The Liability of Giving Away Defective Prizes [e115]

November 7, 2014

The guys end the week by talking about Chevrolet awarding the World Series MVP a possibly defective truck. Nasir and Matt also answer a pizza related question about Yelp!

Full Podcast Transcript

NASIR: All right. Welcome to our podcast where we cover business in the news and answer some of your business legal questions that you, the listener, can send in to My name is Nasir Pasha.

MATT: And I’m Matt Staub.

NASIR: And this is our Friday episode – always a very exciting topic – somehow we get to talk about sports.

MATT: Yeah.

NASIR: Which is my least favorite topic. And then, after all that baseball.

MATT: Yeah.

NASIR: And, apparently, there’s a World Series going on which – I don’t know – will that be over by now? No, it is over, right? San Francisco won?

MATT: Well, the story we’re talking about is about the guy who won the MVP for the World Series so I would wager to say it’s probably over.

NASIR: Okay. So, that’s done.

MATT: Yeah.

NASIR: Who won? San Francisco, right?

MATT: San Francisco won, yes.

NASIR: Nice.

MATT: I’m not surprised. I know you don’t follow baseball so I won’t hold it against you.

NASIR: I don’t think most people follow baseball but okay.

MATT: Yeah, I do. So, basically, I’ll explain this to the listeners – and to you, too – so you understand how this works.

NASIR: Okay. Tell me.

MATT: In the World Series, two teams play, one team wins, and when the World Series is over…

NASIR: Two teams play and one team… Okay, I got that part.

MATT: They select a World Series MVP so it’s basically the player that performed the best. I will assume it’s always been from the team that’s won. I know, in the NBA one time, the winner actually was from the team that lost somehow.

NASIR: Whoa. And is it MVP of that game or of the league?

MATT: Just the series.

NASIR: Okay. Sorry.

MATT: Just for that seven games. So, the selection was pretty easy this year because one pitcher for the Giants basically won three of the four games himself which is unheard of. So, he won and, recently, they started giving out cars – maybe ten years ago, maybe less. But, this year, Chevrolet was the sponsor and they gave out this 2015 Chevy Colorado which, yeah, great. I mean, actually, the guy who won loves trucks. He loves hunting. It’s going to be good for him. The only problem is this truck just had a recall on it for airbag concerns. So, basically, they gave this guy who just had a great performance this truck with potential liability issues and I assume that they got those fixed. But it got me thinking about, you know, if a business gives away something free – like, let’s say you have a promotion as a business and you give away a free prize, like when we gave away that… what did we give? An iPad Mini?

NASIR: Yeah.

MATT: What if that would have, like, exploded when the winner used it?

NASIR: Like, what if the recall was that, “Whoops! Our iPad Minis are actually bombs. Careful with that.” We actually give away a bomb to somebody, that’d be horrible.

MATT: I was trying to think of something. Obviously, a truck is going to be a lot more dangerous than an iPad, but it’s a consideration. I don’t know. From a legal perspective, this seems pretty questionable and, just one little tangent on this, I don’t know if you’ve seen the guy who actually presented the award. I feel bad for him because he was obviously, like, very nervous and he was reading off of like a paper of paper he had and he’s like, “This truck has really cool technology and stuff.” That’s what he said.

NASIR: Why was he so nervous?

MATT: This is less than 24 hours. Chevrolet is already using that slogan in their commercials. I saw a Chevy commercial last night and it’s like, “We’ve got cool technology and stuff.” From a PR perspective, they nailed it.

NASIR: You don’t think it was planned? Oh, obviously, it was probably not planned, but they were just good to react, huh?

MATT: If it was planned, the guy was very good at acting. Like, he was clearly extremely nervous.

NASIR: Oh, okay.

MATT: So, I got off on that tangent.

NASIR: Yeah. So, dealing with recalled products, I’m sure those that actually produce products have already kind of delved into this area because, oftentimes, you’ll get insurance against it because you never know what could happen. I mean, if you’re manufacturing baked good or food, then there’s always a chance of getting a bad ingredient in there, a bad batch, or if you’re making electronics, of having one component that could be bad. I’m sure, as a consumer, people have gone through it, too. I mean, I just returned about nine months ago my Fitbit which was like a wristwatch kind of thing where apparently some people were getting rashes from the nickel that was on the inside of it. So, everyone’s gone through that. But the question is, okay, giving away these recalled products that potentially have a safety problem, of course that would expose you to liability. In fact, you’re actually prohibited from reselling any recalled products – that’s definitely a concern from anyone’s perspective. But, when you have a product that actually could be a danger to somebody’s life because it doesn’t work properly, then I’d be very cautious, of course.

