Amazon’s counterfeit problem is well documented, but it’s easy to forget the myriad ways in which it can become your problem, too. After all, your new face mask probably won’t contain arsenic, your off-brand USB cord probably won’t fry your laptop, your made-in-China hoverboard probably won’t burn your house down, and your designer suitcase probably won’t put you on a US Customs and Border Protection blacklist for importing counterfeit goods.
Not everyone is so lucky, however. In November, Harper Reed, an entrepreneur in residence at Paypal and the former chief technology officer at Obama for America, tweeted that he had purchased a suitcase on Amazon by Rimowa, a high-end luggage brand whose full-size styles typically retail upwards of $700. The suitcase was full-price, he wrote, and there weren’t any red flags on the listing that would have alerted him to a potentially sketchy product. The order never arrived, however, and he got a refund from Amazon and went to Neiman Marcus to buy it in person.
Fast-forward to Reed’s renewal interview for Global Entry, a CBP Trusted Traveler program that expedites the airport security process for “pre-approved, low-risk travelers.” For frequent international flyers, it can be the difference between spending hours waiting in line to have your passport inspected by a customs agent or breezing through a kiosk check in 15 minutes. Except this time, he said, his application was denied. His name had been flagged by CBP for importing counterfeit goods — specifically, a Rimowa suitcase.
While the organization doesn’t release information about specific cases, a spokesperson confirmed that having a past violation of customs laws or regulations on your record may make you ineligible for Trusted Traveler programs. Whether that violation was intentional is, to some extent, beside the point. (And while there is an appeals process, it can take around six months.)
When CBP intercepts a shipment, says Mark Schonfeld, an intellectual property lawyer at Burns & Levinson LLP, in Boston, Massachusetts, it sends a seizure notice to the trademark holder (in this case, Rimowa), which includes the names of the importer and exporter. The brand can then decide what action it wants to take, if any. Going after the latter party can be difficult and costly, since the vast majority of counterfeits come from Asia (in 2016, nearly 90 percent of products seized by CBP originated in China and Hong Kong). The importer, however, is by definition domestic, making them the easier target.
Schonfeld says this is the first instance he’s heard of in which a consumer has been flagged for importing a single item, but that legally, the principle is the same. “It definitely can happen to a consumer,” he says. “You know, you can go to Tijuana, just right over the San Diego border and you can easily buy counterfeits there, but no consumer should think that coming back into the United States with the item is risk free.” Much more common are cases in which Amazon itself is named as the importer, particularly since it began courting Chinese sellers with favorable shipping terms in 2015, and as its Fulfillment By Amazon program expands by leaps and bounds each year, offering third-party merchants the chance to take advantage of the e-commerce giant’s logistics infrastructure, customer service, and even Prime two-day shipping by sending goods directly to its warehouses.
While Amazon’s anti-counterfeiting policy has evolved in the past year in response to pressure from brands, it remains primarily reactive: In the event of a complaint, the site can suspend or shut down a seller’s account, withhold payment, and destroy merchandise, but ultimately the onus is on the rights holder, customers, and independent monitoring groups to police the marketplace. Brands have repeatedly said this isn’t enough: In 2016, Birkenstock pulled its products from the site to protest the flood of fakes, and last summer, the CEO said in no uncertain terms that no sellers were authorized to work with the site (still, a search for the brand’s name brings up more than 1,800 results). The CEO of LVMH, which in October 2016 bought a majority stake in Rimowa, said the following day that there was “no way” its brands would ever do business with Amazon.
Small businesses, meanwhile, have found themselves floundering as Chinese manufacturers knock off their products and undercut their pricing. Seattle-based pillowcase company Milo & Gabby sued in 2013 after finding Amazon Marketplace sellers using their imagery to sell cheap copycats.
The judge ruled in favor of Amazon in that case, but not without reservation. “There is no doubt that we now live in a time where the law lags behind technology,” he wrote, referencing the legal precedent that allows companies like eBay, Facebook, and Google to act as a platform for third-party transactions and advertisements without assuming liability. He posited that it will be up to Congress to enact new legislation to deal with the growing problem, but Schonfeld says case law could change the game even sooner than that.
