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| April 2002
Managing/Legal Issues Can a Wholesaler Be a Retailer? An advertising case study shows who can advertise what Smith Wholesaler sells jewelry to the trade. Its customers must have a federal tax ID number on file to ensure they are retailers. It’s been an OK year for Smith, so he’s thinking about expanding and selling to the public too. To let the public know about his new division and to begin making sales, he places a newspaper ad. What’s the appropriate way for Smith to begin advertising to the public? What can he say? What should he not say? Below are two possible scenarios. Best-Case Scenario Smith’s ads are clear that he sells “wholesale” to the trade and at “great prices” to the public. Competitors don’t complain because he ensures his ads correctly depict the situation. Worst-Case Scenario The ad isn’t clear. Smith advertises at “wholesale” prices, and it looks as though he’s selling “wholesale to the public.” The Jewelers Vigilance Committee is flooded with complaints, reviews the ads and finds they’re confusing. JVC alerts Smith to this violation of the Lanham Act and the FTC’s Guidelines for the Jewelry Industry. Happily, he complies, changes his advertising and no further action is necessary. Ignoring JVC Advice What would happen if Smith didn’t follow JVC advice? Non-compliance can result in a number of possible actions, most of them involving the local Attorney General’s office, the Better Business Bureau and other local agencies. In extreme cases, it also may involve the FTC. In some cases, it can result in costly legal fees. Generally, JVC’s advice is enough to educate wholesalers like Smith about the rules and laws governing advertising. In fact, the organization resolves 400+ cases yearly, many involving advertising. Summary When a company advertises, it does so either as a retailer or a wholesaler. Who buys most of its company’s goods (the trade or the public) determines the category. That category also determines where and how the company advertises. Wholesalers cannot advertise in a section of the newspaper or phone book designated for retailers and vice-versa. • JVC, New York City; (212) 997-2002, www.jvclegal.org. – Caroline Stanley, Director Marketing/Development, Jewelers Vigilance Committee
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