Amazon Moves to End Scourge of Fake Goods on Its Platform

(The Washington Post) -
(Amazon.com Inc)

Merchants have long complained that Amazon’s lax policing of counterfeits has cost them sales and compromised their brands, leaving customers to figure out whether the box on their doorstep actually contains what they ordered or a shoddy replica. The retailer aims to fix that — in part by giving brands the power to flag knockoffs and fast-track their removal from its online marketplace.

Amazon on Thursday unveiled “Project Zero,” which will allow participating brands to use a self-service tool to take down counterfeit listings. The initiative streamlines a process that required brands to make a report, then wait for Amazon to investigate and take action. The tool is currently available only by invite, but Amazon said it plans to open it up to other brands soon.

“This provides brands an unprecedented ability to directly control and remove listings from our store,” the company wrote in a press release. “This information also feeds into our automated protections so we can better catch potential counterfeit listings proactively in the future.”

It’s an unprecedented move for Amazon, which has come under fire — especially from major brands — for not taking a more active role in fighting counterfeits. Though Amazon prohibits the sale of bogus goods on its platform, the e-commerce giant has been accused of reaping the rewards of those sales while shifting blame to the third-party merchants that sell them.

Amazon’s massive third-party marketplace has long been a virtual Wild West, partially due to the ease of entry. Merchants can register on Amazon with contact information, a business name and basic financial information like a bank account and credit card.

Such merchants represent a massive share of Amazon’s business; in 2017, more than half the products sold on the site came from such sellers according to a letter from chief executive Jeff Bezos, published in April. (Bezos owns The Washington Post.) As Amazon’s marketplace has been flooded with overseas merchants and manufacturers, it’s made it tougher to keep tabs on sellers peddling fake goods.

The Counterfeit Report, advocacy group that works with companies to stop the sale of counterfeit products, says on its website that an estimated 13 percent of all products sold on Amazon are fake. The group says e-commerce is an ideal means of distribution for counterfeit products.

The reputation for halfhearted enforcement has cost Amazon business, too, particularly from luxury brands. Birkenstock yanked its footwear from Amazon in 2016, complaining the glut of lower-priced knockoffs on the platform was hurting its brand. Daimler, the German automaker and parent company of Mercedes-Benz, accused Amazon of allowing the sale of fake Mercedes-Benz wheel caps in a November 2017 lawsuit.

Nick Hayek, chief executive of Swiss watchmaker Swatch Group, also has slammed Amazon, saying Chinese rival Alibaba was more committed to fighting fakes. Swatch had been in talks to sell some of its higher-end watches on Amazon, but the deal fell apart when Amazon refused to agree to proactive measures against counterfeits and unauthorized retailers, the Wall Street Journal reported.

“They refuse to enter into discussion because they have, I think, 10,000 … lawyers that say, ‘Please, we at Amazon, we should not enter into anything that should force us to fight against fakes,'” Hayek said in an April interview with CNBC.

The Project Zero rollout comes on the heels of Amazon’s first public acknowledgement of the “risk factor” that unlawful third-party merchants pose to its business. In early February, Amazon acknowledged it “may be unable” to keep sellers from making money off counterfeits, according to a SEC filing.

“To the extent that any of this occurs, it could harm our business or damage our reputation and we could face civil or criminal liability for unlawful activities by our sellers,” Amazon wrote in the filing.

As part of Project Zero, Amazon has been testing automated enforcement measures that use information from brands, like logos and trademarks, to hunt down fake goods in its marketplace. The Seattle-based company claims the automated protections “proactively stop 100 times more suspected counterfeit products” than responding to individual reports does.

Project Zero also includes a “product serialization” tool that generates unique codes for each individual unit of product. The codes can then be scanned when goods make it to Amazon warehouses to ensure they haven’t been duplicated. But it’s up to brands to place the codes on their goods during the manufacturing process, and codes cost one to five cents a pop, depending on volume, according to reporting from the Wall Street Journal.

“Amazon’s product serialization service has been a game changer for us,” Kenn Minn, chief executive of mobile accessory company Kenu said. “We are excited to have this self-service counterfeit removal tool for the U.S. marketplace and consider this to be an insurance policy.”