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Question added to topic Legal Basics For StartupsSeptember 4, 2008

Can I resell products I buy at wholesale to other retailers?

My next-door neighbor is a Maybelline makeup wholesale distributor. So I can buy the products cheaply, sell them and make a profit. Is it legal to buy the products from my neighbor and try to sell to dollar stores and independent beauty supply firms to obtain them as accounts?
Generally, companies such as Maybelline require that you have a direct arrangement with them to buy and sell their products. They want to ensure that the distributor--who is trading and making a profit on the Maybelline name--is a responsible person who will handle customer inquiries and complaints in an appropriate fashion (to limit Maybelline's liability).

If you jump into the middle of that arrangement for your own accounts, Maybelline has no way of pre-screening you. It's also likely that if Maybelline got wind of what you were trying to do, it could bring a lawsuit against you to disgorge your profits.

In addition, some companies that work on a wholesale distribution model (and not just a network marketing model) provide their distributors with an exclusive territory. If you were to buy the products from your next-door neighbor and sell to your own accounts, you could well be undercutting his/her rights to sell exclusively in the territory . . . which will not make for a happy and harmonious neighborhood.

Nina L. Kaufman, Esq. is an award-winning New York City attorney, edutainer and author. Under her Ask The Business Lawyer brand, she reaches thousands of entrepreneurs and small business owners with her legal services, professional speaking, information products, and LexAppeal weekly ezine. She also writes the Making It Legal blog.

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