(Bloomberg) -- There are two classes of merchant on Amazon.com Inc.: those who get special protection from counterfeiters and those who don’t.
The first category includes sellers of some big-name brands, such as Adidas, Apple and even Amazon itself. They benefit from digital fortifications that prevent unauthorized sellers from listing certain products—an iPhone, say, or eero router—for sale.
Many lesser-known brands belong to the second group and have no such shield. Fred Ruckel, inventor of a popular cat toy called the Ripple Rug, is one of those sellers. A few months ago, knockoff artists began selling versions of his product, siphoning off tens of thousands of dollars in sales and forcing him to spend weeks trying have the interlopers booted off the site.
Amazon’s marketplace has long been plagued with fakes, a scourge that has made household names like Nike Inc. leery of putting their products there. While most items can be uploaded freely to the site, Amazon by 2016 had begun requiring would-be sellers of a select group of products to get permission to list them. The company doesn’t publicize the program, but in the merchant community it has become known as “brand gating.” Of the millions of products sold on Amazon, perhaps thousands are afforded this kind of protection, people who advise sellers say.
Most merchants, many of them small businesses, rely on Amazon’s algorithms to ferret out fakes before they appear—an automated process that dedicated scammers have managed to evade.
Amazon says it works hard to proactively police its marketplace, including requiring increasingly detailed verification of seller accounts. The company didn’t set out to create two classes of sellers, but merchants like Ruckel say that is the reality and have started taking their grievances to Washington, where lawmakers are considering new regulations for online marketplaces like Amazon’s.
Ruckel started his company, SnugglyCat, in 2015 and began shipping orders of the Ripple Rug from his home in New York’s Catskill Mountains. Mostly manufactured at a plant in Georgia, the product is basically two sheets of carpet, one with a set of holes, that can be shaped into a cat jungle gym held together by custom Velcro strips. Ruckel is the sole distributor and doesn’t sell the cat mat to wholesalers or any middleman.
In August, Ruckel received an email from a longtime customer: Other sellers were listing their own “Ripple Rugs,” violating not only Ruckel’s designs, but his copyright. By offering the product for a lower price, they had snagged prime placement in the “buy box,” the first product customers see and are most likely to buy. Amazon, which groups identical products together on a single page, had inadvertently given the counterfeiters prime placement.
Amazon support teams removed the first few listings Ruckel flagged. But like clockwork, new sellers popped up. Growing desperate and dissatisfied with Amazon’s response, Ruckel defaced his own product listing, superimposing an SOS on top of the cat mat and warning shoppers to email him before buying.
“The easy fix was Amazon simply locking the product down,” Ruckel said. “A small business should not have to expend so much energy.”
An Amazon spokesperson said the company does not allow counterfeits. “We protect all brands, regardless of size,” the spokesperson said by email, adding that more small- and medium-sized businesses than large brands were enrolled in programs designed to block suspected scam listings before they pop up. “If we detect suspicious or abusive behavior, we investigate quickly and make improvements to better protect the brand.”
In SnugglyCat’s case, Amazon said there was a mismatch between the brand’s name on its listing and how it appeared on Brand Registry, a tool that helps sellers control the text of listings and gets expedited support if something goes wrong. The error “resulted in our not being able to protect their brand as effectively as we would have liked,” the spokesperson said. Amazon touts another program, called Project Zero, that gives sellers tools to more quickly remove counterfeit listings themselves, among other perks.
“Amazon is better than people think at getting rid of knockoffs, but you have to go through their process,” said David Wright, chief executive officer of Pattern Inc., an ecommerce advisory firm that also sells products on the site. The process, he said, often requires sellers to buy a counterfeit, document its illegitimacy and then inform Amazon, which uses the information to strengthen its automated defenses. “It’s a real big pain,” Wright said. “And for a small seller, I can see why they’re struggling.”
What happened to Ruckel is largely a byproduct of Amazon’s determination to offer as large a selection as possible. The company has deliberately made it easy for anyone to list a product on the site, employing self-service tools that require minimal input from the Amazonians who curate the offerings. More listings means more satisfied shoppers, which in turn means more companies hankering to list their wares on Amazon, a virtuous cycle that helped turn the company into the world’s largest online retailer.
For some product categories, such as jewelry and DVDs, sellers require Amazon’s approval to hang out a shingle. In others, as Ruckel found out, it’s open season. If someone claims they have a product to sell, Amazon’s presumption is that it’s genuine, people who advise sellers say.
