AMAZON.COM, INC. What is Automation?
You may have come across an opportunity to generate passive income by investing in an online store or website, operated by someone else. All you have to do is provide the initial capital, and a third party handles the rest. They find the products, create the store, advertise it, process orders, fulfill delivery and customer service. You just sit back and wait for your monthly profits. If it sounds too good to be true, it is.
This is called “automation”, when someone else runs the business, and the investor simply provides the capital and expects profits. It is available in many industries: real estate, trucking, and most notoriously - e-commerce.
Although automation is neither illegal nor a “scam” (including e-commerce), some people use the prospect of easy money through automation to lure unsuspecting clients into a promise that won't be delivered.
This article does not propose that e-commerce automation is a “scam”. Rather, it discusses only those instances in which it is used for fraudulent purposes.
How does the scam look?
A company will set up a website and social media pages, advertising the promise of typically around
In these marketing efforts, you may be told about the potential returns, in oral or written form. You may even see a slideshow, presentation, charts or other materials promising profits and returns.
They promise to select the products for you, based on research, purchase the inventory, open the store in third party platforms, generate traffic, fulfill directly or deliver via Fulfillment by
In exchange, you must pay an initial fee, usually between
How does the Agreement look?
In the Agreement, the company may, firstly, not include any of the promises they've made in either oral or written form. Instead, they will include a standard contract provision called “Entire agreement”, which basically means that any promises, agreements or representations made, not included in the agreement are not valid or enforceable.
Secondly, they may include disclaimers, in which they are not to be held liable for eventualities, such as:
- Failing to open the store;
- Failing to generate profits;
- Suspension or canceling of the Store;
- Violation of Terms of third parties;
- Others
Thirdly, they may provide for a Money-Back Guarantee, typically between 12-24 months, either from the Effective Date of the Agreement, or the date of opening the store. They guarantee to return you your Initial Fee within said time, ONLY IF the Store fails to generate ANY profit, in most cases.
Fourthly, it is possible that the Agreement sets forth that disputes and complaints are to be resolved by arbitration, which is private and confidential.
How does it go wrong?
Once you sign the Agreement, they will begin the “onboarding process”. They may ask: for your driver's license, social security card or number; that you register a company; that you open a commercial bank account and credit line; and/or set up an email address.
They tell you that they need that information to set up the store and purchase the initial inventory, and that it will take several months to get the store up and running. They include this language in the Agreement.
The Stores usually sell nondescript consumer products like - apparel, cosmetics and household items. You must provide an open credit line for monthly inventory purchases, generally around
After several months, in some cases, you do not yet see a Store built, nor sales, much less profits. In other cases, while a Store has been built, it has negligible sales or profits - in the hundred of dollars, at most. At some point afterwards, in most cases, something happens to the Store that it gets suspended, shut down or reported for violation of the Terms of Service of the third party platform (Shopify,
- Operating multiple stores for the same product;
- Artificially generating traffic and user reviews;
- Failing to timely fulfill orders;
- Impersonation;
- Others
Some examples of when companies violate terms are:
- Multiple stores - since they operate a business of opening stores for clients, and those stores sell products that are in demand, they may be similar to other company clients.
- Artificial generation - making a store popular is expensive and takes time. In order to quickly generate sales, sometimes these companies engage in “gaming”, or manipulation, of platform features like: user reviews, ads, and placements.
-
Impersonation - they may ask for your driver's license, SSN, and your own company and bank account, in order to try to fool
Amazon , for example, into thinking that it's you who is opening and operating the store, and not the company.
You attempt to resolve this issue with the company, but they tell you that there's nothing they can do; that it's up to
At this point, you've entirely lost faith and want to walk away. You ask the company for your money back; and may even be eligible for a guarantee. But the company refuses to refund you. They say that they have not breached the agreement, that it is beyond their control since
What can you do?
These cases are not easy to fight and win. In most instances, courts will defer to two consenting parties agreeing to enter into a business which may or may succeed; unless, there is express evidence of the intent to defraud or engage in unlawful acts. Also, in commercial transactions, as opposed to consumers, the parties are expected to conduct due diligence and make an informed decision. Being unsophisticated or inexperienced in an industry is generally not grounds for challenging these agreements.
For this reason, if you wish to have a chance at prevailing in these cases, you
generally must have of one or more of the following:
- Failure to open the Store;
- Zero or near-zero sales;
- Written evidence of a promise of profits or returns not met;
- A money-back guarantee in the Agreement, not honored;
- A violation of third party terms;
- Promise of refund or returns.
If any of these apply, the company may be liable to you for one or more of the following legal causes of action: breach of contract; unjust enrichment; unfair and deceptive trade practices; fraud; misrepresentation; wire fraud; impersonation; illegality and others.
If you believe that you have one or more of the above, you may be entitled to relief. The process is not easy, since it requires that you send notice to them of their breach and your intent to dispute the agreement.
You may be able to negotiate a settlement for a return, or partial, of your investment. If not, you will likely need to sue or demand arbitration.
In some cases, companies may have developed a bad reputation, and have generated multiple negative reviews online. You may be able to take advantage of having multiple aggrieved clients by putting together joint actions, known as joinders, or even class actions, in rare instances. If you feel like you've been harmed by an e-commerce, or other, automation company, or have questions about your situation, feel free to reach out for a consultation.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
EPDG Business Law
Suite 510
33135
URL: www.epgdlaw.com
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