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Super Bowl merchandise highlights the stream of fakes from online sites

February 2, 2017 11:41 AM
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(Bloomberg)—On Thursday, law enforcement officials will unveil piles of counterfeit jerseys, baseball caps, jackets and other sports merchandise seized in the previous year from online vendors, flea markets and stadium parking lots. Operation Team Player, timed for Super Bowl 51 on Sunday, makes for good TV and is designed to publicize the growing prevalence of fakes.

It's a problem that's getting worse and harder to control.

Last year, the U.S. government seized $1.38 billion in counterfeit goods. More than half of that arrived via express courier and international mail. Why? Because fakes increasingly are being bought online—largely at Amazon.com Inc. and eBay Inc.—and often shipped direct to Americans' homes in individual packages. As a result, officials must find counterfeits one at a time in a stream of 250 million individual packages entering the country each year.

"Shoppers can buy things online direct from China and everything comes through the mail," says Matthew Bourke, a spokesman for the National Intellectual Property Rights Coordination Center, part of the Department of Homeland Security. "It makes enforcement incredibly difficult."

Government officials want greater transparency about the scope of the counterfeit problem on Amazon, No. 1 in the Internet Retailer 2016 Top 500 Guide, and eBay. They're pressuring the two companies to share records of counterfeit removal requests so they can get their hands on sellers' physical and IP addresses as well as their preferred payment methods. The data would be used to spot trends and focus enforcement. Officials say the public also would benefit from greater awareness about the prevalence of fake goods on popular sites and that disclosure would be a good incentive for marketplaces to keep counterfeits under control.

EBay says the percentage of fake listings on its site has been falling since 2014.  "We’re committed to combatting the sale of counterfeit goods and have consistently been an internet industry leader in working to stop the online sale of counterfeit goods," spokesman Ryan Moore said. Amazon says it has zero tolerance for fakes. To fight the scourge, the company suspends or blocks sellers suspected of engaging in illegal behavior and takes legal action against bad actors. Amazon also says it special software ferrets out counterfeit merchandise. "We take this fight very seriously," the company said in a statement.

Stings for fake sports merchandise are mostly timed to major events such as the World Series, Super Bowl and Stanley Cup. The rest of the year, brands bear the responsibility of policing the internet themselves. For example, Major League Baseball alone sent Amazon 150,000 requests to take down counterfeit goods listed since the playoffs in October. The online store Fanatics hired a former federal prosecutor to help it fight online counterfeits.

The fakes problem is not limited to the U.S. Red Points, a Barcelona company that uses technology to help brands fight fakes, reported 8,000 counterfeit listings to Amazon in 2016 on behalf of a prominent European soccer club. "It's a huge problem and it's growing," says Laura Urquizu, who runs Red Points and says counterfeit soccer jerseys on Amazon have proliferated in the past year.

Part of the problem, says DHS assistant special agent Richard Halverson, is that many shoppers mistakenly think buying a fake jersey to save a few bucks is harmless. But international crime rings use counterfeiting to launder money from illegal drug sales and human trafficking. "This is not a victimless crime," Halverson says.

As counterfeiting explodes, the report-and-take-down process is looking increasingly ineffective. When Amazon or eBay kick out counterfeiters, they simply open accounts under new names until they are discovered anew. Then the whole merry-go-round starts over.

Alibaba, recently put back on a U.S. anti-counterfeiting blacklist, has been willing to share more information with the government than Amazon and eBay, says Danny Marti, until recently the U.S. intellectual property enforcement coordinator. In October, Alibaba said it had tightened policies against copyright infringement and made it easier for brands to request fakes be removed. It took down 380 million product listings and closed about 180,000 stores on its Taobao marketplace in the 12 months to August, the company said in a letter to the U.S. Trade Representative.

Marti says Alibaba's U.S., counterparts fear damaging their reputations if the full scope of the counterfeit problem is publicized, he says. "The irony in not sharing data is that the e-commerce site ends up harming the very people it wants to attract—the consumer and the brand—while the bad actor finds more room to grow."

Marti, appointed by President Barack Obama, submitted a plan in December designed to guide the various federal agencies charged with enforcing intellectual property laws over the next three years. Greater collaboration with online marketplaces was a key proposal. President Donald Trump will appoint Marti's successor, who will oversee the plan (or change it).

"The counterfeit problem is real, it's growing and it's reached a level that is nothing short of alarming," Marti says. "Until we see more from these marketplaces about what is being done to curb the sale of counterfeit goods, we'll remain largely in the dark. We're not going to seize our way out of this."

Amazon is trying to contain the problem itself, and there are indications it's launched its own pre-Super Bowl crackdown. The company began taking more aggressive action this year after talks with sports leagues selling merchandise on Amazon hit a standstill in 2016 due to concerns about fakes, according to a person familiar with the matter. The effort entails requiring merchants to prove they have permission from the leagues to sell branded merchandise before it's listed, rather than chasing fakes one item at a time.

Several Amazon merchants that have sold NFL merchandise on the site for years have had their accounts suspended in recent months, according to posts in Amazon seller forums, evidence that the crackdown is sweeping up legal vendors as well as counterfeiters. "For Amazon, this is the easiest way to do it," says Chris McCabe, a former Amazon investigator who now runs a consulting business that helps merchants sell on the site. "Just suspend everyone and make them appeal and show agreements to get reinstated."

Amazon's dragnet is annoying legitimate vendors, who say it can take weeks to be re-approved. But the company's efforts are finding favor with one important constituency. Says Bob Bowman, Major League Baseball's president of business and media: "We raised these issues with Amazon and are heartened by their constructive engagement."

 

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