- Amazon cracks down on a creative counterfeit scheme with new lawsuit
- The scheme
- Influencer woes
- Amazon’s investments to curb counterfeiting
- ‘Deterring The Ill-Intentioned’: Amazon Ramps Up Efforts To Screen Out Bad Actors On Its Marketplace, But It Still Needs To Do More
- But it’s still not enough
- More hurdles are needed
- The Amazon Brand Protection Services You Need in 2021
- Registering and Close Monitoring of Your Accounts
- Proactive Steps to Amazon Brand Protection
- Efficient Solutions to Ward-Off Hijackers and Counterfeiters
- Final Thoughts
Amazon cracks down on a creative counterfeit scheme with new lawsuit
Amazon.com Inc. has taken another step in a series of efforts to curb the sale of counterfeits on its marketplace. The ecommerce giant earlier this month filed a lawsuit alleging a group of 13 Amazon sellers and influencers worked together to sell fake goods and engage in false advertising.
But in this instance, the alleged perpetrators got extra creative in their attempts to skirt Amazon’s counterfeit detection tools.
The lawsuit, filed in the United States District Court for the Western District of Washington, says two of the 13 defendants, Kelly Fitzpatrick and Sabrina Kelly-Krejci, conspired with Amazon sellers to evade Amazon’s anti-counterfeiting protections by promoting counterfeit products on social media platforms Instagram and TikTok as well as their own websites. Amazon is No. 1 in the 2020 Digital Commerce 360 Top 1000.
Here’s how the scheme worked according to Amazon’s 114-page suit: The two influencers posted side-by-side photos of a generic, non-branded product and a luxury counterfeit product with the text, “Order this/Get this.
” “Order this” referred to the generic product falsely advertised on Amazon, such as a basic black men’s wallet and “Get this” referred to the counterfeit luxury product, such as a fake Gucci quilted wallet, the consumer would actually receive after ordering the generic item.
Fitzpatrick and Kelly-Krejci—and the sellers they coordinated with—attempted to evade Amazon’s anti-counterfeit protections by posting only generic products on Amazon, while using social media to let shoppers know that they would actually receive a counterfeit version of a luxury item. Fitzpatrick and Kelly-Krejci also posted numerous videos describing the alleged high quality of the counterfeits they promoted, Amazon says.
For example, in one video promoting a counterfeit Gucci belt, Fitzpatrick celebrated a false “Made in Italy” designation of origin, according to the lawsuit. While in these cases many consumers knew they were getting fake goods, Amazon’s aims to curb counterfeiting on its site to protect consumers who may not be aware an item is fake as wells as protect brands.
”These defendants were brazen about promoting counterfeits on social media and undermined the work of legitimate influencers,” says Cristina Posa, associate general counsel and director for the Amazon Counterfeit Crimes Unit.
“This case demonstrates the need for cross-industry collaboration in order to drive counterfeiters business.
Amazon continues to invest tremendous resources to stop bad actors before they enter our store, and social media sites must similarly vet, monitor, and take action on bad actors that are using their services to facilitate illegal behavior.”
Amazon in June 2020 launched its Counterfeit Crimes Unit, a global team with experts experienced in investigating and bringing legal action against bad actors.
Fitzpatrick was previously a member of the Amazon Influencer Program, but after Amazon detected her counterfeiting activities, she was removed from the program, Amazon says.
The Amazon Influencer Program allows influencers with large followings and who post frequently on social media or blogs to create their own page on Amazon to showcase the products they recommend to their followers on their blogs, social media or websites and collect commissions on sales of those goods.
After being removed from the program, Amazon claims Fitzpatrick continued to advertise counterfeits on social media sites and directed followers to Amazon to buy. Amazon also says it detected and blocked a similar scheme by Kelly-Krejci. The defendants also began directing their followers to other ecommerce websites to purchase fakes, Amazon says.
“Amazon strictly prohibits counterfeit products in its stores, and in 2019 alone, invested more than $500 million to protect customers and brands from fraud, abuse and counterfeit,” Amazon says in a release announcing the lawsuit.
Amazon has filed a series of lawsuits recently against counterfeiters in an effort to clean up its site, including joint lawsuits with Italian luxury fashion house Valentino, cosmetics retailer KF Beauty and JL Childress, a seller of travel products for parents.
James Thomson, chief strategy officer at Amazon marketing agency Buy Box Experts, says this most recent move is yet another effort by Amazon to deal with counterfeit problems on its site. Amazon has made a push to be more stringent against fakes on its site after it warned investors early last year in its annual report of its counterfeit issues.
