Federal investigators purchased counterfeit popular products, including cosmetics and electronics, on some of the biggest and best-known e-commerce websites, according to a new report. The findings highlight new challenges for U.S. agencies and businesses in protecting consumers from potentially dangerous goods.
The investigators purchased a total of 47 products from third-party sellers hosted on five major e-commerce websites: Amazon, Walmart, eBay, Sears Marketplace and Newegg. Of those, 20 were determined to be counterfeit by the companies holding the products’ intellectual property rights, the Government Accountability Office, Congress’ nonpartisan investigative division, said in a report set to be released Tuesday.
The products purchased included Urban Decay cosmetics, Yeti travel mugs, UL-certified phone chargers and Nike Air Jordan shoes. All 13 Urban Decay cosmetics purchased across the five e-commerce websites were determined to be counterfeit, as were 6 of 9 Yeti mugs and 1 of 10 UL-certified phone chargers, commonly used by iPhone users. All 15 pairs of Nike Air Jordan shoes were found to be authentic, per the report.
GAO did not not specify which counterfeit items came from which online marketplace. But the report states the agency “purchased at least one counterfeit item and one authentic item from each of the five e-commerce websites,” as determined by blind testing by the companies holding the rights for each brand-name item.
All 47 items purchased were advertised as new, brand-name items sold by third-party sellers with average customer ratings above 90 percent, and all items were shipped from U.S. addresses, according to the report, titled “Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Markets.”
Counterfeit products can harm consumers, the report notes: an investigation of 400 counterfeit iPhone adapters found some “posed a risk of lethal electrocution.” Counterfeit travel mugs may contain higher-than-approved concentrations of lead and counterfeit cosmetics have been found by federal agencies to “contain hazardous substances, including cyanide, arsenic, mercury, lead, urine, and rat droppings,” the report found. (Yeti’s CEO, Matt Reintjes, told CBS News the company had noted the “growing presence” of counterfeit products and “take[s] great measures to ensure consumer satisfaction and safety.”)
L’Oreal, parent company of Urban Decay, said in a statement: “Consumer safety is our absolute priority. Not only are counterfeit products low quality and ineffective, but they use ingredients of unknown origins which can also be potentially harmful to consumers. Led by former federal law enforcement employees, we implement a robust anti-counterfeiting program to mitigate the presence of counterfeit products on the market. Urban Decay products are available only at Urban Decay stores, UrbanDecay.com and through authorized retail partners found at UrbanDecay.com/storelocator.”
Sen. Orrin Hatch, R-Utah, who chairs the Senate Finance Committee and whose 2016 request led to Tuesday’s report, expressed alarm at the findings. “This report highlights an alarming ratio between authentic and counterfeit goods purchased online,” Hatch said in a statement, adding that he would convene a Senate hearing on the issue.
“The rise of eCommerce and online marketplaces has brought countless benefits to job creators and consumers around the globe, while at the same time increased threats to intellectual property protection and consumer confidence and safety,” he said. “These threats not only affect consumers’ health and safety, but also have the potential to wreak havoc on our economy here at home.”
“If marketplace leaders struggle to keep out counterfeit products, and if consumers cannot rely on those leading companies to protect them from counterfeits, we have a serious problem that can undermine consumer confidence in the entire retail market,” Beverly Baskin, CEO of the Council of Better Business Bureaus, told CBS News in a statement.
Presented with the report’s findings, representatives for Amazon, eBay, Walmart, Newegg and Sears Marketplace told CBS News their companies have strict protocols and that counterfeit products are are removed from their e-commerce marketplaces.
All four e-commerce companies also noted their own variations of “zero tolerance” commitments to addressing counterfeits in the future.
Amazon’s spokesperson told CBS News: “We take this fight against bad actors very seriously and will not rest.” A spokesperson for Walmart noted the company has “zero tolerance” for counterfeit products and said the company looks forward to working with policymakers on these issues. A Newegg spokesperson said the company acts “swiftly to remove marketplace sellers who are proven to knowingly distribute counterfeit goods.” eBay noted than a fraction of a percentage point of all items listed on the site have been identified as potentially counterfeit. A Sears spokesperson says the company takes intellectual property rights “very seriously” and looks forward to more information from GAO’s investigation.
The two main federal agencies tasked with stopping the influx of counterfeit products into the country are U.S. Customs and Border Protection (CBP) and U.S. Immigration and Customs Enforcement (ICE). Seizures of counterfeit items by CBP have continued to rise in recent years, with more than 31,000 seizures in 2016 representing more than $1.38 billion in value if the products were authentic. Most of the seized goods came from China and Hong Kong, according to CBP data.
