Mary Kay sue RetailMeNot for encouraging retail sales
This case is odd and I’m a bit late to the party, but I figured it deserved a writeup nonetheless.
Earlier this month, in a Texas District Court, Mary Kay filed a lawsuit against RetailMeNot.
So the lawsuit alleges,
Mary Kay does not publish or distribute Mary Kay coupons or discount offers to the general public or permit others to do so.
RMN places on retailmenot.com various digital offers and coupons concerning, referring, and relating to Mary Kay products and services, falsely representing that Mary Kay produces and distributes, or authorizes the publishing and dissemination of Mary Kay coupons, and that Mary Kay itself sells products to the consumer by way of retail sales on its website.
In essence, RMN is running a fraudulent Mary Kay couponing scheme.
In an effort to understand what on Earth Mary Kay were on about, I visited RetailMeNot’s website.
Apparently, this is what the company is objecting to:
What you’re looking at there is a listing on RetailMeNot for “gifts under $25”.
The “Get Deal” button takes you the Mary Kay online store, sans affiliate referral link (ie. it’s the vanilla storefront):
If one clicks on any of the products, said product can then be purchased for what is presumed to be the recommended retail price:
Guest checkout is available, through which Mary Kay connect a customer “with an Independent Beauty Consultant”.
Ie. You can’t actually purchase anything without a Mary Kay affiliate referral code, but the storefront is there nonetheless – clearly marketing Mary Kay products to the greater public.
In linking to Mary Kay’s publicly available storefront, RetailMeNot simply offer free marketing for the company.
Or as Mary Kay put it;
The purported “sales” listed on the Mary Kay merchant page were developed, written, and created by RMN employees. RMN then posts these “sales,” purportedly based on information contained on and drawn from the Mary Kay website, to the Mary Kay merchant page hosted on retailmenot.com.
According to RMN, it advertises these “sales,” without permission or authorization from Mary Kay, merely to increase the number of consumers visiting its website.
Mary Kay does not provide “digital offers” or “digital coupons” for publication on RMN; nor does Mary Kay permit or authorize RMN to list deals, sales, or codes using or referring to the Mary Kay Marks.
By listing these purported Mary Kay “sales” and “codes” on its website, RMN misleads consumers into believing that Mary Kay has a relationship with RMN, that Mary Kay products can be purchased directly from Mary Kay at a reduced price, and that the coupon “codes” are legitimate.
In short, RMN’s use of the Mary Kay Marks implies that Mary Kay has endorsed or approved of RMN’s activities, which it has not and does not.
The specific uses of the Mary Kay Marks by RMN further increases the likelihood of confusion among consumers. For example, RMN’s inclusion of a “Mary Kay” merchant page, the “About Mary Kay” description, and language such as “Show more about Mary Kay, “Shop marykay.com,” and “Coupons from related stores,” lead consumers into falsely believing there is an approval, affiliation or partnership between Mary Kay and RMN.
RMN’s unauthorized activities and use of Mary Kay’s trademarks also implies that Mary Kay has endorsed or approved its activities, which it has not, and further suggests there is a partnership between Mary Kay and RMN, all to the detriment of Mary Kay.
As a result of the confusion that has been or is likely to be engendered by RMN’s activities, the Mary Kay Marks and associated goodwill are therefore being irreparably harmed
All this because they link to Mary Kay’s replicated storefront? Bloody hell.
Memo to Mary Kay: You can’t control who links to information you publicly provide on your website.
The premise that Mary Kay are huffed that RetailMeNot, who fully disclose they are sending their own visitors to the website of Mary Kay, are providing them free advertising is ridiculous.
So what exactly is going on here?
The key to this issue is in Mary Kay’s description of its business model.
Mary Kay’s success can be attributed to its carefully designed direct-sales business model.
Through this business model, Mary Kay produces the highest quality products and sells them directly to independent contractors known as Independent Beauty Consultants (“IBCs”), who then sell the products direct to their customers.
