Trump Administration Expected to Crack Down on Marketplace Sites in New Counterfeit-Centric Memo

Almost 10 months after Donald Trump signed a memo aimed at combatting the import of counterfeit goods into the U.S., with an emphasis on “third-party online marketplaces,” including “Alibaba, Amazon, and eBay,” and less than two weeks after reports that the $1 trillion behemoth that is Amazon will do more to prevent the sale of fakes on its sites, the Trump administration released its official plan to cut down on the ever-increasing counterfeit trade. 

A booming industry, the total trade in counterfeit and pirated goods tops $1.5 trillion across the globe, according to the International AntiCounterfeiting Coalition. Counterfeit and pirated goods, as well as trade secret theft, cost the U.S. economy, alone, as much as $600 billion a year, or 3 percent of the U.S. gross domestic product, Steve Shapiro, the unit chief for the FBI's intellectual property rights unit told CNBC.

Given the jurisdictional issues when it comes to counterfeit sellers (most are located outside of the U.S.) and other practical roadblocks at play, the fight against fakes is a complex one. “Foreign sellers face little risk of prosecution,” an administration official told Reuters. As such, strong U.S. government action "is necessary to fundamentally realign incentive structures." 

Speaking to CNBC on the heels of the signing of Phase One of Trump’s trade deal with China this month, which follows from claims of rampant infringement of American intellectual property by Chinese entities, Peter Navarro, the Director of the National Trade Council at the White House, revealed that as of now, “if you’re an intellectual property rights holder, whether you’re Michael Kors or Louis Vuitton or Pfizer selling prescription drugs, the onus is really on your company to police the internet, where a lot of this counterfeiting occurs.” 

“That’s not right,” according to Navarro, who says that “the Amazons and the Alibabas, Shopify” – which “have been facilitators of the Chinese counterfeiting” – need to act on their “responsibility to police the problem.” He further noted that sites like “Amazon and eBay” are “making a bunch of money … selling this counterfeit stuff,” without “accepting [their] full responsibility,” which is almost certainly a reference to marketplace sites’ recurring attempt to disclaim liability by asserting that they are not the “sellers” in such equations but merely middlemen. This is what Amazon argued in a recent case over the sale of a defective dog leash that a consumer purchased from its site. 

That case – which could have sweeping impacts for Amazon and its vas third-party marketplace – is still underway, with a Third Circuit Court of Appeals hearing en banc expected this year.  

As for the Trump administration’s latest counterfeit-specific plan, on Friday, the Department of Homeland Security’s Office of Strategy, Policy & Plans released a report entitled, “Combatting Trafficking in Counterfeit and Pirated Goods,” stating that at the forefront of the “best practices for private sector stakeholders” is “the idea that e-commerce platforms, online third-party marketplaces, and other third-party intermediaries such as customs brokers and express consignment carriers must take a more active role in monitoring, detecting, and preventing trafficking in counterfeit and pirated goods.” 

An increased focus on the crack down on counterfeits will be a welcome development for fashion and luxury brands, in particular, which is a particularly hard-hit segment of the market when it comes to the scale of the manufacturing and sale of counterfeits. After all, luxury goods are amongst the most commonly affected, with fake luxury products – from logo-bearing sunglasses to fake leather goods and shoes – accounting for “between 60 to 70 percent” of the total sales of counterfeit goods, per Harvard Business Review, “ahead of pharmaceuticals and entertainment products and representing perhaps [the equivalent of] one quarter of the estimated $1.2 trillion total trade in authentic luxury goods.”

With that in mind and given the need for luxury brands, in particular, to maintain the image of exclusivity associated with their valuable trademarks, brands routinely spend tens of millions of dollars each year to police unauthorizes uses of their trademarks. HBR reported in May that LVMH Moët Hennessy Louis Vuitton, the parent company to 75 luxury goods brands, including fashion houses like Louis Vuitton, Dior, Givenchy, and Celine, “employs at least 60 lawyers and spends $17 million annually on anti-counterfeiting legal action.” 

All the while, luxury titans have been busy lobbying governments “to extend enforcement bodies’ powers to seize and destroy fake goods, and to block access to websites that sell counterfeit goods,” per HBR. If the impending memo is any indication, the Trump administration is willing to up the ante. oa here

Fake baby products are everywhere—here's how to spot the difference

Counterfeit strollers, car seats, carriers and more put your child in serious danger—and the problem is more widespread than most parents realize. Here’s how to avoid buying a fake.