In October, Mercedes-Benz’s parent company, Daimler AG, filed a trademark infringement suit against Amazon, alleging that the retailer “facilitates the sale of an exorbitant number of counterfeit and infringing goods,” including an array of knock-off wheel center caps bearing the automaker’s trademark. Adding to the potential confusion is the fact that the products were marked as “Ships from and sold by Amazon.com,” giving them a veneer of authenticity and implying that they have been vetted by the retailer.
To get the “sold by Amazon” mark, merchants sell products directly to Amazon through a wholesale program called Vendor Express, or the invitation-only Vendor Central. Unlike Seller Central, which welcomes third-party merchants, the vendor programs require that sellers own the intellectual property rights to their products, although Daimler and others allege that the retailer has failed to adequately screen the goods they’ve accepted. Some brands, like Nike, have chosen to go the wholesale route with Amazon in hopes of cutting third-party sellers from the equation, but critics of the programs say the retailer’s aggressive promotional pricing can end up hurting brands more than it helps, and its lower margins and longer payment terms may not be tenable for smaller businesses.
Amazon’s ever-evolving business model sets it apart from fellow internet giants. Facebook, for instance, isn’t renting 114 million square feet of warehouse space to store its users’ products; Google isn’t packing and delivering 2 billion third-party items a year. “It’s no longer just an intermediary,” says Schonfeld. “It’s a seller, it’s the receiver of the payment, it’s the processor, it’s the warehouser. The more it does, the more it opens itself up for liability for selling counterfeit and infringing goods.” Even if the Daimler decision fails to recognize this, he adds, eventually, another case might. (Amazon did not respond to a request for comment.)
“It’s no longer just an intermediary. It’s a seller, it’s the receiver of the payment, it’s the processor, it’s the warehouser. The more it does, the more it opens itself up for liability for selling counterfeit and infringing goods.
Still, this raises the question: If even multibillion-dollar corporations are struggling to fend off counterfeits, how are everyday shoppers supposed to protect themselves?
The CBP spokesperson offered the maxim that “if a deal on any product seems too good to be true, it probably is,” but, of course, this doesn’t help if you’re paying full price or getting only a nominal discount, and some sellers undercut authentic products by just a few dollars, knowing that price is the deciding factor for most Amazon shoppers. It also doesn’t help that counterfeiters can piggyback on brands’ official marketplace listings, taking advantage of their product photography and descriptions, and making it increasingly difficult for customers to discern who, exactly, they’re buying from. Merchants can also choose whether or not they want to advertise their geographical location, so even savvy consumers would have a difficult time avoiding those based in known knockoff hot spots.
“You can’t know based on a listing whether or not it’s a generic or a brand,” Chris McCabe, a former Amazon employee who now runs a consulting business for sellers, told Forbes. “You only know from opening it and using it.” And maybe not even then, if the fraudster does their job well.
Amazon has made no secret of its fashion aspirations. It’s projected to surpass Macy’s and T.J. Maxx owner TJX Companies in apparel sales this year, making it the second-largest retailer in the category after Walmart. By 2021, research firm Cowen and Company predicts that Amazon will generate $62 billion in annual apparel sales, or just over 16 percent of the industry total.
Expanding its footprint in fashion may mean dealing with an increasing number of knockoffs, however. In 2016, clothing, handbags, footwear, and jewelry comprised 53 percent of the more than $1.3 billion worth of counterfeit goods seized by CBP, up from 49 percent in 2015. The organization also launched an ad campaign this past summer warning travelers about the hidden dangers of counterfeits, including potential health hazards, support of organized crime and money laundering, and damage to the U.S. job market and economy. If Amazon wants to stay in the good graces of the premium fashion brands it has managed to court so far — not to mention those of its customers — it may need to come up with a more thorough system of vetting products and cracking down on violations.
Buying a knock-off no longer needs to be as intentional as trekking to Canal Street and following the chorus of “Fendi, Gucci, Prada” into the back room of a seedy storefront. These days it can be as simple — and seemingly innocent — as clicking “add to cart” on a T-shirt that costs $12 instead of $15, or splurging on a suitcase that, unbeknownst to you, is shipped from China. Shopping has never been easier, thanks largely to Amazon’s efforts to make every purchase more seamless than the last, but it’s also never been easier to fall into a trap.
This was originally posted on Racked.com