There are no consequences to bullying, so companies will weaponize the plan to attack legitimate competition – that prevents a functional e-commerce marketplace
Anthony James Dispoto, 2015 - J.D. Candidate 2015, University of San Diego School of Law. “Protecting Small Businesses against Trademark Bullying: Creating a Federal Law to Remove the Disparity of Leverage Trademark Holders Maintain over Small Business,” 16 SAN DIEGO INT'l L.J. 457 (2015). Hein Online, accessed via University of Michigan //DH
These threatened legal actions burden the targeted company rather than the trademark holders that send out the cease-and-desist letters.7 6 The targeted company is in a precarious situation in deciding which action to take.77 They can choose to wait and see if the threatening party will take legal action against them, while continuing to potentially infringe the trademark. Otherwise, the targeted company may seek a declaratory judgment, which could state that its trademark does not infringe upon the other party's mark, thereby precluding further legal action against it.78 The threatening party suffers no consequences from sending such letters. Since they are often viewed as aggressive policing tactics, no sanctions are imposed and the threatening party can decide whether or not to pursue legal action. 79 Small businesses are particularly influenced by the potential threat of litigation, which in turn is externalized as a cost to the consumer and the economy.80
By extrapolating the theory of famous economist Adam Smith, it seems that this externalized cost in trademark bullying creates a barrier to entry, which in turn limits the choices available to consumers. ' It does so by imposing higher costs in the market place, thereby increasing the initial amount of capital investment needed for new market entrants and ultimately limiting the amount of entrants who are capable of success in the market.82 Cease-and-desist letters specifically impose high costs on businesses, not just in legal fees, but also in time diverted from the business.83 This harms the consumer, because the fewer companies that are in the market, the fewer products that are available to the public, and those available will tend to be of a lower quality. 84 Competition between companies improves the quality of products and lowers prices, because competitors produce better and cheaper goods or services in order to win consumers.85