In October 2018, police showed up at a nondescript industrial warehouse in New York’s Brooklyn Navy Yard to investigate reported counterfeits.
Federal agents were looking for knockoff military gear as part of an investigation into a distributor, called California Surplus, that had secured a $20 million contract to supply the U.S. military with specialized uniforms. They’d already recovered thousands of boxes of the stuff from a nearby New Jersey warehouse, according to court documents.
California Surplus, it turned out, was selling Chinese-made counterfeit goods designed to look like gear from one of the top military outfitters in America, Crye Precision. Crye’s Brooklyn headquarters happened to be located just around the block.
The owner of California Surplus, Ramin Kohanbash, and co-conspirator Bernard Klein pleaded guilty in 2019 to trafficking counterfeit goods and were given jail time.
Counterfeiting has ballooned into a massive problem for Crye, costing it millions of dollars a year, said Jonathan Antone, the company’s general counsel. Crye loses out on valuable sales to unlicensed mills overseas that print copies of its patented camouflage, called MultiCam, on ponchos, pants, shirts and hats that sell on Amazon and other marketplaces without Crye’s permission.
Crye Precision gave CNBC a tour of its warehouse in Brooklyn, New York, on August 7, 2024, where it tests suspected counterfeit items for authenticity.
Launched in 2000, Amazon’s marketplace allows businesses to hawk their goods on the company’s site. It’s amassed millions of sellers, and now accounts for more than half of Amazon’s overall retail sales volume. While the marketplace has helped Amazon bring in record revenue, it’s also been found to host counterfeit, unsafe and even expired goods.
By 2016, sellers were speaking out about Amazon’s growing counterfeit problem, telling CNBC of the company’s effort to openly court Chinese manufacturers. Sales from Chinese-based sellers on the site more than doubled in 2015 .
Counterfeits became a more frequent problem on Amazon and across the internet as the pandemic supercharged online shopping, said Jason Goldberg, chief commerce strategy officer at advertising firm Publicis. And unlike brick-and-mortar stores, which may offer up to 150,000 products, online marketplaces like Amazon can carry hundreds of millions of items, Goldberg said. That vast selection can be harder for platforms to police.
“There’s a lot more space on that digital shelf for potential counterfeit products,” he added.
‘Disrupting and dismantling’ counterfeiters
Amazon has rolled out tools like Project Zero and Brand Registry that let brands report and remove suspected counterfeits themselves. In 2020, it launched an internal division , called the Counterfeit Crimes Unit, that partners with brands and law enforcement agencies to take on fraudsters.
The team, which now includes 35 people, is made up of data analysts, investigators and former federal prosecutors, many of whom previously worked for the Justice Department and FBI. Amazon recently invited CNBC to its second headquarters in Arlington, Virginia, to learn more about how the CCU investigates counterfeits on the company’s marketplace.
Kebharu Smith, who heads up the CCU, said the division was launched at the request of Amazon founder and Jeff Bezos, who was CEO until 2021. Bezos felt the company needed to have a team of former prosecutors and experts to “disrupt and dismantle” counterfeiting organizations, Smith said.
“Counterfeiting is an industry that totals around $500 billion in sales, and so we know that it’s going to take a coordinated effort among brands, law enforcement and partnerships with stakeholders to go after these bad actors at scale,” Smith said. “We’re not just focusing on the sellers in the Amazon store who we identify as bad actors, but the supply chain to knock out that network.”
In 2023, Amazon says it partnered with law enforcement around the world to seize 7 million counterfeit products and execute more than 50 raids, spending $1.2 billion and employing 15,000 people to make it happen.
Before the CCU’s launch, Amazon’s anti-counterfeit efforts were largely driven by its customer trust team, which oversees the company’s response to myriad abuse and fraud issues, like fake reviews and bad actors who look to skirt its policies .
Through the CCU, Amazon teams up with companies like Prada, Hanesbrands and Yeti to take counterfeiters to court. In March, it filed a lawsuit with Crye against six companies and 16 individuals allegedly involved in a scheme to sell knockoff versions of the equipment maker’s MultiCam product on Amazon’s marketplace. The items included camping, hunting and traveling bags and backpacks emblazoned with fake versions of Crye’s camouflage pattern.
An example of a backpack previously sold on Amazon that bore a fake version of Crye Precision’s MultiCam pattern.
Amazon
The CCU also passes leads on suspected bad actors to government agencies. In August 2023, federal agents from Homeland Security and the Department of Defense acted on information from Crye and Amazon to raid facilities in Texas and California. Agents seized “multiple tractor trailer loads” of counterfeit MultiCam products, estimated to be worth $8 million, according to court documents.