Instead, Mary Kay sells its products at wholesale prices, and on a pre-paid basis, to the self-employed IBCs.
The IBCs then offer Mary Kay products directly to their end-user customers at retail prices.
Did you catch that?
Mary Kay themselves engage in absolutely zero retail activity.
This in turn means that Mary Kay do not pay commissions on retail sales.
The only commissions the company is paying out itself, are on the purchase of products by its affiliates, and affiliates they’ve recruited into their downline.
This is alarming.
The legitimacy of Mary Kay’s business model would appear to hinge on insisting that their affiliates go on to actually sell products to retail customers.
Absent from Mary Kay lawsuit is any mention that they actually do, nor is there any indication that Mary Kay actively ensure their affiliates are actually reselling products they’ve purchased.
In any event, purely from a financial standpoint, money flowing into Mary Kay directly would appear to be 100% sourced from affiliates.
Mary Kay sells its products at wholesale prices, and on a pre-paid basis, to the self-employed IBCs.
IBCs may also choose to recruit others to become IBCs and can earn commissions when the individuals recruited make wholesale purchases of products from Mary Kay.
There’s just no getting around the fact that on a company-level, there is no retail sales activity taking place.
So what on Earth does this have to do with RetailMeNot?
Mary Kay has received various complaints from IBCs and others, who have been pressured by customers to accept and/or honor the false or unauthorized “coupons” posted on RMN’s website.
Seeing as there’s no actual Mary Kay coupons on the RetailMeNot website, it seems Mary Kay affiliates are upset at being made to honor the retail prices quoted on the Mary Kay website itself.
Afterall, all RetailMeNot are doing is directly linking to Mary Kay’s own publicly available online storefront.
Why else, save for the fact they are charging more than the prices quoted on the Mary Kay website, would Mary Kay affiliates file complaints over RetailMeNot’s free promotion of Mary Kay products?
This is starting to smell dirty. Real dirty.
What I’m guessing is happening here, is that Mary Kay affiliates have spent more than they intended to on products. Thus, in order to turn a profit, they’re out there selling said products at prices higher than those quoted on the Mary Kay website.
Potential customers whip out a mobile phone, click through to the Mary Kay website via RetailMeNot and then demand they not get ripped off.
Mary Kay affiliates complain to the company, who in turn demand that RetailMeNot remove any mention of them from their website:
Mary Kay informed RMN that its unauthorized use of the Mary Kay Marks and logo in connection with the listing of these incorrect, misleading, and infringing coupons, sales, and deals was unacceptable to Mary Kay and must cease.
Mary Kay further informed RMN about Mary Kay’s unique business model, its relationship with its IBCs, the fact that Mary Kay does not offer coupons, codes, or sales in light of its business model, and the fact that it makes no sales directly to consumers.
RMN refused to remove the infringing material, notwithstanding Mary Kay’s effort to resolve these disputes informally.
And so now, under the guise of “unauthorized links” (hahaha) and trademark infringement, Mary Kay have filed a lawsuit against RetailMeNot.
When again, all they are doing is providing free advertising and driving traffic to Mary Kay’s own online storefront.
The good news is RetailMeNot have suggested they aren’t going to take Mary Kay’s lawsuit lying down:
RetailMeNot, Inc. takes concerns related to third party intellectual property very seriously.
RetailMeNot, Inc. continues to believe that it operates in compliance with law and in the best interests of consumers and its retail partners by aggregating information to help shoppers save money using its websites and mobile apps.
RetailMeNot, Inc. believes the allegations in this lawsuit are without merit and intends to vigorously contest this matter.
Not only is this a lawsuit that needs to be fought (“unauthorized links” to publicly available information?), but a regulator needs to take a closer look at Mary Kay’s business operations.
Seriously, we have an MLM company here upset at a third-party for daring to encourage direct retail sales activity. For no other reason than they freely admit they have none!
This should be a regulator’s wet dream, so why hasn’t anything been done about it yet?