Is Your Amazon Purchase A Counterfeit?

The website is ideal for malicious, fraudulent and counterfeit product sales.

March 21, 2018 - One-third of online shoppers received an unexpected surprise last year - they unwillingly received a counterfeit product.¹ An undercover investigation² by the U.S. Government Accountability Office ("GAO") of counterfeit consumer goods on Amazon (AMZN), eBay (EBAY), Sears (SHLD), Walmart (WMT) and Newegg validates that claim -- about 50% of the items purchased by the GAO were counterfeit.

U.S. and cross-border scam artists freely unload an inexhaustible supply of counterfeit merchandise on Amazon, mostly from China, which appear right alongside authentic items conveying Amazon's endorsement. Amazon's 13 global websites operate under a huge legal loophole³, virtually immune to prosecution, IP laws and safety standards. Amazon receives a transaction fee for each item sold.

Amazon is no stranger to allegations it enables, facilitates and directly participates as a retailer of counterfeit goods. The downstream consequences are destroyed U.S companies and retailers, lost U.S. jobs and deceived consumers spending good money for bad products.

• The Counterfeit Report, a consumer advocate and industry watchdog, removed over 34,000 counterfeit items on Amazon, authorized by the right holders.
• Apple® reported that 90% of Apple products it purchased directly from Amazon were counterfeit, while Birkenstock, the global footwear icon, slammed Amazon as "an accomplice" of the fraudsters. The Recording Industry Association of America (RIAA) placed orders with Amazon and found that 44 of the 194 top CD's delivered were counterfeit. Swiss watch company Swatch (Longines, Omega and Blancpain) scrapped selling on Amazon when Amazon refused to "proactively police its site for counterfeits and unauthorized retailers." Smaller manufacturers complain that their business is being destroyed by Amazon counterfeit sales⁴.
• Forbes deemed the e-commerce giant a "cesspool of counterfeits and other illegal and potentially dangerous goods."⁴
• CNBC reports "In Amazon's quest to be the low-cost provider of everything on the planet, the website has morphed into the world's largest flea market — a chaotic, somewhat lawless, bazaar with unlimited inventory."

Amazon operates as both a direct retailer of counterfeits, and allows global third-party "Marketplace" sellers to list just about anything they want, including counterfeits, implying Amazon's endorsement. This is the same marketplace model that landed Jack Ma's Alibaba (appropriately named after the fable “Ali Baba and the 40 Thieves”) on the U.S. Government's Notorious Markets List - a designation reserved for the world's most notorious markets for counterfeit goods.

Amazon also utilizes a crafty approach to avoid removing reported counterfeit listings claiming "Your trademark must be in registered status in [each country the item is sold in]," ignoring their own counterfeit policy. The foreign sellers are difficult to identify and escape liability.

Amazon's illusory counterfeit policy⁵ prohibits the sale of counterfeit, fake or replica products - but it's a lie. Indisputably fake items - items that don't even exist in an authentic product line - are listed and often remain. Listing removal is completely arbitrary, and listings can linger for weeks until inventory is exhausted, or sellers simply relist the counterfeit items. Buyers are not told they may have received a counterfeit item, even if it's dangerous or potentially deadly.

Companies that facilitate criminal activity and profit from dishonest sales which impact consumer safety, jobs and public trust create a public perception of deception and impunity. However, their reputation damage is only a small part of the problem: the value of counterfeit and pirated goods is forecast to grow to $2.8 trillion, and cost 5.4 million net job losses⁶ by 2022, while manufacturer's brand integrity is tarnished or destroyed.

Congress can act to protect consumers, and consumers can shop elsewhere - will they?

Footnotes:

⁽¹⁾ Global Online Shopping Survey 2017 – Consumer Goods
Prepared by: Clarivate Analytics for MarkMonitor® Inc.    November 2017

⁽²⁾ Report to the Chairman, Committee on Finance, U.S. Senate
Full Report: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market
GAO-18-216: Published: Jan 30, 2018. Publicly Released: Feb. 27, 2018.
Summary: https://www.gao.gov/products/GAO-18-216

⁽³⁾ In a devastating blow to manufacturers and consumer protection, the U.S. Court of Appeals upheld a U.S. District Court decision by Judge Ricardo S. Martinez excusing Amazon (NASDAQ: AMZN) from liability in the sale of counterfeit items on its website. (Milo & Gabby, LLC. v. Amazon.com, Inc.)

⁽⁴⁾ Wade Shepard, "As Amazon And eBay Flood With Illegal Goods From China, Beijing Cracks Down On Foreign E-Commerce"
Forbes (Nov. 22, 2017), available at: https://www.forbes.com/sites/wadeshepard/2017/11/22/as-amazon-and-ebay-flood-with-illegal-goods-from-china-beijing-cracks-down-on-foreign-e-commerce/#7223f1604dfd

⁽⁵⁾ Amazon's counterfeit policy claim; "The sale of counterfeit products, including any products that have been illegally replicated, reproduced, or manufactured, is strictly prohibited" is clear, but not Amazons actions. The truth is that counterfeits and replicas can be, and are, easily listed and sold on, and by, Amazon.

⁽⁶⁾ THE ECONOMIC COSTS OF COUNTERFEITING AND PIRACY
The report was prepared for The International Chamber of Commerce Business Action to Stop Counterfeiting and Piracy unit (ICC BASCAP) and The International Trademark Association (INTA)
January 2017
Frontier Economics, Ltd.