Consumers Deceived - Amazon, eBay & Walmart Profit Selling Counterfeits

Holiday shoppers may receive an unexpected surprise - a fake product.

December 7, 2017, Los Angeles, CA – Everyone knows counterfeiting is illegal, but a loophole exempting liability¹ allows Amazon, eBay and Walmart to enable and facilitate the sale of an inexhaustible supply of counterfeit products, most of which come from China. The e-commerce giants take a transaction fee for each item sold. Amazon and Walmart are also direct retailers of counterfeit products, which has no such liability exemption.

Consumers should have confidence and expect honest services, authentic and safe products when they shop online, but that is simply not true. Forbes recently deemed e-commerce platforms, including eBay and Amazon, as "cesspools of counterfeits and other illegal and potentially dangerous goods."

Counterfeit products are produced with the intent to take advantage of the superior value of the imitated product for a profit, and usually deliver a poor quality, substandard or dangerous item. The counterfeit products destroy manufacturers, their reputation and brand integrity.

The Counterfeit Report^®, a consumer advocate and industry watchdog, identified 26 million counterfeit items on e-commerce websites and removed over 22 million items on behalf of just a small group of right holders. The counterfeits included electronics, over-the-counter (OTC) drugs, sporting goods, children's toys and fragrances. The Counterfeit Report also purchased, received and retained over 2,300 counterfeits from the e-commerce giants.

• Alarmingly, after being notified by right holders, the websites do not tell deceived buyers that they may have received a counterfeit item, even if it's dangerous or potentially deadly, like OTC drugs, auto suspension parts or exploding Apple® USB chargers. eBay actually posted the opposite in the buyer's purchase history when the listings were removed; "If you've already sent payment, the sale should process as normal and you don't have anything to worry about."
• Inexplicably, Amazon requires "Your trademark must be in registered status in [each country the item is sold in]" to avoid listing removal, while eBay sends direct email solicitations to consumers to purchase fake items. Walmart has ignored hundreds of repeated complaints for various inarguably fake items on its website.
• There may be no indication in seller profiles of a counterfeit sales history, even for sellers having over 100 counterfeit listings removed by The Counterfeit Report. Amazon removes counterfeit comments, and eBay publicly admitted to Business Insider as true, allegations of deleting negative feedback and removing counterfeit comments and warnings.
• The U.S. Postal Service loses millions delivering counterfeits from China under reduced "terminal fee" postage agreements².

Amazon, eBay and Walmart are no strangers to allegations of selling counterfeit goods. The e-commerce giants face a credibility crisis fueled by their failure to crack down on the profitable 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 losses³ by 2022, while manufacturer's brand integrity is tarnished or destroyed.

Consumers purchasing online receive little if any value from counterfeits, yet support terrorists and other criminals while destroying U.S. jobs. Consumers would be better served and support their community, buying from local retailers.

Footnotes:
¹ 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.)

² The United States Postal Service (USPS) Inspector General's Office reported that the USPS lost $308 million between 2010 and 2014 delivering foreign treaty mail. In terms set out in the UPU treaty, the USPS in 2014 was paid no more than about $1.50 for delivering a one-pound package from a foreign carrier. Packages receive USPS First-Class Mail service with Delivery Confirmation Service which makes it hard for the USPS to cover costs or U.S. retailers to compete. These postal rates are generally far below rates paid by U.S. retailers and shippers. For example, in 2012, the terminal dues on items from China to the U.S. were about $1.60 per kilogram (2.2 pounds).

³ 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.