 

Counterfeit versions of this feeding mat are widely available and could put your baby at risk. Photo: Hip Mommies 

  Jayne Gregory* was pregnant with her first baby and perusing the booths at a downtown Toronto baby show this past spring when she noticed a table selling a product called Happy Mats—silicone placemats that double as plates and suction to the table or high-chair tray so little hands can’t knock them off. Gregory had heard of the mats and they sounded great, so she bought one.
What she didn’t know is that she hadn’t actually purchased a real Happy Mat; it was a knock off. “I just assumed it was the same one—I had no idea it might be something different,” says Gregory. How could she have known? The booth, which featured a number of brightly coloured teething toys, bibs and stuffies, looked totally legitimate. The seller was pleasant, and Gregory was, after all, at a large, reputable, big-city trade show.
It wasn’t until a few weeks later that she discovered through a random Facebook post about counterfeit baby products that she hadn’t bought the real Happy Mat, which is manufactured by a Colorado-based company called Ezpz, and distributed in Canada by Toronto company Hip Mommies. “My biggest concern is health and safety,” says Gregory. “There’s going to be food touching this, and I would be putting it in the dishwasher. What if the material breaks down?”
Hip Mommies owner Jennifer Chua says she often hears from parents who, unbeknownst to them, have purchased fake Ezpz mats. “They come to us saying the product doesn’t work well, and they want a refund,” she says. “I ask them where they bought it, and then I have to tell them they’ve bought a fake.”
Unfortunately, this problem isn’t limited to Ezpz mats. Fake baby products are now everywhere—both online and at bricks-and-mortar stores. And some of them could put kids in real danger.
“The counterfeit problem in Canada is massive,” says Lorne Lipkus, an intellectual property lawyer in Toronto. He says the value of counterfeit goods sold in Canada annually is in the tens of billions, and while no one is certain how much of that is baby products, it’s clear that many major baby-gear brands are affected. Infant-carrier maker Ergo, baby gear company Skip Hop and stroller manufacturer Maclaren, for example, all have pages on their websites about fakes.

How does this happen?
Counterfeiters are masters at replicating. They’ll make fake product websites that look just like the real ones, or advertise a product on a site like eBay, Amazon or AliExpress using images stolen from the real company. An image of Chua’s daughter appears on the authentic Ezpz mat packaging, and she says the picture is now being used around the world to sell fake mats.
Chua says scammers have even begun running real Ezpz ads on Facebook, but when users click it, they’re taken to an illegitimate site, and Lipkus says criminals are increasingly using social media to peddle their wares. “We’re seeing more and more where social media sites like Facebook or Instagram are being used to house the counterfeit operations,” he says.
Because the counterfeit problem is so rampant on Chinese e-commerce sites like Alibaba and AliExpress, it’s super easy for pretty much anyone to order a bunch of knock-offs and sell them at baby shows, in pop-up retail locations, on buy-and-sell websites like Kjiji and Craigslist, and even in mom-to-mom Facebook groups.
The dangers of fakes
Wearing a fake Kate Spade bag that you got on Canal St. in New York is one thing. Wearing your baby in a knock-off baby carrier is another. When a shady company fakes a name-brand product, there aren’t any checks and balances to ensure the item won’t put your kid in danger. Nobody is checking what material it is made of, how strong the product is, and what chemicals were used, whereas products that are imported legally must be declared with the government and can be subject to inspection. They would have to comply with Health Canada’s consumer product safety regulations, which address things like flammability, phthalates and for certain children’s items, choking and strangling hazards.
It’s important to note as well that companies who are legitimately importing from China will visit factories and develop relationships with manufacturers to ensure processes are acceptable. Distributors may also do some due diligence; Chua’s Hip Mommies, for example, reviews third-party safety testing reports for its products before it decides to distribute them.
On top of that, when you buy fakes—whether it’s baby gear or that Kate Spade bag—you may well be supporting bad people doing very bad things. “The factories in China that are making more than 80 percent of the counterfeits are often controlled by organized crime,” explains Lipkus. “They might be providing terrorist financing, and they often use slave and youth labour.” He says he’s had clients go into factories where kids as young as six years old are mixing dangerous chemicals. That can’t be worth a few dollars off the list price.
How to avoid buying a counterfeit baby product
While Lipkus says that every major store you can name has had a problem with counterfeit products, there are nonetheless ways you can protect yourself.
-If you’re looking to buy a specific product, visit the manufacturer’s website to see who is legally allowed to sell it. You’ll often find this under “authorized retailers/distributors” or “where to buy.” Both brick and mortar stores and online shops are usually listed.
-If you’re buying online from Amazon, click on the “sold by” link. It should list either the manufacturer itself, or the name of a distributor, which you can check to ensure it is authorized (see point above).
-Be skeptical if you notice poor descriptions of the product online, such as grammatical errors or other eyebrow-raising verbiage. For example, a fake Ezpz mat on Amazon.ca says the product is good for use on baby walkers, an item that’s illegal in Canada.
-Stick to well-known, well-established online retailers, and/or ones that also have brick and mortar locations. If you find a smaller online retailer that you’d like to shop from, do a bit of digging. Do they have a Contact Us page, and do people respond to your emails? Are their social media accounts active? Beware of websites that offer time-limited deals, or ‘only five left’ at a bargain price.
-If you’re buying in person from a store, baby show or market, inspect the product carefully. Does it look and feel well-made? Take a close look at the packaging, as counterfeiters often use flimsy plastic and leave off key details. You may also see spelling and grammatical errors.
-Be careful when buying from buy-and-sell websites or off Facebook. If someone advertises that they have a limited number of an item at a great price, those could be knock-offs. Similarly, if someone in a neighbourhood group says they have 14 baby carriers available, it’s worth wondering why any one person would have so many carriers.
What to do if you discover your item is fake
Start with the retailer who sold you the item and request a refund. It’s possible they, too, have been duped, and may readily offer you a refund. If that doesn’t work, call your credit card company. Most protect against fraud, so if you’ve used your card to buy an item that turns out to be counterfeit, you may be able to get your money back. Lipkus also recommends informing the Canadian Anti-Fraud Centre as well as the police (using the non-emergency line). It’s an extra step, but if nobody reports these things, it can never be stopped. Once the matter is resolved, destroy the item. If it’s not safe for your baby, it’s not safe for anybody else’s either.
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Amazon Admits to Having a Counterfeiting Problem