For many brands, the process of identifying counterfeits starts with conducting test purchases of products online.
“To the untrained eye, it might appear to be MultiCam, just as is our MultiCam, but it doesn’t look right to us,” Antone said. “So we will just order some test purchases and we’ll analyze them and often can almost immediately say this is easily counterfeit.”
Crye showed CNBC examples of counterfeit MultiCam products that were allegedly sold by retailer L&Q Tactical, one of the defendants in the lawsuit, on Amazon. Among the products were tactical vests, backpacks and plate carriers, which Crye identified as knockoffs due to inconsistencies in coloring with its MultiCam pattern. L&Q included the keyword “MultiCam” in some Amazon product listings even though they weren’t affiliated with Crye, listings show. TK L&Q comment.
“They were trying to bid on military contracts as well with these counterfeit items,” Ernesto Rodriguez, Crye’s MultiCam brand manager, said in an interview. “Fortunately for us, they don’t do a good job of trying to knock off our pattern.”
Crye Precision’s Ernesto Rodriguez shows off a genuine MultiCam backpack (left) and what he calls a “very bad knock-off” (right) in Brooklyn, New York, on August 7, 2024.
Fake backpacks, Apple chargers
When users post fake products on Amazon or elsewhere on the internet, they both threaten to damage a brand’s reputation and present a potential danger to consumers. In Crye’s case, counterfeit versions of its product could end up putting soldiers or police officers’ lives at risk, Rodriguez said. Crye tested the L&Q items with night vision goggles and found they wouldn’t properly conceal a soldier on a battlefield.
“When viewed under night vision, it’s glowing a solid white,” Rodriguez said. “So if a soldier was having this bag on his back or carrying it, it can be seen from miles away.”
The potential for counterfeits on Amazon has created friction with some brands. Over the years, brands including Birkenstock, Nike and Ikea have all quit selling directly on Amazon, pointing to counterfeits and the wild west nature of the marketplace.
Apple in 2016 sued an Amazon seller for selling fake chargers imprinted with its logo that it said “pose a significant risk of overheating, fire, and electrical shock.” Now a seller consultant, Rachel Greer worked in Amazon’s fraud and product safety departments from roughly 2007 to 2015. Around 2013, Greer recalls a case where a U.K. consumer died after being electrocuted from a knockoff Apple charger.
“[The charger] would plug in, sure,” Greer said in an interview. “But then it would zap you really hard because there was no insulation.”
Apple products are now a restricted category on Amazon, meaning resellers have to get approval from the brand to sell those products on the site. Amazon didn’t provide a comment on the U.K. incident. Smith said the company has identified bad actors who use fictitious IDs to set up accounts and sell in restricted, or “gated,” categories.
“We’ve identified schemes such as un-gating schemes, where bad actors will submit fake invoices as a way to get past our proactive tools,” Smith said.
Goldberg said that while counterfeits have become less prevalent on Amazon, “dupes,” or cheaper imitations of popular products, have become increasingly common. Roughly one-third of U.S. adults have intentionally bought a dupe, according to a 2023 Morning Consult study. Buying a knockoff isn’t as taboo as it was in the past, Goldberg said.
“Increasingly today, there are consumers that say, ‘Oh yes, I’m fiscally responsible and frugal. I would never buy that very expensive bag with a Coach logo on it, but I do like that aesthetic. And I was happy to find a bag without the Coach logo that had the same aesthetic on Temu for 10% of the cost,” he said.
Temu, Shein and TikTok Shop have become shopping destinations in the U.S. in recent years, luring American shoppers with their rock-bottom prices on clothing, electronics, home goods and other products. Much of the merchandise is unbranded products that are shipped direct from China.
Amazon has taken notice. The company is in the process of launching its own dedicated storefront for low-priced fashion and lifestyle items that will allow Chinese sellers to ship directly to U.S. consumers, CNBC previously reported. In an effort to remain competitive, the company has set caps on where sellers can price their goods, such as a $20 limit for couches and $9 for bedding sets, according to The Information.
The rise of online marketplaces has made it harder for companies to have “perfect brand safety,” Goldberg said.
“I would honestly characterize it as kind of the new reality in retail,” he added. “Consumers are discovering stuff on TikTok instead of on our store shelves and buying across all these platforms. The world is just more complicated and messy, and perfection is a further away goal than it ever was before.”
Watch the video for a behind-the-scenes look at how Amazon is fighting counterfeits.
