More Effort Needed to Crack Down on Counterfeit Products Sold at Amazon and eBay

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In late September, a Manhattan jury awarded Tiffany & Co. (NYSE: TIF) $5.5 million to compensate the company for sales of counterfeit diamond engagement rings sold by Costco Wholesale Corp. (NASDAQ: COST). A few days later, the jury socked Costco with another $8.25 million in punitive damages.

When Tiffany first brought the suit in February 2013 for infringement of its trademark, Costco countered that “Tiffany” had become generic. Costco’s claim was tossed out by the judge and the rest is now history.

The problem of counterfeit goods is an especially pointed one for online retail outlets like eBay Inc. (NASDAQ: EBAY) and Amazon.com Inc. (NASDAQ: AMZN). Counterfeit awareness and consumer advocate site, The Counterfeit Report, has over the past six months sent notifications to both companies to remove listings for 1.7 million counterfeit items for sale on their websites.

Last month Apple Inc. (NASDAQ: AAPL) reported that nearly 90% of its chargers and cables labeled as genuine at Amazon.com are, in fact, counterfeit. Apple has sued a New Jersey company, Mobile Star, for putting Apple’s logo on the cables and chargers.

Amazon told Bloomberg News at the time that it has “zero tolerance” for counterfeit at its website and that it goes after “wrongdoers” aggressively. What neither eBay nor Amazon does do, according to The Counterfeit Report, is tell customers they’ve bought a fake:

Inexplicably, the e-Commerce giants don’t notify consumers they received a counterfeit, they may be in danger, and are entitled to a refund — even when the websites know or have been notified by the manufacturer the items are counterfeit, or fake (items that don’t even exist in the manufacturer’s product line but bear its registered trademark).

Counterfeiting is a $1.7 trillion global criminal enterprise that is profitable, difficult to track and generally unpunished. The damage is not limited to trademark violation, however. According to The Counterfeit Report, counterfeiting costs U.S. manufacturers more than $250 billion and has cost U.S. workers more than 750,000 jobs.