UPDATED: Amazon Hopes to Restore Consumer Confidence with $1.2B Anti-Counterfeit Initiative
Update 04/21/2023: 📢 In an effort to tackle organized crime on its platform, Amazon has rolled out its Anti-Counterfeiting Exchange (ACX) program. The initiative aims to assist brands in identifying and tracking counterfeit goods sold on Amazon.com.
Online marketplaces, including Amazon, have long struggled to keep counterfeiters at bay and prevent fake products from infiltrating their supply chain.
ACX is modeled after data exchange initiatives used by credit card companies to detect fraudsters and their methods. Under this program, participating stores can:
- Report bad actors to Amazon anonymously
- Use the ACX database to find stores or individuals that have been identified by other stores as counterfeiters
The strength of ACX lies in the ability of participating stores to share account information about detected counterfeiters.
Once the information is shared, all other stores involved in the program can be made aware of the counterfeiter and take action to stop them from selling on the platform. However, each participant retains autonomy to make independent decisions regarding the use of the information shared through ACX.
Since the program’s initial rollout in 2021, hundreds of matching accounts, in which the same counterfeiter attempted to create selling accounts on Amazon and at least one other store, have already been identified.
In addition to ACX, Amazon is collaborating with the US Customs and Border Protection on a new program that will help identify and target low-value cargo that may contain counterfeit products or breach other regulations.
Amazon recently released its latest Brand Protection Report, which outlines its efforts to curb the sale of counterfeit goods to consumers worldwide.
The report highlights specific actions taken by the eCommerce titan to prevent the listing of knock-offs for sale. However, there are still lingering doubts about whether Amazon is truly committed to eradicating counterfeits and bad actors that it has historically neglected which caused big brands like Nike and Birkenstock to leave the platform a few years ago.
Billion-Dollar Anti-Counterfeiting Initiative in 2022
To prevent a potential mass exodus of sellers (and consumers) over growing piracy on Amazon, the tech giant had increased its efforts to protect brands by investing in cutting-edge technology and skilled personnel.
In 2021, Amazon invested $900 million into anti-counterfeiting efforts that saw the disposal of 3 million fake products, 170 counterfeiters sued in US courts, and 600 individuals sued or referred for investigation in several countries.
In 2022, the company poured $300 million more into its anti-counterfeiting program, showing its continued commitment to fighting fraudulent activities on the platform.
With an investment exceeding $1.2 billion, Amazon has employed more than 15,000 professionals dedicated to safeguarding customers, brands, selling partners, and the store from counterfeits, abuse, and fraud.
This crusade against bad actors has led to:
- The seizure of more than 6 million counterfeit products that were being offered for sale on Amazon, doubling the number of the previous year.
- A 1.7 million decrease in the number of bad actor attempts to create new seller accounts, from 2.5 million attempts in 2021 down to just 800,000 in 2022.
- Significantly fewer notices of infringement submitted by brands, which could be, in part, attributed to Amazon’s efforts to address sellers that have purportedly issued fake takedown requests on competitors.
- Over 1,300 criminals sued or referred for investigation in the US, UK, EU, and China.
At a time when the fight against counterfeiters has shifted largely to online and social media platforms, Amazon’s reported wins are quite significant. TikTok, in particular, has become a growing source of counterfeit products.
According to the US Chamber of Commerce, the global counterfeit trade is estimated to be worth over $500 billion annually. Some estimates also show that up to 10% of branded goods, especially luxury products, sold in the market may be fake. It is also believed that 80% of consumers have unknowingly handled falsified goods.
Since its inception in 2020, Amazon’s Counterfeit Crimes Unit (CCU) has been working directly with authorities to identify and seize dupes found in Amazon and factories where they’re being manufactured.
For instance, CCU partnered with several Public Security Bureaus in China to carry out factory raids that led to the confiscation of more than 240,000 fake products. The report also mentioned additional joint efforts with law enforcement in Germany and London.
While these programs are a step in the right direction, for many victims of counterfeiting and abusive practices on the platform, the damage has been done and Amazon may be a little too late in trying to win their trust back.
For years, brand owners have struggled with counterfeit products and have tried various methods to address the issue.
- Chanel and Christian Louboutin sued Amazon and counterfeiters over knock-offs being sold on the retail site. In contrast, Cartier opted to collaborate with the tech giant in its effort to bring counterfeiters to justice.
- Birkenstock and Nike cut ties with Amazon over the same unresolved counterfeiting issue.
- Small businesses opting to enroll in Amazon Brand Registry for brand protection. Others also hire third-party service providers to help them comb through product listings and identify unauthorized sellers.
Yet despite these efforts from both Amazon and sellers, counterfeits still run rampant on the platform. Why?
“Amazon does not do audits of distributors that claim to be selling original products. It has relied on companies and consumers to report counterfeit products to shut down the [unauthorized] seller. But then it’ll just pop up somewhere else.”
Amazon’s behemoth size may have contributed to its poor ability to police itself, which then gave rise to its huge counterfeiting problem today.
Despite having a safety team in place, for example, lots of fakes or banned items did still slip through, as reported by Wall Street Journal in 2019. Similarly, in late 2021, Senate investigations also show that Amazon has not been quick to help small businesses take down fake listings.
So perhaps, until Amazon becomes more effective in verifying new sellers, checking the authenticity of goods that come and go, and defending sellers’ Intellectual Property (IP) rights, expect a large volume of counterfeiting activities to continue. Here’s to hoping that their investments in recent years will continue to show improvements in this arena.
Increased regulatory pressure from antitrust authorities will also be crucial in keeping Amazon themselves from creating knockoffs of successful products. Riding that distinction between counterfeit and knockoff may be legal, but is it ethical?
As reported, the tech giant opposes a lot of antitrust bills seeking to end self-preferencing in digital markets such as S.2992, sparking doubts as to whether Amazon is really serious about its road to zero counterfeit program and whether knockoffs are included in protections that should be awarded to brands on Amazon.
That said, brand protection could, additionally, be a move by Amazon to slow down counterfeiting activity on the site to minimize Senate scrutiny, and that completely cleaning up the marketplace is a lofty, and possibly, insincere target.
The good news is that, whatever the motives behind the action, improvements are being made. However, we can’t expect change overnight or full eradication.
Counterfeiters are not going to go away anytime soon. It would be wise to maintain a proactive approach to protecting your brand, whether it’s by registering your IP, enrolling in Brand Registry, or working with service providers to identify unauthorized retailers and fake reviews.
Marketplace sellers will continue to play whack-o-mole. There just may be fewer moles to whack. Let’s hope the trend continues.