Counterfeit overseas products sold online take a heavy toll on US businesses, consumers
There is an axiom that reads — never let a crisis go to waste. In this instance the crisis is a pandemic that has been extraordinarily challenging for communities and families. And unfortunately, it is criminals that are taking advantage of this crisis by flooding third-party marketplaces with counterfeit goods — much of it direct from China — that undermine legitimate U.S. businesses and put consumers in harm’s way.
Today, criminals are abusing the anonymity granted by online marketplaces like Amazon and Facebook to sell knockoff and often defective versions of consumer products — water filters, brake pads, N95 face masks, cosmetics, apparel, and toys. As Americans are buying more and more products online, the sale of illicit goods has surged unchecked on e-commerce platforms.
These imposters are inflicting serious pain — both physical and financial — on American consumers and businesses. Counterfeits are often made with shoddy materials or contain dangerous chemicals. In one instance, a toddler suffered permanent damage to her esophagus after ingesting a battery that popped out of a counterfeit remote control purchased online. Unfortunately, there are too many news stories to count about shoppers unknowingly purchasing counterfeit items that ultimately prove to be a danger in their homes.
The financial consequences of counterfeits are equally alarming but have largely gone under the radar. While these impacts may be harder to spot, they are significant and are devastating to legitimate American businesses. According to a recent study published by the Buy Safe America Coalition, the online counterfeit industry caused domestic retailers to lose out on nearly $54.1 billion in sales and it is responsible for nearly 283,400 lost retail jobs. And these are good jobs too, accounting for over $33.6 billion in wages and benefits to American workers.
American businesses deserve a far better hand than the one they are being dealt; they deserve the chance to compete fairly against other legitimate entities. But because of online marketplaces — and their lackluster approach to addressing counterfeits — they are competing against fraudsters whose business model is centered around deceiving American shoppers.
There is no doubt the increased sale of counterfeits is linked to the rise of online marketplaces. In 2019, over 59 percent of all goods seized by U.S. Customs and Border Protection (CBP), were being shipped by mail or international express consignment services, while about 23 percent arrived by ocean vessels. For intellectual property rights (IPR) seizures alone, over 90 percent were found in express and international mail shipments. The data shows a significant increase in these shipments began in 2014 when Amazon began to aggressively court Chinese sellers in response to Alibaba’s IPO.
The result is a counterfeit silk road of fakes, knockoffs, and often dangerous consumer goods direct from China. The bulk of counterfeit products to the U.S. come from the country and its dependent territories, which account for over 90 percent of all cargo with IPR violations — everything from the jewelry you wear to the batteries in your laptops. And while Amazon claims that it permanently bans thousands of accounts from China each year from its platform, the truth is, these con artists have managed an amazingly technical and painstaking workaround — they just change their name. For all its boasts about using technology to weed out fraudulent sellers, many illegitimate companies make a quick alteration to their name and they’re back in business on Amazon.
With U.S. businesses, workers, and consumers at risk, federal lawmakers need to approach counterfeits with the sense of urgency it clearly deserves. Namely, they should make it difficult for even the criminals and con artists to set up fake business accounts on e-commerce platforms.
The INFORM Consumers Act, a bipartisan measure recently introduced in Washington, aims to do just this. The common-sense bill would require online marketplaces to actually verify basic business information and allow consumers to know who they are buying from, which consumers are already accustomed to when they shop at their local retailer in person or online.
E-commerce platforms like eBay and Etsy as well as retailers, product manufacturers and consumer safety experts recognize that the bill protects American consumers, as well as our economic interests. But Facebook and Amazon have opened up their wallets to fund an aggressive lobbying campaign to kill efforts to protect consumers. Congress needs to ignore this smokescreen and address the mounting economic and consumer safety threats posed by the silk road of counterfeits coming from China.
Michael Hanson is the spokesperson for Buy Safe America Coalition, which represents retailers, consumer groups, manufacturers, intellectual property advocates, and law enforcement officials who support efforts to protect consumers and communities from the sale of counterfeit and stolen goods.