Who Will Cleanup Amazon's Cesspool Of Counterfeits?
The website is ideal for malicious, fraudulent and counterfeit sales.
November 28, 2017 - Los Angeles, CA – Amazon is under fire for some shady practices; enabling, facilitating and directly participating1 in the sale of an inexhaustible supply of counterfeit goods. Forbes recently deemed the e-commerce giant a "cesspool of counterfeits and other illegal and potentially dangerous goods" while hiding behind illusory counterfeit policies* and ineffective website policing.
Amazon is a haven for U.S. and cross-border scam artists to freely unload counterfeit merchandise, mostly from China, which appear right alongside authentic items conveying Amazon's endorsement. Consumers just don't have a chance of identifying dangerous, deadly and often visually indistinguishable counterfeit goods. The Counterfeit Report®, a popular consumer advocate and industry watchdog, removed over 22.6 million counterfeits from e-commerce sites including U.S. based Amazon (NASDAQ: AMZN), eBay (NASDAQ: EBAY) and Walmart (NYSE: WMT). Consumers can see the authentic items and their counterfeit counterparts on TheCounterfeitReport.com website.
Amazon receives a transaction fee for each fake sold, profits soar, and Jeff Bezos made it to the top ranks of Forbes wealthiest persons list. The downstream consequences are destroyed U.S companies and retailers, lost U.S. jobs and deceived consumers spending good money for bad products. 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.
International sales through Amazon's 13 global websites are a huge legal loophole, virtually immune to prosecution, IP laws and safety standards. Amazon utilizes a crafty approach to avoid removing counterfeit listings claiming "Your trademark must be in registered status in [each country the item is sold in]," ignoring their own counterfeit policy*. Foreign sellers are difficult to identify and escape liability.
While Amazon was initiating lawsuits against two Amazon counterfeit sellers, sharply contrasting activity was occurring in the background. Amazon argued and won a U.S. Appeal's Court decision to disavow itself from any responsibility for 'offering to sell' counterfeits products. Right holders simply don't have the resources to fight the flood of e-commerce fakes, or pursue individual sellers.
Counterfeit notices can be sent dozens of times for weeks, yet the fake products still remain. The infringing products notices trigger ineffective or unrelated automated responses (The Counterfeit Report received thousands in foreign languages) or flat out refusals to remove the infringing listings. Complaints to senior management and corporate counsel fall on deaf ears. Sellers of removed items can easily relist, or return under new accounts.
Amazon, and its 2-million third-party Marketplace account holders, are all counterfeit product sources on any of Amazon's 13 global websites. Many Amazon consumers do not realize that Amazon listings present three distinct global product purchase options - all offering counterfeits;
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 sales2, 3.
Disturbingly, Amazon recently started lowering third-party seller prices with as much as a 9% subsidy to destroy competitors. "This item is sold by a third-party seller. The discount is provided by Amazon,"
Amazon is no stranger to allegations of selling counterfeit goods. The e-commerce giant faces 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 20224 while manufacturer's brand integrity is tarnished or destroyed.
* Editor's Note:
The law, and Amazons counterfeit policy claim; "The sale of counterfeit products, including any products that have been illegally replicated, reproduced, or manufactured, is strictly prohibited" are clear, but not Amazons actions. The truth is that counterfeits and replicas can be and are easily listed and sold on, and by, Amazon.
Footnotes:
1...imports, exports, advertises, distributes, prices, offers for sale, sells, and ships directly to consumers.
2 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/
3 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
4 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.
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