U.S. Supreme Court Knocks Down Barrier To Cross-Border E-Tail

Written by Frank Hayes
March 21st, 2013

The U.S. Supreme Court has removed a major barricade for cross-border E-Commerce. On Tuesday (March 19), the court ruled that so long as a product isn’t pirated, U.S. retailers can import it without violating copyright law. In practice, that means an online retailer can sell U.S. customers many products that are lower priced—and were never intended to be sold in the U.S.—without breaking the law.

We’re not talking about pirated goods here, but what’s often called the “gray market”—legitimate products that aren’t authorized for U.S. sale. Those products are usually priced lower, because they’re intended for less-affluent markets than the U.S. Costco (NASDAQ:COST) and Kmart (NASDAQ:SHLD) have sold those types of products in the past and gotten into legal trouble. This week’s ruling says they won’t have that trouble again (at least until Congress changes the law or product manufacturers come up with new arguments).

But there are much bigger E-Commerce implications in the court’s decision to get rid of those geographical limits.

As StorefrontBacktalk Legal Columnist Mark Rasch explained last April, when the Supreme Court decided to take this case, there are two competing bits of legalese involved here. One is the longstanding idea that when someone sells you something, it’s yours to do with as you please, including reselling it. (As a legal principle, that goes back to the 15th Century, according to the justices.)

That seems to suggest anyone can buy anything anywhere to resell without limits, which is bad news for manufacturers who want to divide their markets up geographically, setting prices according to what they think the locals can afford. (Clearly, E-Commerce makes that really hard to enforce.)

On the other side is a specific phrase in U.S. copyright law that seemed to prevent anyone from importing a copyrighted work “lawfully made under this title” unless the copyright holder authorized the importing. Manufacturers couldn’t copyright watches or shampoo, but they could copyright labels and packaging. U.S. courts decided that clause only kicked in for copyrighted works manufactured outside the U.S., so manufacturers used foreign printers to take advantage of the loophole.

This week’s ruling says the lower courts got it wrong—”lawfully made under this title” means licensed under U.S. copyright law but not necessarily made in the U.S. Loophole closed. And, in theory, E-Commerce floodgates opened.

Or will they be? Big U.S. chains generally don’t like to irritate the manufacturers they depend on.


One Comment | Read U.S. Supreme Court Knocks Down Barrier To Cross-Border E-Tail

  1. Doris Says:

    There goes quality control or at least the little bit we had to deal with


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.