John Bumstead is a computer refurbisher who, every year, saves thousands of laptops from the shredder. He buys MacBooks en masse from electronics recyclers, fixes them, then sells them on Amazon Marketplace or wholesales them to vendors who do the same.
Friday morning, Bumstead got an email from Amazon informing him that he’d no longer be allowed to sell Apple computers on the platform, thanks to a new agreement between Apple and Amazon that will only allow “authorized resellers” to sell Apple products.
“As part of a new agreement with Apple, we are working with a select group of authorized resellers to offer an expanded selection of Apple and Beats products, including new releases, in Amazon’s stores,” the email says. “You are receiving this message because you are currently selling, or have previously sold, Apple or Beats products. Your existing offers for those products will soon be removed from Amazon’s online store in the United States. Please contact Apple if you would like to apply to become an authorized reseller on Amazon.”
As the email notes, this is part of a new agreement between two of the largest companies in the world that will allow Amazon to sell new Apple products around the world; in exchange, Amazon agreed to let Apple pick-and-choose who is allowed to sell Apple products on the site.
It’s the latest in Apple’s long-running list of business decisions that allow it to lock down the repair, refurbishment, and end-of-life of its products.
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When I originally met Bumstead a few years ago, he described the prospect of being kicked off Amazon as a “nightmare scenario” for his business and for other independent computer refurbishers and resellers. Bumstead says that Amazon Marketplace is by far the best platform for his business because Amazon has become so pervasive and is the first place that consumers think to buy things online. eBay and Craigslist are alternatives, but Amazon’s popularity with customers and centralized shipping services have made it much easier for resellers to use it (Bumstead can ship 100 laptops to an Amazon fulfillment center, which then handles shipping them to individual customers.)
“This is what every Amazon seller has been dreading,” Bumstead told me on the phone. “There are hundreds if not thousands of small businesses that do repair and refurbishing, so they’re going to take the biggest hit.”
“Amazon is leveraging its power over its marketplace to give Apple power that the courts and Congress never have and never would”
Apple will ultimately make the decisions about who will be allowed to become “authorized resellers” and what the requirements will be, according to the email that it sent to Bumstead. Apple did not respond to a request for comment, so for now we don’t know how it is going to decide who can be an “authorized” reseller on Amazon. It’s worth noting, however, that Apple places many restrictions on its “authorized” service providers, who it grants permission to repair Apple devices. They are only allowed to work on certain devices, are only allowed to do certain repairs, and have to pay Apple to be accepted into the program.
Aaron Perzanowski, a law professor at Case Western Reserve University and coauthor of The End of Ownership, told me in an email that this decision is a dangerous infringement of ownership rights.
“Wow. This is a very troubling development,” he said. “Given Amazon’s dominance as an online retail marketplace, its decision to disregard the first sale rights of resellers will significantly limit consumer choice. The fact that this move was demanded by Apple makes it even more problematic. What we see here are the world’s two most valuable companies engaging in a coordinated assault on the lawful resale of consumer devices.”
The United States Supreme Court has ruled that people who legally own a product may legally resell it, and federal law protects that right under something known as the “first sale doctrine,” which says that copyright holders give up their copyright to individual copies of a work once it is sold: “the first sale doctrine, codified at 17 U.S.C. § 109, provides that an individual who knowingly purchases a copy of a copyrighted work from the copyright holder receives the right to sell, display, or otherwise dispose of that particular copy, notwithstanding the interests of the copyright owner,” the US Department of Justice explains.
“The first sale doctrine has never required an owner to get permission to sell their property,” Perzanowski added. “But Amazon is leveraging its power over its marketplace to give Apple power that the courts and Congress never have and never would.”
“It’s kind of mind boggling to think that a brand would be able to restrict sale of used products”
Kyle Wiens, CEO of iFixit, told me on the phone that his company’s iPhone replacement parts have been getting periodically removed from Amazon because of what he said were trademark enforcement claims by Apple. So far, he has been able to get them relisted after undergoing a lengthy dispute process with Amazon.
“The idea you have a retailer that if they can strike a deal with the most profitable company in the world and lock out independent resellers is concerning for the future of commerce,” Wiens said. “It’s kind of mind boggling to think that a brand would be able to restrict sale of used products. This is exactly the kind of control Apple wants to exert over the marketplace.”
Bumstead focuses on selling older MacBooks and MacBook Pros because they are generally easier to repair and acquire from recyclers. But his business likely has an expiration date: Apple’s newest computers have a built-in software kill switch that prevents independent repair. On these models, which include the new MacBook Air and new MacBook Pros, the computers won’t work unless Apple authorizes the repair via proprietary software on its servers.
Bumstead buys his computers from small electronics recyclers, (large recyclers are often required by Apple to shred Apple products as part of a contract they have with the company.) These old computers, which would otherwise be bound for a shredder still clearly have resale value, regardless of whether they look pristine when he resells them. Bumstead says that Amazon has always taken a “customer is always right” approach to repaired and refurbished goods, so the quality of repairs is presumably not a major concern for the company (Amazon did not tell me why it’s making this change but said in an emailed statement that it is part of the new agreement with Apple.)
Unlike eBay, where sellers create listings and then describe the quality and condition of the product, Amazon creates its own listings and sellers must meet the requirements of those listings. Bumstead said that there are “grades”—A, B, C, D, or “refurbished,” very good, used good, and used acceptable. “You designate the quality by one of those four grades, and then you can specify if there’s, for example, a dent on the corner,” he said. “There’s an unconditional 30 day warranty on every Amazon product, it has to be fully functional regardless of grade.”
Amazon currently has its own “certified” refurbisher program called “Amazon Renewed” that will be unaffected by the new deal with Apple. But the requirements to sell Apple products under that program are impossible to hit for any small business: They must prove to Amazon that they spend at least $2.5 million dollars every 90 days buying Apple products “directly from a national wireless carrier or retailer with over $5 billion in annual sales (Example: Verizon, AT&T, or Target) or the manufacturer (Apple.)” This means that only big companies with direct relationships with corporate giants can meet the requirements.
“Who can meet that requirement except the top 5 massive companies that Apple has decided to work with?” Bumstead said.
The new authorized reseller program will be separate from Amazon Renewed, and the requirements for the new program are not yet public. Amazon has told sellers that they can continue to sell Apple products on the site until January 4. After that, “Amazon will reimburse you for the return or disposal fees through February 4, 2019.”
“As part of a new agreement with Apple, we are working with a select group of authorized resellers to offer an expanded selection of Apple and Beats products, including new releases, in Amazon’s stores,” an Amazon spokesperson told me in an emailed statement. “Sellers are incredibly important to Amazon and our customers, and we are notifying them now so they can prepare for this change.”This post was originally published here