Counterfeit Enforcement Could Crush Amazon

Fakes, fraud and scams flood Amazon's marketplace.

July 24, 2018 - Los Angeles, CA – Will a flood of counterfeit and replica products, fake product feedback and deteriorating consumer confidence crush Amazon?

A U.S Government Accountability Office ("GAO") report found the website riddled with fakes, while a follow-up warning from the Federal Communications Commission ("FCC") told Amazon to knock off the counterfeits. Amazon's recent "Prime Day" exposed counterfeits offered through the website's premium subscription program. Fraudulent sellers run amok reports the superb Forbes investigative series on Amazon's cesspool of counterfeits and scams.

The pattern is likely to continue writes the Fashion Law blog about sellers of counterfeit products on Amazon, “Chances are, the vast majority of the individual sellers will not be identified and even if they are, they will not be located.”

Most consumers don't know that the majority of products sold on Amazon.com actually come from unvetted “third-party” global sellers, and are not inspected or verified by Amazon to be authentic. Sellers simply send their counterfeit products to Amazon’s warehouse ("Fulfilled by Amazon"), a smokescreen to lend credibility, and Amazon ships them to buyers without examining or authenticating them. Consumers are easily deceived, yet Amazon receives a transaction fee for each item sold and profits soar.

Publicly, Amazon's illusory boiler plate response is that counterfeit and replica products are strictly prohibited and sellers may face loss of selling privileges and destruction of their inventory, but that's just not true. Ongoing counterfeit sales, fraudulent practices and scams on Amazon are crushing legitimate manufacturers and retailers, destroying jobs and injuring consumers. Unvetted sellers can easily list counterfeit products right alongside authentic items using Amazon "catalog pages" -- a single listing with a stock product image and multiple sellers. Detection and enforcement of counterfeit products is virtually impossible without costly test purchases from each seller.

“I think there is a potential monopolization case against Amazon,” Chris Sagers, an antitrust professor at the Cleveland-Marshall College of Law in Ohio, told the N.Y. Times. “If they are getting massive penetration in the market and preventing customers from buying products from their competitors,” that could be problematic from an antitrust perspective, a topic that has been of growing interest amongst market analysts and legal professionals, alike.

Everyone knows selling counterfeits is illegal, but through huge legal loopholes and virtually immune to prosecution, IP laws and safety standards, Amazon continues to enable and facilitate criminal activity and profit from counterfeit sales which destroy manufacturers and directly impact consumer safety, jobs and public trust.

A full Senate Committee hearing on Tuesday, March 6, 2018 chaired by Sen. Orrin Hatch (R-Utah),“Protecting E-commerce Consumers from Counterfeits,” further illuminates the enormity of the counterfeit problem on e-commerce websites including Amazon, eBay, Walmart, Sears and Newegg.

Congress can choose to act on shady e-commerce counterfeit practices. Will they?