united-states criminal-law
Is it a crime to veil the real price of a product to save sales commissions?
<p>I am currently involved in a discussion in some Internet forum. One aspect of this discussion is the question if the following situation is punishable (or a crime) in at least one US state:</p>
<p>There is some web site that offers some products sold by other persons or companies (you might think of Amazon or eBay). The web site operator takes a percentage of the price of the service as sales commission.</p>
<p>A vendor officially offers some expensive product (e.g. $1000) for a very low price (e.g. $20), but the product cannot be used without some &quot;additional&quot; service which is sold separately for a high price (e.g. $950) although it is actually worth nearly nothing.</p>
<p>The customer knows this and is happy because he must only pay $950 + $20 = $970 instead of $1000. The vendor saves a lot of sales provision because he officially sold the product for $20 instead of $1000.</p>
<p>The operator of the web site looses a lot of money because the vendor does not pay the &quot;full&quot; sales provision.</p>
<p>The question is:</p>
<p>Is the vendor liable to prosecution in some US state?</p>

<p>Much more importantly than a site's terms of service, this is a way of cheating a locality out of sales tax if products but not services are taxed, or services are taxed at lower rates. That would be very illegal.</p>

<h2>Yes, it's a crime</h2>
<p>Specifically fraud, the <a href="http://www5.austlii.edu.au/au/legis/nsw/consol_act/ca190082/s192e.html" rel="nofollow noreferrer">definition</a> of which for <a href="/questions/tagged/new-south-wales" class="post-tag" title="show questions tagged &#39;new-south-wales&#39;" rel="tag">new-south-wales</a> is (me emphasis):</p>
<blockquote>
<p>(1) A person who, by any deception, dishonestly--</p>
<p>(a) obtains property belonging to another, or</p>
<p>(b) obtains any financial advantage or <strong>causes any financial disadvantage</strong>,</p>
<p>is guilty of the offence of fraud.</p>
</blockquote>
<p>However, this is unlikely to be prosecuted by the state. Police would probably see this as a breach of contract matter to be resolved civilly between the platform and the vendor.</p>

<p>It seems clear that the vendor is trying to sidestep the terms of the selling platform.</p>
<p>For example, the vendor is selling a $1000 TV for $20, then getting paid $950 for a service of actually plugging it to the wall.</p>
<p>This makes me wonder:</p>
<ul>
<li><p>Could the service be performed by someone else? Such a the customer itself, or a local technician. Since the service is basically worthless, that would mean they would be able to get the TV for less than $30 and the market itself would compensate.</p>
</li>
<li><p>Is the service <em>needed</em> for the product to work? Like, each TV has a lock, and won't go to unlock it unless the vendor, having the key for this instance of the TV, goes and unlocks it. In this case I would think it is not selling the full product (it still requires the &quot;key&quot;) and the service should also go through the platform.</p>
</li>
<li><p>Is the service a requisite of the selling terms? &quot;TV sold for $20, offer requires that you subscribe to our $950 insurance policy which will replace your TV for free if a martian disintegrates it.&quot;</p>
</li>
</ul>
<p>I think in this later case the best solution would be for the platform to state that the product may not require an outside service i.e, either they do not force in their conditions that people get that service, or the service itself must also be contracted through the platform (and thus subject to its commissions)</p>
<p>In any case, this seems mostly an issue of the platform terms being redacted properly so that such loopholes are not possible. And at that point, it will be a clear issue of breach of contract. I'm quite sure that if the platform terms allowed such loophole (and I would recommend consulting a lawyer to ensure they really do, before actually sending anything that way), would quickly be amended. And likely, the vendor account canceled without compensation for the products already sold but whose money was not transferred to the vendor yet. Which is probably a provision on the platform-vendor contract.</p>
