Online Shopping - A Risky Choice For Consumers

Fraudulent sellers and counterfeit goods await e-commerce shoppers

September 6, 2017 - Los Angeles, CA – Consumers love a good deal, but online shopping may be risky, dangerous and of little, if any, actual value. Fraudulent sellers and counterfeit goods may be the real consequence for online shoppers.

“Counterfeiting and piracy continue to grow at an astounding rate” states the 2017 report "The Economic Costs of Counterfeiting and Piracy"¹ commissioned by the International Trademark Association (INTA) and the Business Action to Stop Counterfeiting and Piracy (BASCAP) unit of the International Chamber of Commerce (ICC).

• The report forecasts the total economic value of counterfeit and pirated goods will grow to $1.9 to $2.8 trillion by 2022 - products destined for consumers.
• The report also identifies the significant global impact on employment and net job losses, reported at 2 to 2.6 million jobs for 2013, and projected to rise to 4.5 to 5.4 million job losses in 2022.

E-commerce websites including Amazon (AMZN), eBay (EBAY), Alibaba (BABA), and now Walmart (WMT) are the perfect platforms to enable and facilitate distribution of counterfeit goods, currently a $1.7 trillion global criminal enterprise.

In their quest to dominate online sales, these sites have opened the floodgates for counterfeit products, mostly from China. These e-commerce websites wreak devastation on manufacturers and retailers, destroy U.S. jobs and deceive consumers with an inexhaustible supply of counterfeit goods.

The problem is that anybody, anywhere can open an online e-commerce "Marketplace" account and sell just about anything. By any definition, counterfeiting is stealing. Sellers find counterfeiting profitable, difficult to track and widely unpunished, while the e-commerce websites receive a transaction fee for each fake item sold.

Alarmingly, the e-commerce websites do not notify buyers they received a fake, even after notifications by the right’s holder, and have skirted secondary liability for enabling and facilitating the sale of counterfeits.

The Counterfeit Report®, a popular counterfeit awareness and consumer advocate, sent formal infringement notices, authorized by the right’s holders, to e-commerce giants Amazon, eBay, Alibaba and Walmart to remove listings for 19.5 million counterfeit items offered or sold on their websites. The products were destined for, or purchased by consumers. Actual sales figures on eBay and Alibaba listings indicate consumers purchased over 721,779 counterfeit or fake items from just the small product sampling reviewed by The Counterfeit Report. Amazon and Walmart listings do not reflect sales.

Amazon
Many Amazon consumers don’t realize Amazon listings present products from any of three distinct sources, including Amazon's 2-million global Marketplace account holders (about 50% of Amazon’s business) who can ship counterfeit products, which are never inspected by Amazon, from all over the world. Buyers must look very closely to determine the source of items;

1. Amazon Direct (Amazon a direct retailer “Sold and Shipped by Amazon”)
2. Amazon Fulfillment (provided to Amazon by any global third-party seller just for warehousing and shipping "Fulfilled by Amazon")
3. Amazon Marketplace (sold and shipped directly from any global third-party sellers)

Alarmingly, consumers can't even be confident with Amazon direct purchases. Apple® reported that 90% of Apple products it purchased directly from Amazon were counterfeit. The Recording Industry Association of America (RIAA) placed orders with Amazon and found that 44 of the 194 top CD's delivered were counterfeit, while Birkenstock® pulled the plug on Amazon sales of its popular sandals citing counterfeit enforcement problems. “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” says a recent CNBC Report.

Amazon's commitment to curtailing counterfeits on its website is arguable. Amazon recently won a U.S. Appeal’s Court decision to disavow itself from any responsibility for 'offering to sell' counterfeits products. The Counterfeit Report found that Amazon only selectively removes counterfeit, fake or replica items from its 13 global websites, and presents prohibitively time consuming and expensive obstacles for manufacturers and right’s holders attempting to protect their trademarked items and consumers.

eBay
eBay is migrating from the auction house of garage sale items and concentrating on global Marketplace sales of new items (80%) at a fixed price (86%) from unvetted global sellers. The counterfeit products are visually deceptive and may be dangerous or deadly. The Counterfeit Report purchased and received over 2,300 products from eBay sellers - all were counterfeit. Instead of embracing The Counterfeit Report's research, eBay blocked The Counterfeit Report's test purchase accounts and, by extension, protections afforded eBay consumers.

The Counterfeit Report's research identified over 3 million counterfeit items on eBay, and 699,000 reported sold to eBay consumers. Consumers are best advised to avoid trademarked items on eBay and buy directly from the manufacturer or authorized retailers.

Walmart
Walmart’s decision to participate in online e-commerce sales comes with a cost. Consumers are being deceived and losing money, and Walmart is damaging its reputation. Walmart is allowing and enabling the sale of counterfeit products as both a direct seller, and through unvetted global third-party Marketplace sellers. Counterfeit products can appear right next to authentic items conveying Walmart's endorsement and the illusion the items are from Walmart. Sellers and acquisitions have helped to increase the total number of SKUs available online from 15 million a year ago, to 67 million. Repeated infringement complaints often go unanswered or ignored, and the infringing items remain.

Alibaba
The Office of the United States Trade Representative publicly condemned Alibaba, appropriately named after the fable “Ali Baba and the 40 Thieves,” adding the e-commerce giant (again) to the U.S. Notorious Markets List – reserved for the world’s most notorious markets for counterfeit goods. The action is well deserved, but has done little to stem Alibaba's worldwide distribution of counterfeit goods.

Alibaba claimed it tightened policies against infringement, touting that it took down 380 million infringing product listings and closed about 180,000 stores, just on its Taobao.com subsidiary in a 12 month period ending in 2016. What Alibaba didn’t reveal in the PR stunt is why more than double the counterfeit items of 2015 were allowed to be listed, how many duped consumers already purchased the products, and how many items were simply relisted – a common practice.

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. Consumers purchasing counterfeits online are supporting a criminal element, destroying jobs and receiving little, if any, value in return.

Footnote:
¹ THE ECONOMIC COSTS OF COUNTERFEITING AND PIRACY
The report was prepared for The 130 member country International Chamber of Commerce (ICC BASCAP unit)
and The International Trademark Association (INTA)
January 2017
Frontier Economics, Ltd.