Amazon, eBay & Walmart -- America's Counterfeit Marketplace

E-commerce sites flood the market with fake goods.

April 24, 2018 - Los Angeles, CA – Consumers would be outraged to find that their local grocery, drugstore or retailer was selling counterfeit goods and pharmaceuticals. But that reaction doesn't extend to e-commerce websites, including Amazon, eBay and Walmart, who are flooding the marketplace with inexhaustible supply of deceptive counterfeit, fake and replica products, mostly from China.

The problem; these e-commerce websites allow unvetted worldwide third-party sellers to inundate their websites with counterfeit goods, including dangerous and deadly items.

The consequence; one-third of online shoppers received an unexpected surprise last year - they unwillingly received a counterfeit product from U.S. and cross-border scam artists. Amazon and Walmart also operate as direct sellers of counterfeit goods, easily deceiving consumers into spending good money for bad products.

The Counterfeit Report®, a popular counterfeit awareness and consumer advocate, sent formal infringement notices authorized by the right’s holders to the e-commerce giants to remove listings for over 26 million counterfeit items offered or sold on their websites. Only eBay reports actual sales figures, which reflect that consumers purchased over 750,000 counterfeit items from listings targeted by The Counterfeit Report.

Alarmingly, the e-commerce websites did not notify buyers they received a fake after the receiving the counterfeit notifications, and have skirted secondary liability for enabling the sale of counterfeits.¹

• A U.S. Government Accountability Office ("GAO") undercover investigation of counterfeit consumer goods on e-commerce websites, including Amazon, eBay and Walmart, found that about 50% of the items it purchased were counterfeit. 
• Apple® reported that 90% of Apple products it purchased directly from Amazon (AMZN) were counterfeit, while Birkenstock, the global footwear icon, slammed Amazon as "an accomplice" of the fraudsters. The Recording Industry Association of America (RIAA) placed orders with Amazon and found that 44 of the 194 top CD's delivered were counterfeit. A Tennessee family is suing Amazon for $30 million after a counterfeit hoverboard caught fire and completely destroyed their $1 million Nashville home and personal property in 2016, injuring two of the family’s four children. About 50% of Amazon sales are not from Amazon, but from outside global sellers.
• eBay (EBAY) has migrated from the auction house of garage sale items to concentrating on adding global Marketplace sellers of new items at a fixed price. The Counterfeit Report purchased over 2,300 products from eBay sellers - all were counterfeit. Instead of embracing The Counterfeit Report's research, eBay chose to block The Counterfeit Report's test purchase accounts and, by extension, protections afforded eBay consumers. eBay General Counsel, Marie Oh Huber, also filed a Supreme Court amicus curiae brief endorsing a decision that would allow U.S. and cross-border "Marketplace" counterfeit sellers to skirt local and state sales-tax. eBay Marketplace sellers account for about 80% of eBay business.
• Walmart’s (WMT) decision to participate in online e-commerce sales comes with a cost - counterfeits are destroying Walmart's credibility. Walmart operates as both a direct seller of counterfeits and allows global sellers to list counterfeit products right next to authentic items, conveying Walmart's endorsement and the illusion they are from Walmart. Infringement notices sent to Walmart can languish for weeks before counterfeit listings are removed.

The items below offered on Amazon, eBay or Walmart are all counterfeit, including police badges, and eBay drug pill presses to make replica Oxycodone, Alprazolam and Xanax

(Photo: ©The Counterfeit Report)

Row 1 - Monster® never made a Tron model headphone. Supra® never produced a "Justin Bieber" model skateboard shoe, and the Drew Technologies® Mongoose® Pro vehicle diagnostic interface cable was never made in purple. Vans® does not make or license the use of the VANS® trademark on iPhone 6,7 or 8 phone cases. Your life could literally be riding on this counterfeit vehicle suspension part. Group-A Autosports® never made the Skunk2® lower suspension control arm in the color shown. An automobile suspension part failure can cause a catastrophic accident with fatal consequences to those in, and around, the counterfeit equipped vehicle.

Row 2 - Authentic Dr. Numb is not made in the 10g size shown here. Counterfeit Dr. Numb® 5% Lidocaine Cream submitted for ingredient testing did not contain any Lidocaine as indicated, but Tetracaine, a potentially fatal drug. Composite Resources, Combat Application Tourniquet® (C-A-T®), has been supplied to the U.S. Military, police, first responders and the public worldwide for the past decade but was never produced in tan. Counterfeit versions of the C-A-T tourniquet have catastrophically failed during actual life-saving applications. eBay listings offer drug pill press to make replica drugs including Oxycodone, Alprazolam, and Xanax. The Drug Enforcement Administration ("DEA") and FBI do not sell their badges on eBay, but counterfeits are available to terrorists, child predators and other criminals. CREE®, a global manufacturer of lighting products, does not make flashlights, yet they are sold on Amazon, eBay and Walmart.

Row 3 - The various micro SD® memory cards shown were never produced in the authentic product line in the capacities shown, or licensed by SD-3C, LLC, the right holder of the microSD® trademark. Pharmaceutical giant Novartis does not make its OTC anti-fungicide medication, Lamisil® in the liquid form shown, but sold on Amazon and eBay.

"Counterfeiting and piracy continue to grow at an astounding rate” states a 2017 report "The Economic Costs of Counterfeiting and Piracy"² commissioned by the International Trademark Association (INTA) and the International Chamber of Commerce (ICC), Business Action to Stop Counterfeiting and Piracy (BASCAP) unit. The report forecasts the total economic value of counterfeit and pirated goods will grow to $2.8 trillion by 2022. The report also identifies the significant global impact on employment and net job losses, reported at 2 to 2.6 million jobs for 2013, and projected to rise to 4.5 to 5.4 million job losses by 2022.

Everyone knows selling counterfeits is illegal, yet through huge legal loopholes, and virtually immune to prosecution, IP laws and safety standards, e-commerce websites continue to sell counterfeits and avoid prosecution. Companies that facilitate criminal activity and profit from dishonest sales which impact consumer safety, jobs and public trust create a public perception of deception with impunity.

Footnotes:

⁽¹⁾ In a devastating blow to manufacturers and consumer protection, the U.S. Court of Appeals upheld a U.S. District Court decision by Judge Ricardo S. Martinez excusing Amazon from liability in the sale of counterfeit items on its website. (Milo & Gabby, LLC. v. Amazon.com, Inc.)

⁽²⁾ THE ECONOMIC COSTS OF COUNTERFEITING AND PIRACY
The report was prepared for The International Chamber of Commerce Business Action to Stop Counterfeiting and Piracy unit (ICC BASCAP) and The International Trademark Association (INTA)
January 2017
Frontier Economics, Ltd.