MATT: What about expired food and drink? Should they be selling that at a discount?

NASIR: Yeah, I’m trying to think, there must be a law against that. I don’t know. I can’t name it myself but those expiration dates are weird too because, oftentimes, those dates are just “best eaten by,” right? But, literally, they could be eaten well after the expiration date as far as from a human consumption perspective, so I‘ve heard – don’t quote me on that.

MATT: Yeah. So, I guess the lesson here is just, if you’re going to do this free, I mean, not even free stuff, just products in general, just make sure there’s no issues with it or there’s no known issues when you’re giving the stuff away.

NASIR: Yeah. I mean, obviously, this was a bad circumstance and kind of unlucky thing that happened but, yeah, what are they going to do, too? They probably already have the truck there and everything’s all geared up to go and they find out about this recall. They’d have to what? Switch it out the last minute then Chevy’s already paid all this money? Or do they just ignore it and then fix the car before they give it to him? Not a lot of options.

MATT: Yeah. I assume it was fine when they gave it to him, but we’ll see.

NASIR: We’ll see if – well, hopefully not but – it gets into an accident and the airbag doesn’t go off.

MATT: Yeah, that’d be the worst.

MATT: All right. I’m going to get into the question of the day because it’s really long.

NASIR: Yeah.

MATT: I need to read to here.

NASIR: Clear your throat. Go ahead.

MATT: I’m going to read it verbatim. This is how it’s written. Your favorite topic.
“Yelp has started to automatically provide online ordering for restaurants as they have partnered with online ordering sites EAT24 and EatStreet. Here is the problem: these sites charge the merchant between 10 and 15 percent for the cost of the order. I’m sure Yelp is taking a percentage of this fee.”

NASIR: Yeah.

MATT: “We were never asked if we were okay for them to do this – we are not. We have our own online ordering website that we paid for and I want to drive my customers to my site to order, not to Yelp’s that costs me money. So, by Yelp doing this, they are not only taking away money from me, but they are making money on me from these other sites that cost me more money.” That seems confusing.
“They also removed my link to my online ordering site. Now, I made a big fuss and it took them three weeks for them to remove their link and restore mine.” That’s a victory.
“In doing so, I cancelled my account with EAT24 since they both denied the ability to remove the link. Then, about two months later, the same thing happened with this new company, EatStreet, partnering with Yelp. I finally got Yelp to remove the link, again, after making a fuss. Yelp has also partnered with the company called SinglePlatform and this is the only way I can have my menu displayed on my Yelp page and SinglePlatform charges about $400 per year to a business to use their service. Again, I’m sure millions of businesses are stuck using Simple Platform, with Yelp getting a price.”

NASIR: Piece.

MATT: “With no other options. So, it seems like blackmail that I have no choice but to use SinglePlatform if I want my menu displayed on my Yelp page. So, with all that, does this sound legal to you?” I like the actual question.

NASIR: That was pretty clever at the end. Yeah, that was pretty good. Yeah, you know what? I think it’s completely legal. What do you think?

MATT: I’m sorry. You think it’s what?

NASIR: I think it’s completely legal.

MATT: Illegal?

NASIR: No, legal – like, okay.

MATT: Legal?

NASIR: Yeah. I mean, what’s wrong with it?

MATT: I would tend to agree. I mean, it’s a private site and they can do what they want, right?

NASIR: Yeah, and that’s my whole point with Yelp. The only reason Yelp has power is because we give it to them, you know, and that’s why I am a big proponent of just boycotting them because, as businesses, I understand small businesses are relying upon the traffic that comes from Yelp, but the problem is that we have no control over it. Even the law is starting to go against us in this respect. We were following a case out in Virginia right now where – we talked about this before but – it’s being appealed where a local company is suing Yelp and they got an order for Yelp. The court would force Yelp to reveal the names of certain reviewers that the business believes to be fake – a very, very common problem. Yelp is refusing to do so, so they’ve appealed, and even companies like Google and Facebook are against this because they think it might be against free speech. But, of course, the argument is, well, speech that is not true and damaging shouldn’t be protected. So, these are things that are going on right now and I’d think, you know, as a restaurant, Yelp is a huge money-maker – unfortunately – for restaurants. It’s a source of income but, at the same time, by giving them more power of listing your restaurant – which you don’t have control over anyway – and having people review – that you don’t have any control – then now they’re forcing their people to use their menu system, their ordering system which they all get a cut. Taking away the power from the business owners may be good for users, but maybe not either, but all of this is not in your control.

