Amazon, eBay and Walmart A Risky Choice for Black Friday Shoppers

The websites are ideal for malicious, fraudulent and counterfeit sellers.

November 20, 2016 - Los Angeles, CA – When e-commerce giants Amazon, eBay and Walmart try to maximize profits, the collateral damage to manufacturers and consumers can be enormous and devastating. Each are a haven for scam artists selling an inexhaustible supply of counterfeit merchandise that appear right next to authentic items conveying the websites endorsement. Black Friday shoppers just don't know they have a very real possibility of receiving visually indistinguishable counterfeit goods.

eBay, Amazon and Walmart have channeled their business models into e-commerce “Marketplace” retail outlets which allow unvetted global sellers to peddle hugely profitable counterfeit goods to unsuspecting consumers. The counterfeit goods are not limited just to third party sellers - Amazon and Walmart have each been caught repeatedly as direct sellers² of counterfeit goods to consumers. eBay does not sell products directly, products are sold by global third-party sellers. The websites take a transaction fee for each sale.

The problem isn’t just the well-known fakes; watches, shoes and handbags, but a vast counterfeit universe of auto parts, cosmetics, drugs, electronics, sporting goods, toys, and much, much more. Even inarguably fake items - items that bear a trademark, but do not even exist in the authentic product line, are also offered.

Each website has a policy that counterfeits, fakes and replicas are not allowed on their websites, but that is not true. Consumers can see the authentic items and their counterfeit counterparts from eBay, Amazon and Walmart on The Counterfeit Report® website, a popular consumer advocate and industry watchdog.

While manufacturers spend millions, perhaps billions, researching, building and protecting their products and brand, they are being destroyed by e-commerce websites sites that enable and facilitate the sale of counterfeit products. China's Alibaba (BABA) flooded the e-commerce marketplace with millions of counterfeits¹, making CEO Jack Ma a billionaire. While The Office of the United States Trade Representative responded by publicly condemning Alibaba and adding the e-commerce giant to the U.S. Notorious Markets List, U.S websites have dodged the designation reserved for the world’s most notorious markets for counterfeit goods,

Amazon

Both Amazon, and its 2-million third-party Marketplace account holders, can offer counterfeits on any of Amazon's 13 global websites. Many Amazon consumers do not realize that Amazon listings present three distinct global product purchase options;

1. Amazon.com (Amazon as a direct retailer) “Sold and Shipped by Amazon.com”
2. Amazon Fulfillment (provided to Amazon by a third-party for warehousing and shipping) "Sold by [third party] and fulfilled by Amazon"
3. Amazon Marketplace (un-vetted sellers list and ship products from all over the world) "Ships and sold by [third party seller]"

Apple recently claimed that 90% of Apple products it purchased from Amazon as a direct retailer, were fake. Birkenstock, a popular sandal maker, pulled the plug on Amazon sales citing an uncontrollable counterfeit problem. 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 sales^{3, 4}.

The Counterfeit Report sent infringement notices, authorized by the right holders, and removed over 32,000 counterfeit items from Amazon. Some notices were resent over a dozen times for weeks, and yet the fake products still remain, or listings (including fake FBI and law enforcement badges) were flatly refused to be removed. Sellers of removed items can easily relist, or return under new accounts.

How fiercely competitive is Amazon? Amazon recently started lowering third-party seller prices with as much as a 9% subsidy. "This item is sold by a third-party seller. The discount is provided by Amazon,"

eBay

eBay migrated from the auction house of garage sale items to the Marketplace sales model of new items; (80%) at a fixed price (86%) from global sellers. That move is drawing an avalanche of counterfeits from both U.S. and global sellers. 

For example, The Counterfeit Report researching just a handful of products, identified over 3.1 million counterfeit, fake and replica items listed on eBay. The actual eBay listings report that over 704,000 items were sold to eBay consumers. While the sellers usually remain and may relist the fakes, the deceived eBay buyers are never told by eBay they received a fake, and of course, be entitled to a refund. Buyers can’t even turn to eBay's feedback as an indication of seller credibility – eBay admits it may be altered, and the counterfeit listings that have been removed are not reflected in eBay seller feedback.

The Counterfeit Report purchased and received over 2,000 counterfeit products from eBay sellers. Alarmingly, eBay actually sends email solicitations promoting the purchase of fake items. Weary of test purchases, criticism of eBay's refund and guarantee process, and refund demands, eBay blocked all of The Counterfeit Report’s test purchase accounts, and by extension, any protection afforded eBay consumers.

Could you identify these actual counterfeit products purchased on Amazon or eBay? Only one exists in a manufacturer's authentic product line.

