Can Amazon and Its Marketplace Rivals Fix Their Fake Stuff Problem?

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Indian Retail News

April 11, 2018

Since Amazon first created the Marketplace to take on eBay, the e-tailer has brought into its fold and onto its website millions of third-party sellers.

By 2016, third-party goods accounted for half of all merchandise sold through the site. Credit Suisse has put Marketplace’s sales at $135 billion, and that could expand $259 billion by 2020, according to figures cited in Entrepreneur magazine.

That’s a lot of stuff. It’s a massive river of stuff, as the company’s name aspires to. And into that massive river of goods, by many accounts, pours a steady stream of counterfeits and knockoffs.

As attorneys for Daimler AG, owner of the Mercedes-Benz brand, said in an October suit against Amazon, “Amazon sells and/or facilitates the sale of an exorbitant number of counterfeit and infringing goods” because of the “lack of effective regulation.”

Amazon has a strict anti-counterfeit policy and has recently taken new steps to address the issue. And its third-party platform certainly isn’t the only one that has been infested with fakes. Investigators have long decried the problem on eBay, too, and Alibaba is famous for the problem—Jack Ma even acknowledged counterfeits were the “cancer” of the Chinese e-commerce site.

But Amazon has, by far, the largest marketplace domestically, with the biggest impact on commerce. As such, it has drawn fire from some of the world’s most known brands, and plenty of small ones too, over what they say is a proliferation of counterfeits onto the site. Brands and investigators have long said Amazon and its fellow e-commerce marketplace operators do little to prevent counterfeit sales, leaving the brands to try to protect themselves in an often sketchy online world.

43% fake

Counterfeits are a booming business. Trade in pirated and counterfeited intellectual property accounted for $461 billion in 2013, or about 2.5% of all trade, according to the International Trademark Association. By 2020, the figure could reach nearly $1 trillion, the association said. (For comparison, the entire global apparel industry is currently worth about $3 trillion in sales, according to FashionUnited Group.)

Congress recently asked the Government Accountability Office to look into the flow of counterfeits into the country. The GAO found that “growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products.”

The agency conducted its own investigation, ordering branded shoes, travel mugs (namely the popular Yeti brand), cosmetics and phone chargers. Staff made nearly 50 purchases from among the online world’s largest marketplaces for third-party sellers: Amazon, Walmart, eBay, Sears Marketplace and Newegg. The agency then verified the authenticity of those products with the manufacturers.

The sample size was modest, but the findings were striking: Nearly 43% of the products they bought were counterfeit, GAO said in a January report.

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