Consumer Alert: Counterfeits Attract Attention From FTC, Election Candidate, and Shark Tank Host Feuling a $4.5 Trillion Criminal Enterprise.
Police Seize Counterfeit Purses. Creative Commons
LOS ANGELES — Consumers flock to the internet in search of bargains, but what they often find is far more dangerous: a $4.5 trillion counterfeit industry thriving through online shopping platforms. A Red Points survey found that 68% of consumers were worried about buying fake or low-quality goods online.
E-commerce sites have become ideal platforms for distributing counterfeit, fake, and replica products. These counterfeit goods represent a global criminal enterprise, and online sellers face little consequence. While consumers have legal protections for faulty or harmful products purchased from brick-and-mortar stores, they’re often left unprotected when buying from online marketplaces. Protected by 47 U.S. Code § 230, e-commerce giants are not held liable for false information posted by third-party sellers, many of whom operate anonymously from abroad, particularly in China.
The counterfeit problem has even caught the attention of Shark Tank host Mark Cuban, who reportedly discussed the issue with Vice President Kamala Harris’ team, focusing on protecting American businesses from Chinese knockoffs. While details of the conversation remain sparse, the issue raises the question: Should marketplace platforms be required to vet foreign manufacturers selling to U.S. consumers? (Bezinga)
The Counterfeit Report, an award-winning industry watchdog, has removed listings for almost 500 million counterfeit items offered on e-commerce websites, including eBay, Amazon, Walmart, Wish, Google, Newegg, and Alibaba. Despite these efforts, the problem has spiraled out of control. Brand-protection programs on these sites are either ineffective or obstructive, and consumers are rarely notified when they’ve purchased counterfeit or harmful items.
Before buying online from the e-commerce giants, consumers should consider what we’ve learned over the past decade.
Alarmingly, the e-commerce giants usually do not notify buyers they received a fake or harmful item after receiving brand owner counterfeit notifications and have skirted secondary liability for enabling the sale of counterfeits (47 U.S. Code § 230).
The advertised bargain may be no bargain at all. Shoppers may find better deals by carefully shopping competitors and local retailers.
Over 700,000 brand owners have signed up to fight Amazon counterfeits, a glaring representation of the enormity of the counterfeit problem and the challenges facing consumers. Amazon search results and product reviews are no indication of authenticity or quality, and may not even be related to the product searched. Amazon’s review system is awash in fraud, paid endorsements, and manipulation by the e-commerce sites themselves. Amazon and eBay often block or remove negative consumer reviews and comments.
Amazon is a direct retailer of counterfeit goods, “sold and ships by Amazon.com,” and enables and facilitates counterfeit goods sales from unvetted worldwide marketplace sellers. Amazon Prime membership, Amazon Warehouse Deals, and the Fulfilled by Amazon (“FBA”) offerings are plagued with counterfeit, fake, replica items, and illusory endorsements. The coveted “Amazon’s Choice endorsement regularly lands on counterfeit and fraudulent products. Amazon VP Dharmesh Mehta testified to Congress that “Amazon does not manually curate products. There is no unique safety testing for the “Amazon’s Choice” products. There is no unique screening for authenticity to receive that badge.”
eBay has migrated from the auction house of garage sale items to a global “Marketplace” seller model. Unvetted marketplace sellers are about 80% of eBay’s business and can sell just about anything they want on eBay, including counterfeits, fakes, and pirated media. eBay sales figures reflect consumer purchases of over 2.4 million counterfeit, fraudulent, and replica items from just the tiny sample of products investigated by The Counterfeit Report – who purchased over 2,300 counterfeit and fraudulent items from eBay. eBay responded by blocking all accounts and test purchases by The Counterfeit Report.
Walmart consumers who believe they are buying legitimate, safe products online may be in for a surprise. Walmart is both a direct seller of counterfeit, fraudulent, and dangerous items and allows third-party marketplace sellers to offer fake and fraudulent goods on its website. The Counterfeit Report purchased hundreds of counterfeit or fraudulent computer memory cards, flashlights, batteries, and other items from Walmart as the direct seller, and third-party sellers.
Alibaba and its subsidiary AliExpress are the “go-to” websites for counterfeits and replicas and should be avoided. Both serve as a first stop for brand owners to check if their products are counterfeited. This marketplace model landed Alibaba (appropriately named after the fable “Ali Baba and the 40 Thieves”) and some Amazon websites on the U.S. Government’s Notorious Markets List — a designation reserved for the world’s most notorious markets for counterfeit goods.
Wish.com consumers are attracted to its brand-name products offered by China sellers at a fraction of retail. Shipping may take weeks or over a month for customers who prioritize savings over speed of delivery. However, many items are counterfeit, fake, or replica products. Wish.com, a 2011 market newcomer, built its fast-growing e-commerce business by offering a vast range of products that are “discounted” by as much as 90 percent.
Newegg.com is an American company and direct retailer of items, including computer hardware and consumer electronics. Newegg also enables marketplace sellers, many from China, to offer counterfeit, fraudulent, and replica items. Counterfeit computer memory is not uncommon, and marketplace offerings have expanded to counterfeit auto diagnostic equipment, beauty products, first-aid devices, and fraudulent batteries. The Counterfeit Report removed listings for over 511,000 counterfeit, fraudulent, and replica items identified on Newegg.
A U.S. Government Accountability Office (“GAO”) undercover investigation of e-commerce counterfeit goods sales revealed that about 50% of the items it purchased from eBay, Walmart, Newegg, and Amazon were counterfeit.
The Federal Trade Commission or FTC recently sued Amazon for monopolistic practices, alleging a $1 billion price-fixing scheme and inflating costs for both consumers and sellers. The FTC, joined by 17 state attorneys general, accuses Amazon of forcing sellers to use its fulfillment services and keeping prices higher than on other platforms. In a press briefing, FTC Chair Lina Khan said, “Amazon is now exploiting its monopoly power to harm its customers, both the tens of millions of families that shop on Amazon’s platform and the hundreds of thousands of sellers that use Amazon to reach them,” she said. “Amazon now takes one of every $2 that a seller makes.”
In July, the FTC announced a voluntary recall of dietary supplement Umary, promoted and sold for pain, found to be tainted with unlisted drugs diclofenac and omeprazole which cannot be marketed as dietary supplements. Despite the recall, Umary remains listed and sold on eBay, several other online sellers, and a confusingly similar “K-umary” on Amazon.
Consumers are better off shopping with local retailers or trusted major chains like Kroger, Costco, Home Depot, and Best Buy, which offer competitive prices on authentic products. When it comes to counterfeit goods, the advertised “bargain” may come at a much higher cost.