“We also may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies,” the report notes. “Under our A2Z Guarantee, we reimburse buyers for payments up to certain limits in these situations, and as our third-party seller sales grow, the cost of this program will increase and could negatively affect our operating results.”
That 2018 annual report is reportedly the first time Amazon mentioned the word ‘counterfeit’ in a regulatory filing.
What’s more, counterfeits will ly only become more difficult for Amazon to police as the marketplace continues to grow third-party sales. 60.5% of sales on Amazon are from third-party sellers while 39.
5% stem directly from Amazon selling its own goods, according to Digital Commerce 360 estimates.
In this particular case, experts say the individuals were ly targeted because of their brazen approach.
“There is a lot of black hat stuff going on, but most of the time the mouse [counterfeiters] outruns the cat (Amazon),” Thomson says. “These influencers must have been pretty obvious to be caught.”
Mike Begg, co-founder of AMZ Advisers, which helps manufacturers and brands sell on the marketplace, says Amazon is beginning to push its influencer programs more and wants to weed out bad actors as it grows these initiatives.
One example of its increasing focus on influencer-type marketing is its Amazon Live livestreaming service that allows sellers to “promote discovery” of their products by hosting their own livestreams for customers on Amazon, Begg says.
It’s akin to an HSN or QVC within Amazon.
“I believe the lawsuit is being brought by Amazon against these individuals to prevent future influencers from trying to help unethical sellers manipulate the platform,” he says. “It appears that these influencers were targeted because of how blatant they were in the marketing of counterfeit goods and that they were previously part of the Amazon Influencers Program.”
Still, despite Amazon’s increased diligence, many black-hat workarounds are bound to slip through the cracks on such a massive marketplace, Begg says.
“There will always be bad actors trying to play around Amazon’s Terms of Service. We’ve seen this before with fake product reviews and review hijacking,” he says. “There is almost an unlimited amount of ways for bad actors to use black hat tricks within the Amazon platform to move their products.”
Amazon’s investments to curb counterfeiting
However, Begg adds that increased attention from regulators both in Europe and in North America is prompting Amazon to take the counterfeit issues more seriously and spend ample time and money to curb them.
“Counterfeit products previously seemed a fire Amazon was willing to let burn,” Begg says. But recently, he says, Amazon has continued to roll out new programs to fight counterfeit products.
Those programs include:
- Amazon Brand Registry: Designed for brands that hold the trademarks on their products, the service allows registered brands to complain, for example, when an Amazon seller offers a counterfeit product using a brand’s registered ASIN, or Amazon Standard Identification Number, the ID Amazon uses to display identical products from several sellers. The brand can also complain if a seller of one of its products, such as a handbag, uses improper product descriptions or images, or outdated logos. Amazon can prevent the violator from selling that handbag using the ASIN for that product, making it less ly that the seller would show up if a shopper searches for that product. One way to use Brand Registry to fight unauthorized sellers on Amazon is for the brand to make a small variation in a product, even if it’s just to its label or warranty. That way the brand can complain that a seller listing a product without the minor change is guilty of trademark infringement and ask that the seller be removed from that ASIN. Amazon says more than 350,000 brands are enrolled in the free service.
- Transparency: This service allows brands to add unique codes to their products or packaging to identify each unit they produce. These codes enable Amazon to inspect and authenticate every unit enrolled in the Transparency program and detect and stop counterfeits before they are shipped.
- Project Zero: Project Zero uses machine learning to scan products and remove suspected counterfeits. Brands provide key data points about themselves such as trademarks and logos and Amazon’s Project Zero technology scans more than 5 billion daily listing update attempts, looking for suspected counterfeits. More than 10,000 brands are enrolled in the program.
While some consumers seek out ‘dupes’ on Amazon.com, experts say these anti-counterfeiting efforts are mainly focused on improving the customer experience as most shoppers don’t want to be fooled into purchasing fake goods.
That focus on the customer is made clear in the boilerplate messaging included in every Amazon press release: “Amazon is guided by four principles: customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.” The customer comes first.
“At the end of the day, customers having negative experiences because they’ve purchased a counterfeit good is the main issue that Amazon wants to avoid,” Begg says. “Not so much to help the brands themselves.”
‘Deterring The Ill-Intentioned’: Amazon Ramps Up Efforts To Screen Out Bad Actors On Its Marketplace, But It Still Needs To Do More
Amazon AMZN is trialling two new programs to screen new sellers on its online marketplace, acknowledging a problem with fly-by-night operators, fraudsters, and counterfeiters. These programs, both of which are only active in very specific markets, are a good start. But there is much more the retail giant could be doing to protect both brands and customers.
