it’s hard to frame the right cause of action for Amazon seller-on-seller misbehavior

Factory Direct Wholesale, LLC v. iTouchless Housewares &
Products, Inc., 2019 WL 5423450, No. 19-CV-01228-LHK (N.D. Cal. Oct. 23, 2019)
The parties compete to sell stuff on Amazon. They agreed to the
Amazon Seller Agreement, which requires the seller to represent and warrant
that “any information provided…to Amazon…is at all times accurate and
complete.” The Amazon Code of Conduct requires that sellers “not engage in any
‘unfair behavior’ or activities that (a) intentionally damage another seller,
including its listings or ratings, or (b) manipulate or game the Amazon.com
selling or buying process, including Amazon’s search results or sales
rankings.” “Sellers are further prohibited from contributing false, misleading
or inauthentic content.”
Amazon identifies each new product  “through a unique combination of 10 letters
and numbers, referred to as an Amazon Standard Identification Number or ‘ASIN’
designation.” Factory Direct allegedly discovered “false, deceptive, and
unauthorized changes” to its product advertisements and listings, including
changing product descriptions, providing improper ASIN numbers, and changing
the product’s listing category (thereby moving the product from Amazon’s Home
& Kitchen category). A third party (allegedly iTouchless) was requesting
Amazon to make these changes, merging Factory Direct’s products’ ASINs into
other products.  Factory Direct sued in
the Northern District of Georgia, and then discovered that iTouchless was using
Factory Direct’s BESTOFFICE trademark (registered on the Supplemental Register)
to advertise a trash can.
During the pendency of the Georgia action, the listing
changes allegedly ceased, but were renewed afterwards. For example, Amazon
allegedly ended up advertising a Factory Direct trash can as an iTouchless
trash can, changing the product image, title, and description.  Factory Direct also alleged that iTouchless
falsely submitted an unfavorable review and deceptively removed Factory Direct
from Amazon’s vendor control.  [If I were
interested in increasing regulation of Amazon, I might invite a representative
of Factory Direct to testify about why a lawsuit was necessary here/what they
did and didn’t get from Amazon in the way of help.]
In the Georgia action, the court granted iTouchless’s motion
to dismiss because the Lanham Act claim didn’t allege any falsity of the
advertisements, or that the changes made by Amazon at the defendant’s request
deceived or had the capacity to deceive consumers.
The complaint here alleged additional details about Amazon’s
rules and policies. It alleged: (1) violations of the Lanham Act; (2)
intentional interference with contract; (3) intentional interference with
prospective economic advantage; (4) negligent interference with prospective
economic advantage; (5) violations of California’s UCL; and (6) trademark
infringement.
The court found no claim preclusion of the Lanham Act claim,
but claim preclusion of UCL and tortious interference claims.  Claim preclusion doesn’t apply when the
relevant conduct hadn’t occurred yet when the first suit was brought, and that
was the case with the Lanham Act false advertising claims based on post-Georgia
suit conduct. Likewise with trademark infringement.
However, the UCL claim was based on a more than that. While
California courts have allowed continuous accrual in cases of periodic,
recurring obligations like misstated rent, a  “continuing obligation to avoid
anticompetitive behavior is not a periodic, recurring obligation such as a
monthly payment or monthly bill.” Thus, the UCL claim accrued during iTouchless’s
previous course of alleged misconduct. So too with tortious interference.
What about issue preclusion?  Factory Direct previously alleged “false or
misleading statements of fact” without describing them, but provided more
specific allegations here about how changes to its listing “falsely advertised”
or misrepresented its products as products “manufactured and branded by
Defendant,” and misrepresented characteristics “including the product title,
image, brand, manufacturer, and description of the 13-gallon trash can.” These
new factual allegations weren’t actually litigated or decided in the prior
proceedings.
As for the false advertising claim under 12(b)(6), the claim
was adequately pled with respect to a specific listing for a trash can. With
literal falsity/intentional deception, actual deception is presumed; that was
appropriate here.
Allegations that iTouchless attempted to merge two more
listings, however, failed, because Factory Direct didn’t allege that the
attempts succeeded. Even if statements to Amazon were false, they weren’t made
in a commercial advertisement, and they didn’t result in a false advertisement
to the public because they failed.
There also wasn’t enough detail about allegedly false
changes to other listings/the unfavorable review/removing Factory Direct from
Amazon’s vendor control. Factory Direct didn’t explain why any of the “changes”
or “unfavorable review[s]” were “false and deceptive,” as required by Rule
9(b). The court did grant leave to amend.

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