Amazon.com has become synonymous with online shopping. No other e-commerce platform anywhere on the Internet can boast the sheer reach and influence that Amazon has. Jeff Bezos is richer than most rich people. It’s an undeniable success story. It’s also not a clean story, one plagued with lawsuits over trademark, copyright, and patent infringement, and even accusations of aiding in IP-theft. However, the company has managed to maintain an air of legal invincibility. An Amazon lawsuit on those grounds today generally has a good chance of being dismissed. Any cases the company feels it can’t win can easily be settled out of court, where the story tends to be forgotten.
This is fueled a 2015 Amazon lawsuit over counterfeit animal-shaped pillows, the result of which set a seemingly unbreakable precedent. The company effectively removed itself from legal liability for over half of the products they offer online. While it is illegal to sell trademark infringing goods or counterfeits in the U.S., Amazon has taken the argument that they are not at fault. They are merely a venue where sellers can work, and if there is anyone at fault, it would be them.
The Amazon lawsuit that could change everything: enter Mercedes-Benz
In October 2017, Daimler AG filed a lawsuit against Amazon. The parent company of Mercedes-Benz claims that that wheel caps bearing the Mercedes-Benz branding were listed on the site as “Ships from and sold by Amazon.com”. Coincidentally, in the animal pillow lawsuit of 2015, that was the criteria that was required to prove that Amazon was directly involved with copyright infringement. If Amazon is the seller, and is setting the price, advertising the product, handling inventory, and so on, then it could be held liable. Daimler AG believes it has done so.
In its lawsuit, Daimler AG claims that Amazon “facilitates the sale of an exorbitant number of counterfeit and infringing goods”, which can be connected to Amazon’s own efforts to court Chinese sellers and manufacturers. While not a particularly glamorous product to center a legal showdown on, this new Amazon lawsuit potentially shatters the 2015 precedent… if the courts see it Daimler AG’s way.
Why Amazon’s choice of sellers damages legitimate business
For years, Chinese e-commerce sites have been plagued by counterfeit sellers. But Amazon made an effort in 2015 to bring these sellers and manufacturers to outside markets. As a result, scammers and counterfeits have filled Amazon’s digital shelves with products that infringe trademarks, and often do not match the quality of the official product.
But it is cheaper, and consumers love cheaper goods.
This has had damaging effects on smaller businesses, who find their success cut short by Chinese counterfeit manufacturers. They can quickly identify hot selling items, acquire them at cost, then reproduce them for cheaper to flood the market. In one instance reported by Forbes, Amazon’s own anti-counterfeiting process was so incompetent and inefficient, a legitimate seller received an infringement notice on his own products. A notice that he himself filed after seeing over 1500 of his products being resold by a counterfeiter.
The problem is not limited to smaller businesses. Large brands, such as Birkenstock, have left Amazon behind entirely. In a scathing statement, Birkenstock attacked the ‘open market’ atmosphere of Amazon.com, stating that they suffered from “unacceptable business practices which we believe jeopardize our brand.” Policing the counterfeit Birkenstock products proved “impossible.”
The damage to businesses is very tangible and real, there are other considerations, some of which are possibly life-threatening. And while this new Amazon lawsuit is not a life-or-death issue, counterfeit products have been a long-standing health and safety concern.
The danger of counterfeit products
Daimler AG’s wheel caps are a big deal, in terms of trademarks and intellectual property. It is difficult for the average person to possibly sympathize with a large corporation arguing technicalities with another large corporation.
The unfortunate reality is that counterfeit products can endanger property and lives. In an age of powerful mobile devices, having a handy extra battery to supply a charge is convenient. Even something as simple as a USB C cord and adapter can extend the usability of a device. However, these devices require specific amounts of power. If the cables and adapters are poorly made, you can cause fires, or even cause batteries to explode.
Samsung’s Galaxy Note 7 battery fires were the result of manufacturing flaws, limited to a small percentage of the phones. But Samsung took the drastic action of recalling every single Galaxy Note 7, including the replacement phones they sent to customers who lost their phones in fiery fashion.
Counterfeiters have significantly fewer scruples. They are seeking quick profits off established brands, and readily disappear into new Amazon accounts when they are reported and eventually shut down. They are less likely to take the action that Samsung took for its major product lines. They also place consumers at serious risk. For example, consider Mobile Star LLC based out of New York. They were selling counterfeit iPhone chargers on Amazon, and a number of these chargers caught fire and even exploded. Others caused irreparable damage to the phones. Amazon was accused of allowing Mobile Star to use Apple’s unique branding, official product photography, and listed these counterfeits as being sold directly by Amazon.com.
When Apple obtained these counterfeits for testing, they discovered them to be poorly constructed, and lacking the safety features found in the official product. The company described the fakes as fire risks and potential electrocution hazards. However, they were sold for significantly less than the original product, and therein lies the problem.
Consumers purchase products from Amazon, and often expect that they are getting the official product. They could be swayed by the pricing offered by counterfeiters, but thanks to deceptive marketing they still believe they have purchased the real product from the real manufacturer. There is a significant possibility that they are not. This is bad by itself, especially for the official branding owner.
Now imagine that counterfeit shirt containing toxic dye that irritates your skin. Imagine a study revealing animal urine in your bargain health supplement. Or consider how it would feel to wake up with your room full of smoke because your cheap phone charger has lit a wall on fire.
For any number of reasons, Amazon has opened its marketplace up to any seller willing to put in the effort. For years, it has consistently been challenged over the flood of counterfeits advertised on its site. This most recent Amazon lawsuit over wheel caps is yet another challenge to its entire business model.