Amazon Marketplace Sellers

Counterfeit Products On Amazon Put Company In Difficult Bind

Resources & Self-Education   |   Wednesday, December 27, 2017

In January 2016, a family in Nashville, Tennessee saw their $1 million home burned to the ground after the battery in their toy hoverboard exploded.

In the summer of 2017, a California man alleges he experienced vision loss after viewing a solar eclipse with fake viewing glasses. A South Carolina couple also reported similar symptoms. 

Sales at a once-thriving moving strap business dropped 30 percent because of Chinese-made counterfeits that were offered at lower prices, eventually driving the business to near financial collapse. 

What do all these cases have in common? The products in question were purchased from e-commerce giants Amazon, eBay, and Walmart. 

The consumer advocacy organization, The Counterfeit Report, has found 26 million counterfeit products on e-commerce sites. Among its findings, the organization found fake designer perfumes for sale which contained antifreeze, urine, bacteria, and lead; fake Apple chargers and iPads that catch fire; smoke detectors that are nothing more than plastic boxes with push buttons; and bee pollen that contains methamphetamine.

But, in spite of sustained efforts to stop it, e-commerce firms have been unable to rein in burgeoning counterfeit sellers. Because it seems that the moment they shut down a fake seller, another one appears soon after selling the same products under a different name 

Huge Stakes For Amazon

For Amazon though, the stakes have never been higher. Amazon, with about $50 billion annually in third-party sales, offers a marketplace platform that’s easy to use, that’s fast and efficient, and makes it the leading platform to sell products online.

But, as news reports, complaints and lawsuits pile up about counterfeit products on its website, the risks increase until, “some . . . American . . . is going to kill himself with it (a fake product),” said Craig Crosby of The Counterfeit Report.

Not surprisingly, its reputation is taking a hit. Prestige labels have eschewed Amazon, choosing to sell on their own e-commerce sites. Birkenstock shoes, luxury brands like Coach and LVMH (Louis Vuitton and Christian Dior), the Swatch Group (Longines, Omega and Blancpain) all have refused to sell through Amazon, stating that the company isn’t doing enough to prevent and stop counterfeiters. 

A steady stream of damaging news reports about fake products, customer injuries, property and business losses, could leave Amazon open to a significant negative shift in buyer attitudes and behavior. Once it’s lost, customer trust is costly to rebuild. 

Be Careful What You Wish For

According to Marketplacepulse.com, an e-commerce industry observer and news source, up to 25 percent of Amazon’s marketplace is comprised of Chinese sellers - a $12.5 billion revenue stream for Amazon. 

Has Amazon created a monster that it can’t, or chooses not to fully control?

The genesis of the rapid escalation of Chinese fake goods on Amazon begins in 2015. Seeking to streamline the process of getting goods into its warehouses, the company registered with the Federal Maritime Commission which allowed Chinese firms to ship products directly to Amazon warehouses. 

Since then, the Amazon marketplace has become a perfect platform for fake products. And while Amazon has significantly increased its policing efforts, shutting down fake sellers, even taking legal action against some of them, its efforts have had little impact to slow its counterfeit marketplace.

Amazon’s Immunity From Patent Liability

In 2015, Amazon won an important legal challenge in the Western District of Washington. The court ruled that Amazon, along with other e-commerce firms, weren’t liable for patent infringed products sold on its platform. So long as Amazon takes action when it receives complaints, the company is free from patent liability claims. In effect, consumer safety, trademark and copyright laws were rendered useless. Even more troubling, the companies responsible were outside the jurisdictions of U.S. courts.

The Thorny Issue of Product Liability

Patent liability is one thing. Product liability is quite another. Consumers are fighting back. 

A South Carolina couple has filed a class action product liability lawsuit against Amazon alleging their eyesight has been impaired after watching a solar eclipse through a pair of fake eclipse glasses they purchased on Amazon.

The Tennessee family whose $1 million home burned down because a faulty battery exploded in a hoverboard, has filed a $30 million product liability suit against Amazon.

While each state governs product liability law, the law generally refers to liability of all parties involved in the manufacture, assembly, wholesaler, or a retail store. In these two cases, Amazon could be at risk as the retail entity.

Daimler / Mercedes-Benz Might Be A Game Changer

In October, Daimler AG, the parent company which own Mercedes-Benz, filed a lawsuit in U.S. District Court. Daimler alleges that Amazon breached the Lanham Act when the company sold and distributed fake Mercedes-Benz wheel caps. The Lanham Act is the main federal trademark law in the U.S., prohibiting trademark dilution, infringement, and false advertising.

At issue is the language of the Amazon listing featuring the wheel caps: “Ships from and sold by Amazon.com.” The listing, according to Daimler’s suit, suggests that Amazon was indeed the shipper and the seller of the fake wheel caps.

In the court filing, Daimler also states, “the sales at issue in this case are not merely third-party sales that are facilitated by Amazon in the Amazon Marketplace; rather the sales at issue are infringing products that are “shipped from and sold by Amazon.com.””

It’s far from certain that Daimler will win this case. But it could represent a gradual shift in the way Amazon, and other e-commerce platforms, are held accountable for the products sold on their platforms. Until then, third-party sellers and consumers are left to their own devices to navigate an increasingly risky marketplace.

This entry was posted on Wednesday, December 27, 2017 and is filed under Amazon Marketplace Sellers, Internet Law News.






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