Amazon, eBay & Walmart Profit Selling Deceptive Counterfeits

E-commerce websites prosper deceiving consumers.

January 23, 2018 - One-third of online shoppers received an unexpected surprise last year - they unwillingly received a counterfeit product.¹ Amazon (AMZN), eBay (EBAY) and Walmart (WMT) have become the wild west of fraudulent sellers, opening the floodgates to an inexhaustible supply of deceptive counterfeit goods - most of which come from China.

Amazon and Walmart both also operate as direct sellers of counterfeit goods.

• Forbes recently deemed e-commerce platforms, including eBay and Amazon, as "cesspools of counterfeits and other illegal and potentially dangerous goods.²"
• Birkenstock, the global footwear icon, slammed Amazon as "an accomplice" of the fraudsters, while Apple found that 90% of Apple products it purchased directly from Amazon were fake.

Amazon, eBay and Walmart all allow unvetted global third-party sellers to list just about anything they want, including counterfeits on their websites, implying the website's endorsement. This is the same sales 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 List³ - a designation reserved for the world’s most notorious markets for counterfeit goods.

Tragically, counterfeit OTC drugs, medical devices, electronics, auto repair and suspension parts not only can injure or kill the purchaser, but also unknowing non-participant third-parties.

Policing counterfeit activity on e-commerce sites is almost impossible, a complaint common with manufacturers. The Counterfeit Report, an industry watchdog and consumer advocate, issued infringement complaints and removed over 23 million counterfeits from e-commerce websites, including Amazon, eBay and Walmart, just a fraction of the fakes destined for unsuspecting consumers. Backing up the claims are thousands of counterfeit brand-name products purchased from the Amazon, eBay and Walmart. Despite the complaints, the websites continue to promote, enable, facilitate and profit from counterfeit sales.

Counterfeiting is big business, currently a $1.7 trillion global criminal enterprise. The websites operate under a huge legal loophole⁴, virtually immune to prosecution, intellectual property ("IP") laws and safety standards, which allow Amazon's Jeff Bezos, and Alibaba's Jack Ma, to prosper selling substantially discounted counterfeit products to duped consumers, while legitimate retailers and manufacturers struggle to keep their doors open.

The e-commerce giants all have illusory policies prohibiting 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 - often remain, and listing removal is completely arbitrary. Listings can linger for weeks until inventory is exhausted, or sellers simply relist the counterfeit items. The websites take a transaction fee for each item sold, and buyers are not told they may have received a counterfeit item, even if it's dangerous or potentially deadly.

If you can't identify the sample counterfeits shown below, you shouldn't be buying online. They are all fake - they do not exist in any authentic product line.

(Photo: ©The Counterfeit Report)

Monster® never made a Tron model headphone. Supra® never produced a "Justin Bieber" model skateboard shoe, and the Drew Technologies® Mongoose® Pro vehicle diagnostic and programming interface cable was never made in purple. Vans® does not make or license the use of the VANS® trademark on iPhone 6,7 or 8 phone cases. Authentic Dr. Numb is not made in the 10g size shown. Counterfeit Dr. Numb® 5% Lidocaine Cream submitted for ingredient testing did not contain any Lidocaine as indicated, but Tetracaine, a potentially fatal drug. Composite Resources, Combat Application Tourniquet® (C-A-T®), has been supplied to the U.S. Military, police, first responders and the public worldwide for the past decade but was never produced in tan. Counterfeit versions of the C-A-T tourniquet have catastrophically failed during actual life-saving applications. Your life could literally be riding on this counterfeit vehicle suspension part. Group-A Autosports® never made the Skunk2® lower suspension control arm in the colors shown. An automobile suspension part failure can cause a catastrophic accident with fatal consequences to those in, and around, the counterfeit equipped vehicle. The various micro SD® memory cards shown were never produced in the authentic product line in the capacities shown, or licensed by SD-3C, LLC, the right holder of the microSD® trademark. ICOM® never made a V87 model amateur radio, and pharmaceutical giant Novartis® does not make its OTC anti-fungicide medication, Lamisil®, in the liquid form shown.

Buyers should be very wary of purchasing any trademarked item online unless directly from the manufacturer or verified authorized retailer. Counterfeiters and dishonest sellers are very good at creating visually deceptive products, packaging, holograms, certification labels and documentation that easily deceive consumers.

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 losses⁵ 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⁾ 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

⁽³⁾ In 2017, 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 the previous 12 months. What Alibaba didn't reveal 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. Alibaba remains in the U.S. Notorious Markets List.

⁽⁴⁾ 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.)

⁽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.