Rick Case, CEO and Founder of Nite Ize at a shipping and distribution center in Boulder. The company … [+] used an International Trade Order to force Amazon to quickly stop fakes and copies of its popular Steelie phone mount. June 15, 2018 in Boulder, Colorado. (Photo by Joe Amon/The Denver Post via Getty Images)
Denver Post via Getty Images
One method, which was rolled out on a pilot basis in select markets, requires new sellers to get verified through a video call. According to Techcrunch, more than 1,000 sellers had used the video verification program as of April.
“As we practice social distancing, we are testing a process that allows us to validate prospective sellers’ identification via video conferencing.
This pilot allows us to connect one-on-one with prospective sellers while making it even more difficult for fraudsters to hide,” Amazon said in a statement to Techcrunch.
Amazon is also currently advertising three positions for a ‘Seller Onboarding Associate’ whose primary duties include “collecting the required information and documentation and conducting the relevant verification” before the merchant can start selling on Amazon. The verification and onboarding tasks the Associate is required to do could take place on Amazon’s premises, or at the seller’s place of business. There are currently job openings in New York, Santa Monica, and Seattle.
Seller verification is something that Amazon has largely automated in the past, relying on screening tools to prevent rogue merchants from defrauding customers.
But for brands selling on Amazon and many customers who’ve received fake products, it's clear that primarily relying on machine-led systems was not enough.
Hand-to-hand combat is needed, and bad actors need to know the risk of being caught is high.
But it’s still not enough
The problem with these programs is that they are very limited in their scope. Could three Seller Onboarding Associates meet every new seller in the U.S. in person? Unly, given that the research company Marketplace Pulse counts 70,000 new sellers on the Amazon US marketplace in 2020 so far.
The most notorious source of counterfeiting and fraud comes from China. Last year, the Wall Street Journal discussed Amazon’s heavy recruitment of Chinese sellers as being a significant source of this activity. It’s unclear if any additional hurdles have been created for new Chinese-based sellers.
Amazon needs to do what they do best: scale up their onboarding and verification programs. And fully automating it is not the answer.
I have encountered many devastating examples of false-positives caused by Amazon algorithms recently: products being suspended for incorrect price-gouging claims during the pandemic, and new merchants having their accounts suspended because competitors vengefully reported their products as being counterfeit. While Amazon does need to scale up its detection systems, they also need more human intervention and thoughtful judgement calls.
More hurdles are needed
Video screening and in-person visits need to be supplemented with other hurdles that will deter and catch bad actors.
I have written previously about a small change that will put more pressure on merchants, one which is already in place in most international Amazon markets but confoundingly, not in the U.S.
market: simply publishing the seller’s physical address and business details to their seller page. Doing so would put more public accountability on sellers and allow customers to do their own due diligence.
Sunlight is a great disinfectant.
Here are some other things that Amazon could be doing.
- Requiring proof of physical address by sending direct mail with a code that needs to be verified within 30 days. Google GOOGL does this very well with their system of verifying new businesses for Google Places. Each Amazon seller should have a unique address – address matches would be red flags since some sellers will be using mail forwarding services. Not a deal-breaker on its own, but all accounts with matching addresses could be more closely investigated.
- Validate business phone number through an automated call
- Additional verification through a D-U-N-S number if its a business registered in the U.S.
- Follow through with Amazon’s long-held requirement for product liability insurance. This is a requirement of all sellers, but I have never heard of Amazon actually calling for proof of it. The cost of product liability insurance is not usually a substantial expense to a genuine retail business, but it’s certainly a barrier to entry for fly-by-night operators who are only out to make a quick buck.
None of these should be deal-breakers on their own, but data points that Amazon could use to investigate outliers. All of this should be done without telling the new seller about the verification tools. This will catch bad actors who supply false information.
All these things sound pretty straight-forward and scalable to enact, especially for one of the most powerful companies on earth. In 2019, Amazon spent $500MM on anti-counterfeiting programs and removing bad actors.
Relative to their gross merchandise volume, this is a small amount, all while public concern over counterfeits and fraud seemingly escalates.
It begs the question, does Amazon actually want to fix this problem, or do the 2,527 sellers joining the marketplace every day actually present more opportunity?
The Amazon Brand Protection Services You Need in 2021
In life, we often focus on the main ideas or the centerpiece that people see when building something. We spend hours choosing the chandelier that will not only light up the house but catch the attention of any visitors.
We focus on the color and design of the building’s facade. We want all the visible details of our lives presentable that we sometimes forget to give the same attention to what’s behind the curtain, which is just as important.
The same goes for Amazon. It is easy to get caught up in the goal of making your brand and product known and how your images and ads should appear.
But while doing this, many people tend to forget Amazon Brand Protection, which is as essential as any other task on your plate. Brand registry in Amazon can make or break your business.
