. Agreed. All right, Paul. Time for my favorite time of the podcast, where I ask every guest the following three questions. Number one, what's been the most influential book that you've read and why?

Paul Rafelson 00:40:30  Outliers. Malcolm Gladwell just the cause and effect relationships. I mean, there's so much about that book that just blew my mind when I first read it, and I've never forgotten how I felt. Read that book. It was just, it was mind blowing and also a little bit relatable with the hockey team. Because I was the youngest in high school, I was always the youngest.

Paul Rafelson 00:40:45  I was 17 when I started college. I was a little young, you know, not crazy young, but I was just always young, and I was really good at sports. and it's really related to that chapter about the hockey players. And I didn't want the both related to the skill set, but I just I just love the book. It just was the first book to teach me to think differently.

Josh Hadley 00:41:02  Excellent recommendation. Question number two. What's your favorite AI tool that you would recommend other people use?

Paul Rafelson 00:41:07  So interestingly, I'm due for recommendations. I'm still just ChatGPT. I have mixed, I mean, I feel like everything out there is running on ChatGPT even if they say it's like this, you know, I tried every legal tool. They're not great. I'm still still ChatGPT, I think, although Jedediah is getting there, Gemini's getting there, but I'm still for GPT, for, oh, whatever that's called. so my jam. But you know, it's not there yet like it's, AI is fascinating.

Paul Rafelson 00:41:31  It's super cool. But for lawyers it's, it is not even close to there yet. It's got a ways to go. I still feel like it's always like you're paying for work. Like it costs them per word. So they're trying to shorten everything. You know, you'll tell me to write something and or can you proofread this and give it back to me and it'll shorten it just so it doesn't have to rewrite what you just gave it to it. Like it's just it's it. Something's off. But I'm still, I guess you could say, I don't know, any recommendations?

Josh Hadley 00:41:52  not legal wise. but I'm a big fan of creating custom GPT, right? So if you want, you know how you do that, which is called knowledge. Paul's knowledge. Download every transcript of Paul speaking YouTube videos that you can find of Paul. Download that upload it as a PDF into a custom GPT in chat GPT. And then you could pick Paul's brain without having to jump on a call with Paul.

Josh Hadley 00:42:13  So that's my favorite.

Paul Rafelson 00:42:15  How do you do that? Somebody, my friend did that for me. He created it. But then he wanted to be part of a business. So I had to pay. Like the issue was like I was playing like $100 a month for my brain or something like that. The problem was that he could see everything that I couldn't put on my website, because he could see everything that people were typing. I'm like, that's a legal confidentiality problem. Like, I could realize it. Like they can see what you know when you buy the bot from service, it's like they can see everything that I need to own the bot. I can't have clients typing in questions about legal questions. And then have you gone to a third party that just, you know, I just, I don't know, but how do you do that? Like, what's there is there a software for that or is it like, I mean, I know you create a GPT, but I think pretty little bot like.

Josh Hadley 00:42:48  So Perry Perry Belcher would be the guy I'm not going to act like I know. I would recommend going to Belcher. He's wicked smart stuff on that right now. Last question, who is somebody that you admire or respect the most in the e-commerce space that other people should be following in line?

Paul Rafelson 00:43:01  So obviously there's you know, there's obviously Kevin is amazing, right? I think it goes without saying, the way he brings people together. but somebody I was thinking about just, you know, who probably deserves a shout out and I'll never be able to pronounce his name is, the gentleman who created Marketplace Pulse. I absolutely love that this website is probably a website if you've never been to it is one of the most fascinating websites with all the data about Amazon. If you want to know how many FBA sellers are in a particular state like he is, he just has all this data. It's fascinating. I like when he's featured in an article, like when people feature him. I'm just not going to try to butcher his name.

Paul Rafelson 00:43:33  But the founder of Marketplace Pulse, I feel like he needs a shout out. I feel like he's just. It's one of the coolest websites out there if you've never been, and, if you're in the Amazon space in particular. Okay. Is it the coolest website out there? No, it's not the coolest school website in the Amazon e-commerce space. One of the coolest websites because it's just fascinating data, you know, and really easy to access. So I'd like to give a shout out to Marketplace Pulse.

Josh Hadley 00:43:56  Love that. Paul. Paul, this has been a great episode. If people want to learn more, they want to follow you. Where could they do so?

Paul Rafelson 00:44:03  Okay, Follow me. I think this seller's basics are on Instagram and Facebook, but you know, I'm easy to reach. I'm Paul at Ecom Law, which is Paul at Ecom. and, if you want to learn more about, you know, you can always email me and it'll go to me and I'll respond.

Paul Rafelson 00:44:19  and then, and, so basically, if you want to learn more about solid bases, I'm going to sell a basic scam and check out what they're doing over there. It's pretty cool stuff. And, I love it because it's $100 a month, like it's thousands and thousands of dollars. It's pretty cool. And I think it's like, it's a neat concept and a better way to handle account health. What I love about solid basics too. I'll say one last thing. I'm gonna try to plug it in, but I love it because it's built to be aligned with the client's interests, the members' interests. Right? Like we don't want you to like, like if you run a normal suspension service and that's all you do, and you're making thousands of dollars of spending to pretend like we're suspended. We're solid basics. We don't want you to be spending because that means we have to, you know, like it's like insurance. So it's nice to be on the same side. It's nice to be, like, aligned with the client in that respect and have a system that's designed to be that way, that we want you to prosper and not be suspended.

Paul Rafelson 00:45:05  That's bad for us too. So it's 100 bucks a month. So it's like, you know, I think that's flexible. So check out the celebrations and learn more about our town's health stuff and quality town law. If you haven't. Or just go to the website Combat Law, which we'll be changing soon. to learn more about what we do on Amazon Legal and Commerce. So thank you so much. I appreciate it.

Josh Hadley 00:45:22  Beautiful. Thanks for coming on the show, Paul.

Paul Rafelson 00:45:24  You bet. Have a great one. Take care.