Ahen Stefan Neubig founded the Sonnenglas brand, he wanted to bring a solar lamp for the Third World onto the market – inexpensive, simple, durable, assembled in South Africa. But when he put the lamp on the online marketplace of the e-commerce giant Amazon, it suddenly became a hit with German customers who bought the designer glass for their patio table or balcony.
It didn’t take long for the imitators to arrive. “Our product became a bestseller in the lighting category on Amazon. That immediately attracts counterfeiters, ”says Neubig. He had to fend off brand pirates almost every day.
Particularly damaging for his brand, says Neubig, were the bad reviews from customers who had received a fake version of the sun lens via Amazon and who mistakenly complained about the poor quality in his shop. Neubig found a technical solution to his problem at Amazon – but with that he puts himself completely in the hands of the e-commerce giant.
Successful products and brands attract imitators. Brand pirates can run their business openly on Amazon, Ebay, Facebook and Instagram. In the fight against counterfeiters, Amazon has developed its own serial number system. But that makes retailers like Neubig even more dependent on the industry giant.
Corona makes business easier for brand pirates
“Customers often do not know that they are buying counterfeits,” says Julia Hentsch, responsible for legal and consumer policy at the German Brand Association. On online platforms, product counterfeiters can “offer their goods in the same environment as the brand manufacturers”.
The corona pandemic has exacerbated the problem again. “On the one hand, online shopping is booming. On the other hand, supply chain problems mean that certain branded goods are in short supply. That makes the pirates’ business easier, ”says Hentsch.
In 2020, counterfeit goods worth 121 billion euros were imported into the European Union, according to the EU Intellectual Property Office (EUIPO). That corresponds to almost seven percent of all imports. “This affects every branch of the economy, from cosmetics and toys to wine and beverages, electronics and clothing to pesticides and pharmaceutical products,” according to a study by the EUIPO from March 2021.
70 percent of EU citizens shop online. And one in ten of them has already received counterfeit goods, according to EUIPO. In a survey by the German Chamber of Commerce and Industry (DIHK) in autumn, over 80 percent of German brand manufacturers called for “better enforcement of product safety and customs”. But because of the flood of parcels from Asia, that’s easier said than done. It is impossible for customs to check every shipment.
The mesh of online brand pirates
There are two ways for online pirates to sell their cheap goods. The first variant works like this: The counterfeiters set up an online shop, copy logos and product photos from legitimate dealer websites and create a serious impression.
If you take a closer look, you will see clear warning signals with this first counterfeit variant: An imprint is almost always missing. And those who place an order are often redirected to a Chinese website for payment. Last but not least, the goods are often suspiciously inexpensive. “Consumers are often tempted by offers that are too good to be true,” comments expert Hentsch.
In order to lure customers to their pages, the pirates also place ads on social networks and use profiles on Facebook or Instagram. “Many of these fake shops cavort on some large social media platforms and advertise with offers that never arrive or that differ in quality from the description,” says Ulrike Regele, Head of Retail at DIHK. “Some test mechanisms seem to fail on the platforms.”
The second way is more difficult to see through. The product counterfeiters set up their own shop on one of the large online marketplaces and simply tell Amazon & Co that they are selling the same product as the regular retailer. Just cheaper.
“They simply relied on our ASIN,” explains Sonnenglas founder Neubig. ASIN stands for Amazon Standard Identification Number. Anyone who sells their product under the same number will be displayed as an equivalent dealer in Amazon’s marketplace.
“Anyone who sells the apparently same product at a lower price immediately ends up in the buy box,” explains Neubig – he is the first retailer suggested by Amazon’s algorithm and generates the most sales. This practice is called “hijacking” among traders, in English “kidnapping”. Customers notice that they have ordered from a branded pirate if there are inferior goods in the package.
Amazon’s fight against brand fraud
Amazon itself has been fighting the problem with several programs for years, such as the registration of trademarks. The group developed its own technical solution against brand fraud in 2019. The idea: Every single product copy has its own serial number. Their output is managed by Amazon. “We scan every number in our logistics centers before delivery to the customer,” explains Ann Ziemann, who is responsible for the fight against brand piracy in Europe at Amazon. Customers can scan the serial numbers in their own app and thus verify their product as genuine.
From the manufacturer’s point of view, however, there is also a catch: every product that leaves the factory must have an Amazon serial number, regardless of whether it is intended for sale via Amazon or not. This is the only way to ensure that genuine products without a serial number do not end up at Amazon and then sorted out.
Each individual code costs 4.5 cents, and, of course, by assigning the serial numbers, Amazon indirectly learns details that the manufacturer might prefer to hide – such as how many copies leave the factory in total, what proportion of the production is sold via Amazon and which via other channels.
Ziemann assures that the serial number data is only used for the Transparency project – nevertheless, the manufacturers have to trust the company more than some would like. Despite being dependent on Amazon, Neubig is satisfied. “It’s extremely effective,” he says. “We haven’t had any problems with hijacking since we started using it.”
The Serial Numbers Project may solve the piracy problem for Amazon, but not for other platforms. Consumers should be particularly careful when branded goods are sent directly from China or other countries outside the EU. Customers are protected by buyer protection programs, such as PayPal.
But they still have to try to withdraw from the online business. The necessary return of counterfeit goods to China or Hong Kong is time-consuming and disproportionately expensive, and a refund of the purchase price is unlikely.
Now the EU is planning a new law, the Digital Services Act (DSA). This is intended to oblige platform providers to determine the identity of dealers and to ban illegal products in the event of counterfeit reports. The DSA will be negotiated in the EU Parliament in January.
But the brand manufacturers are already warning that, in their view, the regulation does not go far enough. “For example, it must be possible that once reported and removed, counterfeit and sometimes unsafe products do not appear again and again on the platforms,” says Volker Bartels, chairman of the action group against product and brand piracy. “It’s an absurd approach when the same legal violations have to be searched for and reported again and again instead of preventing them in the long term.” Since the manufacturers have to check potential forgeries every time, the pirates always stay one step ahead of them.
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