Not making use of it is building a beautiful (and expensive) house without purchasing homeowners insurance.
If you haven’t enrolled in the Amazon Brand Protection Program yet, 2021 is the perfect time to do so! Below are the Amazon Brand Protection services you need to get you ahead of the competition.
Registering and Close Monitoring of Your Accounts
While you’re busy perfecting your products and making sure you live up to your customers' expectations, an Amazon Brand Protection team will begin enrolling your account. Once you have your trademark, copyright, and intellectual property certification from the Intellectual Property Office, your partner agency will handle the next stretch of the process for you.
After registration, your Amazon Brand Protection team will maximize the services provided by Amazon. Along with these resources, agencies also have their own tools to check for hijackers and counterfeits.
These are the following black hat tactics your Amazon Brand Protection team will consider as red flags. With close monitoring, they can call out the bad actors and inhibit further damage to your business.
- Fake comments and reviews, which can affect your product listing ranking
- False claims submitted on Amazon
- Unauthorized reselling of your products
- Selling counterfeits under your name, which can ruin your brand and product reputation
- The activity of your dormant accounts
As you can see, some dire practices include spreading fake news and claims about your product.
These bad actors have found a way to use Amazon’s rules and regulations to get legitimate sellers suspended instead of protected.
These activities, when detected by Amazon bots, will garner you an Amazon suspension, so dealing with the wrongdoers as soon as you catch them is vital to ensure that your business stays operational.
Proactive Steps to Amazon Brand Protection
There are three primary Amazon Brand Protection services available once you are registered to the Amazon Brand Protection Program.
Securing copyright, trademark, and intellectual property certifications can take ages. Hence, Amazon offers IP Accelerator, which allows you to partner with law firms and get access to lawyers who can focus on getting your certificates immediately.
Nonetheless, Amazon allows sellers to register their accounts to the Amazon Brand Protection Program even if they haven’t received proof of copyright, trademark, and intellectual property. To do this, you can upload documents proving that you are in the process of procuring your certification.
2. Brand Registry
Once you are registered, first among the Amazon Brand Protection services you can enjoy is the opportunity to build your brand extensively. You can do this through the different Sponsored Ads available.
Amazon allows registered accounts to use the Sponsored Brand. Here sellers can enjoy the following benefits: logo features, creating catchy headlines, and even showing as many as three products.
If you are going to use Sponsored Products for your individual and bundled products, you can freely use your logo. Your brand logo will serve as proof that you are the authentic seller of your product.
Moreover, suppose you and your Amazon Brand Protection team see counterfeits of your product. These hijackers are easier to catch because of the lack of a logo, and they also lack copyright, trademark, and intellectual property rights to the product they are selling–which means you can take action against them.
3. Transparency codes
Another advantage of a brand registry in Amazon is getting transparency codes for all of your products. Transparency codes are codes on your products that customers can scan for authenticity.
These codes will set you apart from counterfeiters, and you can include this in your product descriptions.
Let your customers know that products without the codes are counterfeit, and encourage them to report the fake items existing in the market.
Efficient Solutions to Ward-Off Hijackers and Counterfeiters
Consider the Amazon Brand Protection services above as your business’ defences; these are preemptive features you build. But what happens when you’re in the midst of a problem? We will now discuss the measures you and your Amazon Brand Protection team will take to stop hijackers and counterfeiters from destroying your account.
Once your Amazon Brand Protection team catches counterfeiters and hijackers, they will maximize Amazon Brand Protection’s Project Zero. This initiative from Amazon allows sellers to contact Amazon wrongdoers directly through a cease and desist email.
However, don’t think that you’ll be sending the usual email. The end goal of this is to stop counterfeit sellers from operating, and so your email should contain a very strong message.
Tell them that if they do not stop with the unauthorized selling or the selling of fake products, you will be compelled to take legal actions.
It is your Amazon Brand Protection team’s job to create this email. Agencies usually have their own templates, so it would take them no time at all to send the warning. With the powerful message of your email, counterfeiters and hijackers will hopefully stop their actions. If not, you and your team always have the choice of escalating the incident to Amazon for further investigation.
Amazon sellers are forecasted to rise year after year, and this brings about tougher competition. Along with the increase of competitors is the addition of individuals who resort to dire practices to succeed. As you continue to make your product competitive to the market, ensure that no distractions happen through registering for the Amazon Brand Protection Program.
Seller Interactive can be your partner Amazon Brand Protection team. We will monitor your account, execute immediate measures to stop dishonest practices, and ensure that you will make the most all the Amazon Brand Protection services there are.
Contact us at 1-800-820-3746, or visit our website and get to know more about us.