image: Amazon

Amazon admits that it might have a problem with counterfeits. For the first time ever, the Seattle-based e-commerce giant made mention in its annual 10-K filing of the elephant on its platform: fakes. In a single line in the “risk factors” section of the yearly report it files with the U.S. Securities and Exchange Commission, the Jeff Bezos-owned company stated, “We may be unable to prevent sellers in our stores or through other stores from selling unlawful, counterfeit, pirated, or stolen goods, selling goods in an unlawful or unethical manner, violating the proprietary rights of others, or otherwise violating our policies.” 

The arguably long-overdue admission comes amidst mounting criticism of and a growing number of lawsuits filed against the world’s largest e-commerce platform, most of which have accused Amazon of being “complicit” in the widespread sale of counterfeit goods on its site. These qualms have largely followed from Amazon’s 2014 move to enable China-based entities to sell directly to Amazon shoppers in the West, and in the process, growing its sales by a whopping 20 percent in a single year and enabling its total revenues to blaze past the $100 billion mark for the first time.

To date, Amazon-specific criticism has come from a multitude of sources, including this website, which questioned the merit of its “zero tolerance” policy when it comes to fakes in light of the fact that searches for things, such as “Fake Gucci” bags and “replica Birkin” bags, readily return results for counterfeit goods.

Independent sellers — forced to directly compete on Amazon’s marketplace with scammers who blatantly steal their intellectual property — have spoken out. Casey Hopkins, the founder of industrial design firm Elevation Lab, penned a highly-cited post on his website last year, calling out Amazon for directly profiting from the sale of fakes.

Brands also have not been shy about taking the $1 billion giant to task. Birkenstock, for instance, publicly cut off Amazon, not once, but twice, “terminating  [its] business relations with Amazon” in the U.S. and the European Union, due to Amazon’s alleged failure to commit to “proactively policing its site for counterfeits.”

Still yet, at least one trade group, the American Apparel & Footwear Association, has urged the U.S. Trade Representative to include Amazon’s international arms to its annual blacklist of “Notorious Markets,” asserting that its “members are growing increasingly frustrated with how [Amazon] protects their intellectual property.”

These complaints, among others, have coincided with legal action. Mercedes Benz’s parent company, Daimler AG, filed suit against Amazon in November 2017 on trademark infringement grounds, claiming that in additional to its problematic marketplace, Amazon’s model for labeling products as “Shipped from and sold by Amazon.com” amounts to a “fraudulent business act.” In particular, Daimler asserted that by using the “Shipped from and sold by Amazon.com” model,  “Amazon itself sells infringing items” and “capitalizes upon and profits from Daimler [and other brands’] reputation and goodwill.”

Less than a year after that legal battle was initiated, fashion brand Ella Moss filed a trademark infringement suit against Amazon, alleging that the giant launched a similarly-named private label, Ella Moon, with a similar aesthetic and lookalike designs  in an effort to confuse consumers and steal sales from Ella Moss.

All the while, Amazon’s PR team has been adamant that it “strictly prohibits the sale of counterfeit products and invest heavily – both funds and company energy – to ensure our policy against the sale of such products is followed.”  

According to CNBC, the newly-added acknowledgement of counterfeit goods in its 10-K filing “reflects Amazon’s increased concern over the counterfeit problem on its marketplace, as the words ‘counterfeit’ and ‘pirated’ were never mentioned in its annual filing before.”

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