Fraud and counterfeiting of products: How Amazon is fighting against it

Dusseldorf The evidence for the fraud is clearly documented: The seven defendants from two Chinese companies are said to have counterfeited accessories from the popular GoPro camera brand on a large scale and sold them on the Amazon marketplace. Now they are standing before the judge in the Seattle District Court, facing severe penalties.

The company owes the fact that GoPro was able to put an end to these fraudsters to a troop of special investigators working for Amazon. The Amazon Counterfeit Crime Unit (CCU), founded a year ago and made up of former FBI agents, cybercrime experts and data analysts, is hunting down the criminal gangs who are flooding the marketplace with counterfeit products. And it can now report its first successes.

Brand manufacturers were able to open 64 legal proceedings last year on the basis of the CCU’s investigations against counterfeiters, reported Amazon this Monday. These include luxury labels such as Valentino and Salvatore Ferragamo, the toy companies Dutch Blitz and Asmodee or the cool box manufacturer Yeti. “The first successes are very encouraging,” says Kebharu Smith, the head of the CCU, the Handelsblatt.

Around 250 fraudsters have already been identified and the information handed over to the authorities. “It is so important that we create transparency here so that the web shops can protect themselves against the fraudsters in good time and so that the fraudsters realize that they have no easy game here,” says Smith, who previously worked as an expert on computer crime at the US Ministry of Justice has worked.

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It’s about gigantic sums. The OECD estimates that product piracy has an annual turnover of more than 500 billion US dollars worldwide. That is around 3.3 percent of world trade – or as much as Belgium’s gross domestic product.

Retailers and brands are putting pressure on Amazon

For these fraudsters, Amazon has created the perfect trading platform with its marketplace. Millions of traders have been able to sell their goods there largely uncontrolled for years. Hardly anyone seemed to be interested in whether they obeyed the law, whether the goods were safe, whether they even paid sales tax.

But now there is great pressure from governments and the public. The company, which has been led by Andy Jassy since July, not only has to fear state regulations that could even go as far as breaking up. Amazon’s reputation among customers is also at stake. Counterfeits destroy customer confidence – and that is the most important currency in e-commerce.

“The political pressure has increased to make the platform more responsible for fraudulent behavior by retailers,” observes Nils Zündorf, managing director of the Factor-a agency, which supports brand manufacturers in their business on the Amazon Marketplace. And what is at least as important for Amazon: The brand manufacturers also called for decisive steps.

Manufacturers and dealers in the USA have now joined forces and denounced in a report for Congress how they believe that online platforms are being flooded with counterfeit products. US retailers lost more than $ 54 billion in sales every year, according to a report by the Buy Safe America Coalition, which is supported by major retailers such as Walmart and Target.

Destroyed two million counterfeit products

The timing of the initiative is no coincidence. In Washington, legislative proposals are currently being discussed that will oblige platform operators to show more transparency and take on greater responsibility for third-party dealers. Similar legislative proposals are also being prepared in the EU.

In a statement, Amazon described the study as one-sided and stressed that the problem was not as big as it was shown. But in order to prevent further criticism, Amazon is now taking radical action and trying to prevent counterfeit products from being put on sale in the first place.

Last year, for example, the company sorted out two million counterfeit products from its warehouses and destroyed them. At the same time, more than ten billion presumably fake offers were blocked and not even allowed on the platform.

According to its own statements, Amazon used around 700 million dollars in 2020 to protect the platform from fraudsters. 10,000 employees are said to be busy preventing fraud. But Amazon mainly relies on algorithms and technical aids that are supposed to detect counterfeits.

Fraudsters bypass the technical hurdles

The group has introduced “Project Zero”, in which participating companies can remove counterfeit items from the platform themselves. So far, more than 18,000 brands have used this option. With the “Transparency” service, manufacturers provide their articles with special QR codes so that their authenticity can be clearly identified when the goods are received. Around 15,000 brand manufacturers have taken part in this program to date.

According to Amazon, just 0.01 percent of customers complained last year that they had bought a counterfeit product. But the proportion of products that made it through the controls on the platform is likely to be significantly higher.

It’s like the cat-and-mouse game: “The fraudsters are always finding new ways and technologies to get to our site and thus manage to get past the automated hurdles,” reports Amazon investigator Smith. And for precisely these criminal gangs his special unit CCU is responsible, which so far only employs 20 experts, but is to be expanded further.

“We use Amazon’s large database to identify the people behind the scams,” he explains. The detective work is based, for example, on the combination of IP addresses, log-in data, bank details and e-mail addresses. Important information is also provided, for example, by the time when certain accounts were opened and then closed again.

Influencers advertise product counterfeiters

The methods used by criminals are becoming more and more diverse. “In the past few weeks we have uncovered a fraud system in which social media influencers advertised fake luxury products and forwarded their followers directly to the sellers on the Amazon Marketplace,” says Smith.

In order to curb fraud effectively, Alexandra Poch, legal expert at the European Union Intellectual Property Office (Euipo), calls for even closer cooperation between brand owners, retailers and platforms in order to identify counterfeits before they can be offered. “That is the key to discovering the counterfeit products,” she explains.

This is exactly what Amazon manager Smith suggests. “We need closer cooperation in the industry in the fight against counterfeiters,” he emphasizes. “The criminals switch from one e-commerce store to the next and they don’t stop at national borders either.” Amazon has already started exchanging data and lists with fraudsters with other e-commerce retailers.

At the same time, however, Smith is calling for law enforcement agencies to be better staffed and for customs to work more closely with trading platforms. “If we exchange our data with customs in real time, we can identify the perpetrators early on and prevent the counterfeit goods from entering the country in the first place,” he explains.

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