Amazon has filed a lawsuit against some social media influencers of Instagram, TikTok and businesses for promoting counterfeit products, besides abusing its marketplace. In the lawsuit which was filed in the U.S. District Court Western District of Washington, Amazon alleged that 13 individuals had been running a counterfeit scam.
As per the court paper, the influencers promoted the products on Instagram and TikTok pages with links to Amazon's dummy listing which shows an image of a generic item. When ordered, the seller delivers a different counterfeit item of a branded product.
Amazon alleged that the scheme was a "sophisticated campaign of false advertising for the purpose of evading Amazon's counterfeit detection tools." Among the influencers, Amazon highlighted two of them — Kelly Fitzpatrick and Sabrina Kelly-Krejci for the scheme.
How Did It Work?
To expose the scheme, Amazon's investigators ordered 12 items from Fitzpatrick through her now-defunct @styleeandgrace Instagram page. She provided an image of the Amazon listing and also said what the buyer would receive. The final transaction happened through Amazon but since the displayed product was not a counterfeit item, the company failed to detect it. Amazon shut down the sellers' accounts after finding out about the shady nature of the businesses, which are mostly based in the U.S. and China.
This way, both Fitzpatrick and Kelly-Krejci served as important intermediaries between the sellers and buyers as they didn't sell the products themselves. Once the purchase is complete, the influencers would receive a small percentage through the referral and Amazon's affiliate program. After detecting their schemes, Amazon removed them from its Influencer Program while reporting their accounts to Instagram. But both of them opened multiple other accounts to escape the ban urging followers to purchase from knockoff marketplaces such as Etsy and DH Gate.
"Now as most of you know Amazon has really cracked down on dupes... Now there are barely any dupes on Amazon. Our very trusted seller of the last year has moved to DH Gate... I know it's a big change to switch from Amazon to DH Gate but this guarantees that the links do not get reported and shut down sometimes canceling our orders," Fitzpatrick posted in her Instagram page.
Amazon's lawsuit which was filed by Amazon's Counterfeit Crimes Unit (CCU), however, doesn't carry any criminal charges. Instead, it has asked for monetary damages and a permanent ban from the platform. Amazon's vice president of customer trust and partner support, Dharmesh Mehta, told CNBC that it was brazen abuse of social media platforms.
"With the social media sites, we've had efforts where as we detect abuse that we think is happening on their sites, we report this to them," he said. "I think this is going to require continued investment from those parties as well because I would expect any of these critical social media sites would not want a set of crime being perpetrated or organized or advertised through their platforms."
Amazon's War Against Counterfeit
Since the beginning of this year, Amazon has waged war against knockoff products on its marketplace. At times, customers unknowingly buy such items due to the low prices. However, for smaller brands that sell products on low margin, the knockoffs hurt revenues. Amazon has strengthened its counterfeit detection algorithm while also launching CCU in June 2020 to investigate such items on its platform.
Besides Amazon, other online marketplaces have also faced similar problems around the world with most of the counterfeit products coming from China. The sellers knock off popular products from brands like Gucci, Dior, Adidas and others and sell them at a very low price point.