MATT: There’s a difference here. So, you know, we’re saying that it’s fine for them to do this, but we’re not saying that it’s fair. That’s something to keep in mind. I don’t think that’s fair from a business owner perspective. I mean, I get everything the person who asked the question is saying. It makes sense to me and it doesn’t seem like it should be allowed, but these companies can do what they want. It’s like the Better Business Bureau; you can pay to have a higher rating, that’s just how it operates and it’s unfortunate, but I think the key here is for the consumer to understand what’s going on, but I just don’t know what percent of them actually understand the situation. That’s the problem.

NASIR: I agree. I think only consumers that have friends and family that are small business owners that have a Yelp page – even physicians, even dentists, even other professionals – understand the power of Yelp and the power of Yelp that they have over them. You know, something that didn’t exist five years ago, now business owners have to worry about all these different liabilities and they’re trying to market themselves the best way possible. In the end, you market yourself in a way that puts you in the best light. But, now, they have to worry about their competitors dropping reviews that are totally false and affecting your reputation permanently. It’s ridiculous. It’s unfair, definitely.

MATT: Yeah.

NASIR: That’s what I’m saying. All these things that they’re doing, it’s not unexpected. They have all these users that review the other listings every day. People like us go to Yelp to see which restaurant we should eat and, therefore, it gives them power to charge 10, 15 percent for each order that goes through. It gives them the ability to charge $400 per year to put a menu up there. That’s the power we give them.

MATT: I’d noticed there was a thing for a menu and, a lot of times, you would click it. It wouldn’t be a link to the website for the restaurant. It would be some other company that was doing it. I always wondered why that was.

NASIR: So, we like talking about Yelp and bashing them. But the only alternative, I’ve been using Urbanspoon and I don’t know what their business practices are, but one thing I like is that basically – I don’t know if you can leave comments but – the comments and reviews aren’t very prominent. It’s more like either you like it or you don’t, you know, and it’s a percentage or something. I think that’s what it is. But, for whatever reason, it seems a little bit more… that’s for restaurants only. But I don’t know.

MATT: Yeah.

NASIR: It’s an alternative. So, okay, Yelp sucks.

MATT: There’s your answer. Are you still on your Yelp ban?

NASIR: Yeah, I’m still on my Yelp ban. I haven’t used it since we last banned it.

MATT: Oh, at least you stay strong, I guess.

NASIR: That and Uber I haven’t used.

MATT: I haven’t used Uber in a while, I guess. I need to go to the airport. That’s pretty much it.

NASIR: That was the worst – that we went off on how Uber had bad practices and then, literally, that same day you were going to the airport using Uber.

MATT: I think it was like an hour later I used it.

NASIR: All right.

MATT: I had no other way to get to the airport. It was my only option.

NASIR: A taxi or something else. Okay. So, before you guys leave or actually after you leave or during this period of time that I’m speaking now, make sure you leave a positive review on our iTunes page or channel or whatever or however that works.

MATT: I just remembered to look at that Jimmy John’s voting.


MATT: Oh, man, I guess I lost.

NASIR: We’ve had a good handful of votes yet but the episode just released, like, a couple of days ago, right? So, you have time.

MATT: Yeah. Initially, there was two votes – one for underrated and one for overrated. I know I was one of the two. I assume you were the other one. But now there are actually votes. Man, way overrated. It’s at least fine. There’s no… I don’ know.

NASIR: Oh, that’s a good one.

MATT: Pretty upset about that.

NASIR: All right. Ridiculous.

MATT: Never win.

NASIR: I’ve been, like, traveling from different devices throughout the country to make sure I could vote.

MATT: That’s fine. Less people can go there. It’s more sandwiches for me.

NASIR: The worst. I should say, the best logic I’ve heard in a long time. All right, guys. Thanks for joining us.

MATT: Yeah, keep it sound and keep it smart.


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Legally Sound Smart Business

A business podcast with a legal twist

Legally Sound Smart Business is a podcast by Pasha Law PC covering different topics in business advice and news with a legal twist with attorneys Nasir Pasha and Matt Staub.
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