Counterfeit and pirated goods are not new. They have been sold for years on street corners and out of the trunks of cars. In some countries, that is still the case. It was not too hard for consumers to identify the goods as illegitimate. The price, the quality and, of course, the location where these goods were sold were clear giveaways. Like many other parts of our lives, though, trading counterfeit goods made its way from analog to digital. In the online world, distinguishing what is real and fake can be much harder for consumers and can leave them with a defective product that fails to work correctly, falls apart quickly, or doesn’t meet their expectations. Often the blame is put on the authentic company, which forms a damaged brand image. The authentic brands face an uphill battle against counterfeiters who operate very effectively online by stealing a company’s designs and branding and even by mixing their knock-off goods with the brand’s online product reviews. The images used of the product are sometimes the brand owners’ real photos, leaving the customer playing a guessing game between what is real and fake.
To mark World Anti-Counterfeiting Day, Amazon published its second Amazon Brand Protection Report, sharing its progress in the fight against safeguarding both sellers and customers against counterfeit merchandise, fraud, and other forms of abuse.
In 2021 alone, Amazon invested over $900 million and over 12,000 people in the endeavor. The effort stopped over 2.5 million attempts to create new selling accounts, preventing these bad actors from posting a product for sale. Like real life, where taking down a seller on one street corner does not stop them from finding a new location, the fight against online counterfeit has to be broader than one store. Industry collaboration among online sellers and between private and public sectors is a must, so Amazon created a blueprint aimed at maximizing impact.
“We feel strongly that there’s no competition in a world of counterfeit,” said Mary Beth Westmoreland, Amazon VP of Brand Protection, “We’ve tried to build our program, so it’s not Amazon specific. The IP Accelerator, that helps brands get a trademark, protects their brand anywhere, not just on Amazon. The Counterfeit Crimes Unit identifies and seizes counterfeits so they don’t get put back into the supply chain. Whether or not a brand is sold on Amazon, it can still share IP information with us, share product information and submit notices of potential infringement.”
Amazon’s work to ensure customers can trust their shopping experience focuses on robust and effective proactive techniques to protect the stores and the brands and hold bad actors accountable. Bringing bad actors to justice is the only way the industry can get the upper hand on counterfeiting. This is why Amazon created the Amazon Counterfeit Crimes Unit (CCU) in 2020, a team of former federal prosecutors, FBI agents, experienced investigators and data analysts. The trafficking of counterfeit goods is a global multimillion-dollar crime that involves well-known organized criminal groups. Offering high profits and low penalties, partly because of societal acceptance, selling counterfeit goods remains a very appealing business. Last year Amazon filed civil litigation against more than 170 counterfeiters in U.S. courts and sued or referred over 600 criminals for investigation in the U.S., Europe, and China, an increase of more than 300% over 2020.
Increasing shoppers’ peace of mind is a two-pronged affair. On the one hand, there must be the assurance of the vendors that have access to the store and on the other, there must be empowerment in protecting, rather than disputing, intellectual properties (IP). And machine learning can help with both.
The process starts with a robust seller vetting process that includes an in-person verification program, which requires prospective sellers to have one-on-one conversations with Amazon’s team members to verify their identity and documentation. This verification is further enhanced through proof of the seller’s physical location and payment instruments. Machine learning models are also used to detect risk by using hundreds of data points about the prospective account, such as payment methods, business location, previous activities and even relations to previously enforced bad actors.
Technology is also used to constantly monitor Amazon.com for potential infringement. For example, Amazon’s automated technology scans more than 8 billion attempted changes to product detail pages daily for signs of possible abuse. In 2021, Amazon blocked more than 4 billion bad listings before they made it into the store. These listings were suspected of being fraudulent, infringing, counterfeit, at risk of other forms of abuse, or presenting significant product quality concerns.
Fighting bad actors is only one side of the coin. The other is ensuring that brands and their IP are protected. Amazon created a Brand Registry, a free service for brand owners to manage and protect their brand and intellectual property rights regardless of whether they sell on Amazon. In 2021, Brand Registry saw a 40% increase over the previous year, with over 700,000 brands enrolled. In addition, the improvements in automated protections, powered by machine learning models, led to fewer infringing products in Amazon’s store. As a result, the average number of valid notices of infringement submitted by a brand in the Brand Registry decreased by 25% from 2020.
For many businesses, especially small businesses, the hurdles in protecting their IP starts with the actual registration. The time and the financials involved are too much to bear for some. Amazon IP Accelerator helps businesses obtain intellectual property rights more quickly, allowing brands to protect their IP in every store, not just on Amazon. IP Accelerator connects businesses with a curated network of trusted IP law firms, which provide high-quality trademark registration services at competitive rates. In 2021, 5,900 small and medium-sized businesses took advantage of the IP Accelerator.
All of these tools power Amazon’s machine learning algorithm with millions of data points to identify and detect IP infringement before it ever impacts the customer. Sharing information between the private and public sectors will only help improve these machine learning models. This is why, in 2021, Amazon enhanced communication and support with the United States Patent and Trademark Office (USPTO). Amazon now directly uses information from the USPTO so that fraudulent trademark applications and registrations are not used to enroll in its Brand Registry. In return, Amazon shares information regarding abusive behaviors and trends within its stores to support the USPTO’s investigation of potential fraud by their applicants and registrants.
However, all these efforts would be somewhat futile if consumers were not better educated about shopping with confidence and intentionally avoiding counterfeits.
A 2019 study by the International Trademark Association showed that, while Gen Zers have a strong respect for the value of people’s ideas and creations and 74% think it’s important to buy genuine products, 57% believe their money is better off benefiting the local counterfeit seller than a large corporation. This thinking is linked to a somewhat romanticized idea of the people that engage in the sale of fake goods. As mentioned, more often than not, these bad actors are part of organizations that exploit workers and engage in other illegal activities. For example, Europol found links between migrants who have been smuggled across borders and organized criminal groups with children being used to produce the fake goods.
The International Trademark Association study also showed that 91% of Gen Zers expressed openness in changing their views on the topic of counterfeiting based on new things they learn, highlighting that education is a critical part of how counterfeiting could be defeated in the long run.
We often believe that technology can solve all our problems, even those that, in some way, it helped create in the first place. The reality, however, proves that while technology such as machine learning can lend a helping hand, we need to drive a change in behavior at the root of the issue. First, we must educate consumers about the hidden cost of buying fake and, by doing so, change the public perception that this is not a crime that should be taken lightly. Second, we should support businesses more in their IP protection, which is critical to innovation.
Disclosure: The Heart of Tech is a research and consultancy firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this column. The author does not hold any equity positions with any company mentioned in this column.