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February 18, 2020

From Dirty Diapers to Counterfeit Jewelry, Product Quality Problems Abound on the Amazon Marketplace

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Amazon stated in its 2019 Form 10-K that it may be unable to prevent third-party sellers on its marketplace from selling unlawful, counterfeit, pirated, or stolen goods, or selling goods in a way that violates the proprietary rights of others.

Since then, product quality problems on the Amazon marketplace have been the subject of significant media attention. Just last month, a woman said she bought diapers on Amazon that were dirty, used, and covered in feces. Another consumer complained last month that the waffle maker they purchased on the marketplace arrived with an old waffle still in it.

The Wall Street Journal has recently published two investigative reports centered on Amazon’s product quality issues and sales procedures with the headlines: “Amazon Has Ceded Control of Its Site. The Result: Thousands of Banned, Unsafe or Mislabeled Products” and “You Might Be Buying Trash on Amazon – Literally.” The first report found that more than 4,000 items for sale on Amazon were unsafe, deceptively labeled, or banned. These products included toys, medications, supplements, cosmetics, and electronics. The other report revealed the practice of third-party sellers who sort through people’s trash for products that they clean up and then sell on Amazon.

In addressing another layer of product quality issues, The Washington Post recently examined the prevalence of counterfeits on Amazon. It reported that although Amazon has invested substantial time and money to police the sale of counterfeit products, “Amazon’s system is failing to stanch the flow of dubious goods even with obvious examples of knockoffs.” The Post suggested that Amazon’s continued counterfeit problem is a result of its decision to prioritize a broad selection of products at low prices over the use of technologies and policies that could limit counterfeiting.

The desire for broad selection and low price makes it easy for almost anyone to become a third-party seller on the Amazon marketplace, even those who sell counterfeit products. In fact, the U.S. Department of Homeland Security (DHS) recently released a Report to the President called “Combating Trafficking in Counterfeit and Pirated Goods.” This report addressed, in part, how counterfeiting has been facilitated by “increasingly mainstream e-commerce platforms and third party online marketplaces that convey an air of legitimacy.” The report also discussed various efforts the DHS, U.S. Customs and Border Protection, and other entities have undertaken to combat counterfeiting.

The DHS report warned that the “projected growth of e-commerce fuels mounting fears that the scale of the problem will only increase, especially under a business-as usual scenario.” For the DHS, the projected growth of eCommerce and online marketplaces now demands “an effective and meaningful response” to curb the sale of counterfeit products. However, brands also cannot continue to operate under a business-as-usual scenario; they have to recognize that selling products online can leave them vulnerable to counterfeiting, and must proactively prevent and closely monitor counterfeiting of their products. This includes conducting test purchases of suspected counterfeit products on the online marketplaces, identifying how the products are counterfeit, and reporting evidence of counterfeiting to the marketplaces, ideally using the assistance of legal counsel.

Although the DHS report addressed only counterfeit products, the online marketplaces make it just as easy for unauthorized third-party sellers to sell non-counterfeit but nonetheless poor-quality products sold outside of a brand’s quality controls, as reports like those by The Wall Street Journal have revealed. This kind of press attention further confirms the need for brands to take proactive steps to control the unauthorized sale of poor-quality products by third-party sellers. Doing so will allow the brand to ensure the sale of only high-quality products, protect consumers, and preserve their reputation and customer goodwill.

The most important step for a brand is to implement an eControl program. This means implementing and enforcing a solid distribution strategy with policies that prohibit diversion and allow the brand to assert control over where and how products may be sold. Once this strategy is in place, a brand has to enforce its policies by investigating, identifying, and shutting down unauthorized sellers, and by cutting off authorized sellers who do not respect the policies. A brand’s best defense against the product quality problems on Amazon and other marketplaces is to do the work necessary to be able to assert control over its product sales.