out of them.We do not inspect this particular lot, due the quick turn-around required by our customer. They receive the goods, and find that most of it is really second quality, some even third. Upon receiving the customer complaint, the Chief Executive Officer, who is the only person authorized to allow returns or discounts, refuses to take the shipment back, or discount the price. His premise is that the goods did not come with a guarantee, and that it was the customers' fault that we didn't have time to inspect them properly in the first place. The customer sues us, asserting that we knew that the goods were second quality all along, and intentionally cheated them.Far and away the first scenario is the most common. Although it is not really a quality issue, it is the area in which the company is the most vulnerable. Several procedures have been put in place to mitigate the potential liability issues.The people selling us high-end licensed apparel are required to provide us with documentation that the manufacturer has the legal rights to manufacturer and distribute the merchandise. This may come in the form of a copy of a portion of their license agreement or a letter from the licensor or a "sanitized" invoice. To sanitize an invoice, the proprietary details are whited out, such as price, date, contact person, terms, etc. What is important is that the trademark logo shows on the invoice, and the size and color breakdowns of the merchandise. Sanitized invoice is applicable when buying from broker.The other way that the risk is controlled is by using specific channels of distribution. There are some brands that are extremely aggressive in protecting their trademarks. The example I used above, Tommy Hilfiger is one of them. The Hilfiger licensees are strictly forbidden from distributing trademarked apparel through discount stores anywhere in the United States. Further, because there are licensees all over the world, they a...
