Counterfeiting

Amazon and the Digital Underworld of Counterfeits

December 13, 2019

The LocatorX Team

December 13, 2019


The thrills of holiday shopping have brought about the usual chaos: Long lines, maxed-out credit cards, an occasional fist fight at the toy store


Thanks to online shopping, though, the dangers of Christmas consumerism are greater than ever. Specifically, the threat of counterfeit goods, which are being passed off to unsuspecting buyers at breakneck speed. 


Nowhere is this more true than Amazon. The Seattle-based e-commerce site is the largest online retailer by a country mile, with a recent valuation exceeding $860 billion. Along with this, it has become a counterfeiting free-for-all that is unprecedented in scope. It’s a modern minefield for global shoppers who flock to the site for its convenience and low prices, but may get taken advantage of by those passing off faulty products as something they are not. 


Customers and brands alike are being robbed of their finances by counterfeiters using the site, which “increasingly resembles an unruly online flea market” (Wall Street Journal). There are approximately 2.5 million independent merchants selling goods on Amazon, and none are immune from the counterfeit curse. Though counterfeits are more prevalent with products like makeup and razor blades, there is nothing (or no one) off limits. 


Earlier this month, Amazon saw the single biggest shopping day in its history on Cyber Monday. Of the millions who made a purchase that day, an unfortunate number were likely victims of counterfeiters. According to one study, counterfeit activity rose 40% between 2018 and 2019, and Amazon’s nonstop growth is largely thanks to the third-party market that fraudsters call home.


The Wall Street Journal (WSJ) recently reported on Amazon’s “aggressive” recruitment of Chinese merchants and manufacturers to the platform. In general, China is the largest exporter of counterfeit goods, according to the Organisation for Economic Co-operation and Development. These sellers that Amazon actively sought out now represent a high proportion of problematic listings discovered on the site, according to the WSJ investigation. 


Along the way, Amazon has made a point to skirt around accountability. 


“Even though it has become a source of fake or dangerous goods, Amazon has denied it is liable for what’s sold there, saying in court cases that it neither makes nor sells the products in question,” writes Jon Emont in the WSJ piece.  


Product ripoffs are bad enough — buyers often receive items that are shoddily made when compared to those they are imitating. To make matters worse, research has shown that many counterfeit goods on the site pose additional risks. Thousands of items on the site have been “declared unsafe by federal agencies, are deceptively labeled or are banned by federal regulators — items that big-box retailers’ policies would bar from their shelves.” 


At least 2,000 items discovered in the WSJ investigation were toys or medications that lacked the proper warnings about health risks to children


As with many of our most pressing problems, the conflict at the heart of Amazon counterfeiting is one of morality vs. profit. According to The Washington Post, as cited by NBC news, “Amazon took steps to curb the counterfeiting a couple of years ago, but observed a decline in growth in merchandising and so reversed course.” 


Additionally, Amazon has increasingly created knockoffs of their own — product lookalikes that they design themselves and sell to customers at a lower price. Many of these items are marketed under the AmazonBasics name. These behaviors don’t do much to instill confidence in brands trying to generate revenue on the site, or customers forming an opinion on the brand’s values.


Amazon initiatives Transparency and Project Zero are designed to help brands identify suspected counterfeiters. Both programs require an effort on the part of brands, though, which may present a roadblock. Considering that the issues still run rampant, the world’s richest online store needs to show a much greater effort to join the fight against counterfeiting — or at the very least make it seem like they care. 


The ballooning scope of the site’s problems, held up against the company’s unequaled resources, is being rightfully criticized and examined left and right. This extends all the way to the White House.


While Bezos and Co. continue troubleshooting — or claim to be, anyway — major brands are reconsidering their relationship with Amazon due to these and other issues. Nike, the largest shoe manufacturer in the world, just announced it would remove its products from the marketplace, citing the lack of control over third-party sellers of their products and counterfeits as a central reason. Even after identifying and flagging these merchants, the issues remained. 


“Third-party sellers whose listings were removed simply popped up under a different name,” according to a write-up in Bloomberg. “Plus, the official Nike products had fewer reviews, and therefore received worse positioning on the site.”


With Nike — one of the most popular consumer brands in any space — making this call, it may be a sign of things to come if Amazon doesn’t crack down. To do so properly would require a more thorough vetting process in registering merchants and creating listings, which would certainly have an immediate impact on revenue. But if they don’t act quickly, the backlash may be far greater. 


Echoing the sentiments of Nike, the American Apparel & Footwear Association (AAFA) recently proposed that five regional Amazon sites be added to the government’s list of Notorious Markets. The AAFA, a fashion trade group that represents hundreds of consumer brands (e.g. Gap, Adidas), drafted a letter to the U.S. Trade Representative outlining their concerns.


“Anyone can become a seller with too much ease, and it is often misleading and difficult to interpret who the seller is,” writes the AAFA. “Members emphasize that from a consumer standpoint, it is hard to decipher from whom the purchase is being made.”

“Amazon needs to go further by demonstrating the commitment to the resources and leadership necessary to make its brand protection programs scalable, transparent, and most importantly, effective.”


It’s impossible to deny the draw of Amazon — for both shopping and selling — even in the face of its counterfeiting quandary. But as with Facebook and other tech giants, we have to keep our guard up and proceed with caution, and not mistake its convenience for safety. As for your holiday gifts, it doesn’t hurt to consider buying local this time around. 


If you’re a consumer brand selling your products online, or have come across suspicious products in your Amazon searches, visit STOPfakes.gov for details on identifying potential counterfeiters and reporting them to the authorities. 


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