Then there are the exceptions—the brands afforded extra protection from counterfeiters. In one high-profile example, Apple Inc. and Amazon struck a deal a few years ago to expand the selection of iPhones and other products on the site. In exchange, Amazon prohibited sellers from listing used or refurbished devices unless they had Apple’s blessing.
Juozas Kaziukenas, founder and chief executive officer of Marketplace Pulse, which studies e-commerce platforms, said there are at least hundreds, perhaps thousands, of brands whose products are locked down to some degree. Try to sell a KitchenAid mixer, and Amazon will direct you to an email address at Whirlpool Corp. Want to sell your collection of Funko Inc.’s big-headed pop culture figurines? You’ll need to apply with Amazon.
The company extends that shield to some of its own products. One model of the web router built by Amazon-owned eero suggests prospective sellers shouldn’t bother trying: “You are not approved to list this brand and we are currently not accepting applications.”
Amazon didn’t say how many brands had such protections, or how companies could go about qualifying for them, saying by email that the company’s selling requirements help safeguard the customer experience and maintain broad, authentic and safe selection.
Sellers suspect Amazon is reluctant to hand out brand-gating protection because it wants to ensure the marketplace is competitive. The more products the company protects, the less chance a wholesaler might emerge who can offer customers a better price. The downside is that some brands find themselves in a constant war with the counterfeiters. “This is the price you pay when you have an open marketplace, these sellers are going to be coming and going all the time,” said Chris McCabe, a former Amazon employee who now advises sellers.
At least four different entities, all based in China, began selling their own versions of Ruckel’s Ripple Rug: Wyatt Smoothly, Senkmlemt-NA, Le Tao Tao Cm, and Fuxinda Business. All described themselves with the same boilerplate, saying they were “committed to providing each customer with the highest standard of customer service.” Some fought Ruckel’s efforts to shut them down, citing a U.S. design patent that Ruckel said appeared to be a thinly veiled knockoff of his own filing. At one point, Amazon suggested he work it out with an apparent counterfeiter.
Frustrated with Amazon’s response, Ruckel found a responsive ear in Washington. He shared his concerns during a call last month with staffers from a U.S. House of Representatives committee working on a bill designed to force companies like Amazon to take more responsibility for counterfeit products sold on their platforms. Amazon said it looks forward to working with Congress to protect consumers from fakes.
Ruckel also says he filed complaints with state attorneys general and law enforcement.
“The system has totally failed,” he said.
It’s not just the lost sales that concern Ruckel. Customers have started receiving the knockoff cat mats they ordered, and Ruckel is worried that negative reviews of counterfeits could tank his brand.
Allison Stringer ordered a Ripple Rug on Amazon in August for her cats, Fergus and Scout. The product arrived at her Virginia home strangely cramped in a small box. The mats felt flimsy and didn’t hold their shape. The Velcro fell apart within a week. She learned through a post on a cat-focused social-media account that her product was likely counterfeit. Stringer has since ordered two Ripple Rugs from Ruckel directly.
“It makes me much more leery of purchasing things online, through a site like Amazon,” she said. “I have to obviously do a bit more due diligence rather than just clicking.”
The Amazon seller Stringer purchased from, Le Tao Tao Cm, offered disappointed shoppers apologies, $15 back or a full refund if the product was returned to a woman named Ying at an address in Long Island, according to communications with buyers seen by Bloomberg.
Ying, who requested that her last name be withheld, said in an interview that she handles Amazon returns for sellers she communicates with on Facebook and WeChat. A product or two arrives at her home each week, she said. Some she keeps, others she gives as gifts. The cat mats, which she said looked poorly made, went straight to the trash.
Ying said she informed the sellers of Bloomberg’s interest in an interview, but never heard back. Le Tao Tao Cm doesn’t appear to have an active Amazon seller page. Neither does Fuxinda Business. Wyatt Smoothly and Senkmlemt-NA couldn’t be reached through the company’s seller contact service.
A couple of days after Bloomberg approached Amazon with questions about SnugglyCat, a company representative wrote Ruckel with some good news: Amazon had enabled “Proactive Protections” for his listing.
An Amazon spokesperson declined to elaborate on what that meant. Ruckel isn’t sure, either. He asked fellow merchants to see if the new protection worked. One was immediately granted permission to start selling the Ripple Rug; a second seller said Amazon asked for proof SnugglyCat had authorized them to sell the mats.
“I’m grateful,” Ruckel said. “But how many companies are going to go through all this?”
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