Amazon’s ongoing battle with counterfeits

Brands are growing frustrated with the online retailer’s inability to protect their intellectual property.

Sneaker brands such as Nike or Adidas collaborate with high-profile fashion designers every year. Prestigious names such as Virgil Abloe or Sean Wotherspoon have all put their own unique take on already existing shoe designs. These often limited edition designs typically sell out within hours. Shoe resellers jack up the price astronomically.                            

According to the Los Angeles Times, the footwear industry is worth roughly $100 billion. As the market for footwear and luxury apparel continues to succeed, counterfeiters will try to leech off of that success by creating and selling replicas. Counterfeiters carefully assemble replicas that look identical to the real thing, making it almost impossible to distinguish between real and fake. They’re made with precision to imitate the original’s design and shape. Products that are often replicated include handbags, watches, clothing, electronics and even medicine.

Counterfeiting is set to become a $1.8 trillion-dollar industry. A lot of counterfeits are manufactured in developing countries, but most prominently in China, which is estimated to be the source of 80% of the world’s counterfeit goods. The biggest reason why China is the largest source for counterfeits is due to the lack of property protection on legit products.                     

Counterfeits have most commonly been sold in underground markets, but now the selling of counterfeits has transitioned onto the Internet—which is also where genuine products are being sold. This makes it nearly impossible for a consumer to tell whether what they’re buying is real or fake. Today, stopping people and businesses selling counterfeit products is a huge challenge for online retailers that has yet to be tackled. 

Amazon Marketplace allows individuals to open up stores online to sell their products, creating the opportunities for counterfeits to be sold. If Amazon bans a seller’s storefront due to counterfeiting activity, the seller can easily create another account and open up a new store. Furthermore, with millions of people using the platform to open legitimate stores, ferreting out the counterfeits can be quite challenging. As a result, counterfeits are thriving on Amazon. 

Amazon has admitted to its growing counterfeit problem, but have been unable to prevent it or stop sellers from collecting payments when buyers report their products. Amazon will refund buyers who are scammed but this does very little to resolve the problem. Multiple lawsuits issued against Amazon by small and big companies complain that Amazon do not put much effort in preventing the selling counterfeits on their sites. 

In a November 2017 lawsuit, German automaker and parent company of Mercedes-Benz, Daimler, accused Amazon of lacking responsibility in taking steps to ensure protection of their intellectual property. Failing to do so has allowed the sale of fake Mercedes-Benz wheel caps. Dalmer pursued statuary and compensatory damages against Amazon as they have caused reputational damage to its company. 

German shoemaker, Birkenstock, also had complaints with Amazon. They noticed Amazon’s inactive role in stopping the sale of counterfeits after finding several of their products being knocked off on their sites. They have since discontinued selling authentic goods at Amazon. 

In 2017, Amazon launched they launched a service called Brand Registry, which allows brands to provide logos and intellectual property to Amazon. This allows the e-commerce company to easily find and remove listings that contain counterfeits. More than 200,000 brands have joined the program. 

But recently, the company announced a new program that makes it easier for brands to independently stop counterfeit listings without Amazon constantly needing to intervene. The program, Project Zero, is intended to decrease the counterfeit listings on Amazon by automatically removing them. The program makes it easier for brands to find out the counterfeiters, and where are they sourcing it from. If a brand stumbles upon a reseller’s listing that may contain a counterfeit of their own product, they can remove that listing from Amazon’s website. However, if the removed listing was for a legitimate product, the reseller can contest the removal of their listing by proving to the legitimate brand and Amazon that the product was bought from a reliable supplier. The reseller can do this by providing Amazon and the clothing brand with an assigned manufacturing number tag that often comes with the product. The serial numbers are assigned by brands to ensure the authenticity of the product. Now each time Amazon sells one of their products, they can confirm it’s authenticity by checking if it came with a code assigned by the brand. 

“What brands are doing right now is very labour-intensive and increases liability,” says Chris McCabe. McCabe is a former Amazon employee, but now is a consultant for Amazon sellers. “This is a move to pair off the resellers and the brands in their own arena and battle it out, with Amazon much less involved.”

This new anti-counterfeiting program is likely to be supported by many brands as it permits brands to quickly pursue against sellers who are willingly listing counterfeits of their products and shut down them down. While it may decrease consumer consumption on Amazon’s sites, Project Zero will leave Amazon less involved and a bit more relieved from its counterfeiting issues. 

Other platforms are also taking note of the issue. eBay is cracking down on counterfeits, launching its own system that can detect whether or not the listed product is authentic or not. They want to avoid the damage to their reputation that they are seeing happen to Amazon. 

“Amazon makes money with these fakes,” Birkenstock CEO Oliver Reichert said, “As far we’re concerned, Amazon is an accomplice.”

Image Credit: Hermes Rivera

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