E-commerce has exploded in recent years as the shift toward digital continues. And throughout the Covid crisis, shoppers have been turning online more than ever.
While the web represents fertile ground for retail, it also presents significant risks for brands and consumers with the proliferation of counterfeits across marketplaces and social media.
U.S. consumers have become more reliant on e-commerce as the pandemic rages on, shopping avidly on sites like Amazon and increasingly through Instagram and Facebook, according to the American Apparel and Footwear Association (AAFA). In its comments for the United States Trade Representative’s (USTR) 2020 Special 301 Out-of-Cycle Review of Notorious Markets, the AAFA underscored its existing concerns about the proliferation of illicit goods and lack of sufficient brand protection measures on these platforms, recommending that they be included on the list of offending entities.
“Certainly, Covid-19 has resulted in more Americans relying on e-commerce to fulfill their shopping needs,” AAFA president and CEO Steve Lamar told Sourcing Journal. “While we embrace the growth of e-commerce, unfortunately, counterfeiters have as well, taking advantage of these circumstances globally and flocking to sell their fake goods online.”
The line between social media and bona fide online brands and businesses has blurred in recent years, giving way to a rising trend toward social commerce. The trade group has recommended the inclusion of Facebook and Instagram, which is owned by the Mark Zuckerberg juggernaut, on the USTR’s Notorious Markets report, citing input from AAFA members and growing research showing a rise in counterfeits and fraudulent advertising on the platforms.
“Some well-known online third-party marketplaces have a counterfeit problem that needs to be properly addressed to prevent illicit goods from appearing on the doorsteps of unsuspecting American consumers,” Lamar said, adding that counterfeiters have “scaled up their threat” to American shoppers. “We need these platforms to scale up the solutions to tackle that threat.”
The AAFA has also re-nominated third-party seller haven Amazon to be included on the list after the company’s foreign domains were included in the Notorious Markets report last year. While AAFA’s members have reported improvements and increased cooperation on the part of the tech giant over the course of the past year, the systems that Amazon has developed to address the counterfeit issue remain overloaded by the massive scope of the issue. The AAFA cited an insufficient seller vetting process, the presence of repeat offenders on the platform, and challenges with Amazon’s brand protections systems as areas in need of drastic improvement.
The problem has been exacerbated in that pandemic’s harsh light. American brands and retailers are struggling to survive after months of retail shutdowns, supply-chain disruptions, and consumer anxiety about spending—all of which has resulted in drastically constricted sales over the course of 2020.
“While American businesses and American workers are working hard to survive, counterfeit product sales are stymying the recovery by stealing intellectual property, intercepting sales, and damaging brand reputation,” Lamar said. The fake goods could also put U.S. shoppers’ health at risk, as they could be made with processes that deviate from safety regulations and standards put in place by legitimate brands.
While the Notorious Markets report has historically focused on marketplaces outside of the U.S. that pose a threat to American shoppers, the USTR’s 2019 report highlighted the growing concern that counterfeit products were entering the country—and landing in consumers’ mailboxes—via domestic third-party marketplaces like Amazon. While the list has become an “essential tool” in spotlighting these players’ negative impacts, Lamar and the AAFA argue that lawmakers need to address the problem.
“Current legislation in Congress proposes to increase requirements to provide consumers with transparency about who they are purchasing from,” he said. “It is time to take the steps necessary to protect American consumers and American businesses from the many harms of counterfeit sales.”
On Wednesday, an Amazon spokesperson told Sourcing Journal that the company shares a “common interest in combatting counterfeit” with the AAFA, and said that the company has strengthened its defenses against bad actors through increased vetting, machine-learning-based risk analysis, seller background checks and a Counterfeit Crimes Unit established in June. “We strongly disagree with AAFA’s recommendation and are disappointed that certain AAFA members have been unwilling to partner with us directly, despite our proven results,” they said.
Amazon has had “regular, productive dialogue with many of its member brands,” they added, touting significant progress on the issue through the use of advanced technology and brands’ expert knowledge of their products. “Amazon’s automated systems have proactively stopped more than 14 million suspected bad listings for AAFA brands,” the spokesperson claimed.
“The results and progress we can make when we work together is indisputable and our efforts have ensured that more than 99.9 percent of pages viewed by customers did not have a valid notice of counterfeit infringement,” they continued. “We know that stopping counterfeit requires retailers, brands, and law enforcement to work together and while we will continue to engage with AAFA, we look forward to those brands that have not come to the table, to do so.”