(Clockwise from left – Photo: The Counterfeit Report®)

1. SanDisk® 64GB microSDHC memory card. The microSDHC® standard is limited to a maximum capacity of 32GB, but over 170,000 fake SanDisk®, Kingston®, Samsung® and unbranded Generic microSD® cards were sold to consumers by eBay sellers. Data is lost or overwritten when the actual capacity, often far less than the printed capacity, is reached.
2. These counterfeit Marvel® action figures purchased on eBay are listed as LEGO® products -- they are not.
3. The Lunatik® TakTik® Extreme model case is not made for the Apple iPhone 6®, in red, or in metal, yet The Counterfeit Report made dozens of purchases of poor quality counterfeit Lunatik® trademarked products representing over 160,000 sales to duped eBay consumers.
4. The authentic Drew Technologies Mongoose Pro on-board diagnostic interconnect cable has the processor and all of the electronics integrated inside to re-program critical vehicle functions including braking, emissions and performance. This counterfeit purchased on Amazon may damage or destroy expensive vehicle computers and components, and alter safety features or performance specifications.
5. Federal, state and local laws regulate the sale, purchase, possession and display of fake badges, as of course does common sense. Website policy also specifically prohibits most police badges and items. However, replica current issue LAPD, FBI and other law enforcement badges are listed on eBay and Amazon, available to terrorists, child predators and other criminals. Despite notices to eBay and Amazon senior management and general counsel about the alarming practice, the items remain.
6. Fullips® instantly popular lip enhancer has a number of counterfeit counterparts on eBay and Amazon, including sizes not offered by Fullips, and made with potentially hazardous materials. This counterfeit may look indistinguishable from an authentic item, but it is a fake.
7. Vans® does not make iPhone 6 or 7 cases – but they are common on eBay and Amazon. Counterfeit product sales are used to support criminals, organized crime and terrorists.
8. The Monster® trademarked Tron T1 Headphone was never produced or sold by Monster Products but are listed on eBay and Amazon. Unsuspecting consumers can be duped out of over $300 for this fake Monster product, purchased on eBay.
9. Dr. Numb® Over-the-Counter 5% Lidocaine topical pharmaceutical is not manufactured in a 10gr. size but was purchased on eBay. Unsuspecting consumers receive a fake product with unknown and potentially deadly ingredients such as Tetracaine, and an obvious spelling error.

Walmart

Walmart's push to capture a portion of the exploding e-commerce marketplace has exposed Walmart and consumers to the same deceptive and dishonest dealings occurring on Amazon and eBay - counterfeit products.

Walmart is also a direct seller of counterfeit products, while also allowing global third-party sellers to list and sell just about anything on its website. Counterfeit products appear right alongside authentic items conveying Walmart's endorsement and the illusion they are from Walmart. Consumers who look closely may see the "Sold & shipped by Walmart" or "Sold & shipped by [Third party seller] source identifiers.

The Counterfeit Report purchased inarguably counterfeit items from Walmart both as a direct seller, and from Walmart's third-party sellers. The Counterfeit Report submitted dozens of infringement notices for hundreds of counterfeit items to Walmart, and while some items were removed, months later others still remain. Disturbingly, Walmart customer service had no consistent response in handling counterfeit inquiries, or how to report counterfeits.

Promises from Walmart staffers for removal of counterfeits products, and commitments for telephonic follow-ups from Walmart management were simply lip service.

Conclusion

Amazon, eBay and Walmart are no strangers to allegations of selling counterfeit goods. The e-commerce giants face a credibility crisis (and lawsuits) fueled by their failure to crack down on counterfeit goods.

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 losses by 2022² while manufacturer's brand integrity is tarnished or destroyed.

The e-commerce giants have become lawless sales platforms for fraudulent, malicious and counterfeit sellers.

Footnotes:
¹Alibaba claimed it tightened policies against infringement in October 2016, touting that it took down 380 million product listings and closed about 180,000 stores in the previous 12 months, just on its Taobao.com subsidiary. It did not mention how many items were sold to consumers, or simply relisted.

²...imports, exports, advertises, distributes, prices, offers for sale, sells, and ships directly to consumers.

³ Paul Ausick, Is Amazon Doing Enough to Combat Counterfeit Product Sales?,
24/7 Wall St. (Mar. 2, 2017), available at http://247wallst.com/retail/2017/03/02/is amazon-doing-enough-to-combat-counterfeit-product-sales/

⁴ Wade Shepard, "How Amazon's Wooing of Chinese Sellers is Hurting American Innovation,"
Forbes (Feb. 14, 2017), available at https://www.forbes.com/sites/wadeshepard/2017/02/14/how-amazons-wooing-ofchinese- sellers-is-hurting-american-innovation/#419e95ab1df2

⁵ 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.