Attorney General Dana Nessel Cautions Michigan Residents About Drop-Shipping Scams

LANSING – Michigan Attorney General Dana Nessel is urging caution among residents regarding the potential risks associated with drop-shipping, a business model that has garnered attention recently.

In the drop-shipping model, a company signs an agreement with a third party — the manufacturer, another retailer, or a wholesaler — who ships the goods directly to the buyer. The drop-shipper is positioned in the middle of the retail transaction between the seller and the customer and keeps the difference between the retail and wholesale price. The worst operators in this space likely do not have such agreements in place. They instead use a website to lure consumers into buying something they could get cheaper from the source.

“It’s important for Michiganders to be extra careful when shopping online,” Nessel said. “In one’s eagerness to purchase a gift or other necessities this holiday season, consumers run the risk of falling into a scheme that will cost more money than it should. Drop-shippers may attempt to lure in customers with flashy websites and products that appear to be on sale, but consumers must be cautious that the websites they are visiting are legitimately run operations.”

Drop-shipping itself is not illegal, but potential pitfalls exist for both buyers and sellers, which is why Nessel advises Michigan consumers to exercise vigilance and take the precautions outlined in her alert, Drop-Shipping: What you Need to Know Before You Buy or Sell Online.

In an online video, AG Nessel encourages shoppers to follow these tips:

Research the product AND the seller.
Do an online image search of the product that the seller has posted to see where the product is coming from, how much it really costs, and who else is selling the product.
Compare prices for the same or similar products from other sellers.

The Department of Attorney General issued a notice of intended action yesterday to a Mississippi-based company that is purported to have taken orders and payment for furniture they never delivered, nor refunded upon request. ACF Wholesale has until January 8th to respond.

Residents who believe they have been defrauded by a drop-shipper, or fallen victim to any other consumer scam, are encouraged to file a complaint with the Department of Attorney General, or contact:

Consumer Protection Team
P.O. Box 30213
Lansing, MI 48909
517-335-7599
Fax: 517-241-3771
Toll-free: 877-765-8388
Online complaint form

A library of consumer alerts created by the Department of Attorney General’s Consumer Protection Team is available online and organized by a number of categories.

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