RUN-DMC’s complaint alleges that the defendants are advertising, manufacturing, selling, and distributing multiple products with the iconic 1980s rap/hip-hop group’s RUN-DMC trademark without the permission of RUN-DMC, which is owned by former band member, Darryl McDaniels. Run-DMC alleges that Amazon directly advertises and sells infringing products, as well as fulfills orders for infringing products sold by third parties who are also named in the lawsuit.

Although this complaint did not layout out an abundance of evidence against Amazon – unlike the complaint by DRTV companies Allstar Marketing Group LLC, Ontel Products Corp., and Ideavillage Products Corp. (filed just three weeks before RUN-DMC’s complaint) – the key is that, similar to the DRTV complaint, Amazon is accused of direct infringement, rather than just contributory or vicarious infringement claims, which Amazon has been able to successfully avoid liability for in the past.

In addition to troubles in the U.S., Amazon has agreed to pay $1.1 million Canadian in penalties and costs to the Canadian Competition Bureau to settle a matter regarding its pricing practices. The fine comes after a two-year investigation into list prices on Amazon’s Canadian site, Amazon.ca. According to the Competition Bureau, “Amazon often compared its prices to a regular price – or ‘list price’ – signaling attractive savings for consumers.” The Bureau concluded that these claims created the impression that prices for items offered on Amazon.ca were lower than usual market prices, even though they may not have been. The investigation found that Amazon relied on its suppliers to provide list prices and did not verify that those prices were accurate. The savings claims at issue were not only advertised on Amazon.ca, but were also e-mailed to customers and displayed in online ads.

Amazon has since made changes to these anticompetitive practices in Canada and now validates list prices provided by suppliers on the Canadian platform. According the Bureau, new practices have also been applied to Amazon.com, which was engaging in the same behaviors as its Canadian counterpart. Although unclear as to when exactly the plan to change this practice was set in motion, in May 2016, former general counsel of the U.S. Senate’s antitrust subcommittee, Seth Bloom, stated that he had not heard anything said about how Amazon was harming consumers (which is a necessary element in the test for antitrust violations). Just a few months later, amidst antitrust probes in Japan and Europe, Amazon hired Bloom to lobby on its behalf.

Although not insignificant, a million-dollar payout is just a drop in the bucket for the online behemoth, which has a market value of approximately $250 billion. The point, however, is that many more drops in the bucket could add up as an increasing number of lawsuits continue to be filed by similarly harmed marketers. In spite of these issues, marketers, distributors, and consumers alike love Amazon’s convenience, free shipping for Prime customers, and simple return policies. The point is not to take down Amazon with fines and lawsuits, but rather, persuade Amazon into changing its illegal and deceptive practices. The more product owners and governments take action against Amazon’s egregious counterfeit and knockoff goods problem and deceptive practices, the more likely Amazon will be forced to reform.

As always, stay tuned to this space for updates.

Naturally, we were concerned by this information and perplexed as to why so many marketers continue to do business with Amazon in spite of the fact that knockoffs and counterfeits were harming their brands’ reputations as well as their profit margins.

However, it seems that the tide has turned, as a few industry leaders – putting their competitive natures aside – banded together to take on what is arguably the largest source of counterfeits, knockoffs, and intellectual property infringement in the country. Here’s a quick synopsis of the lawsuit:

On Dec. 5, Allstar Marketing Group LLC, Ontel Products Corp., and Ideavillage Products Corp. filed a lawsuit against Amazon in the U.S. District Court for the Southern District of New York. Their claims include direct trademark infringement, direct counterfeiting, contributory counterfeiting and trademark infringement, unfair competition and false designation of origin, copyright infringement, and contributory copyright infringement. These claims are based on Amazon’s routine practice of manufacturing, importing, exporting, advertising, marketing, promoting, distributing, displaying, offering for sale and/or selling unlicensed and/or infringing versions of the plaintiffs’ “As Seen on TV” products.

What is noteworthy about this action is that it includes direct infringement rather than just contributory infringement claims, which Amazon has been able to skirt in the past – relying on immunity theories under Section 512(2) of the Digital Millennium Copyright Act, which protects internet service providers who operate third-party vendor platforms.

The complaint calls Amazon out on its well-known practice of commingling products sold by third parties (counterfeits) with inventory supplied by authentic sellers and fulfilled by Amazon. Further, the complaint details how Amazon allows third-party sellers to list their products against a legitimate product’s listing, such that a consumer can see the less expensive option, but believe it to be authentic because it shows up on the primary listing’s page. This particular conduct has been a thorn in marketers’ for some time, as it prevents easy removal of counterfeit listings (and negative reviews) on the platform.

Damages sought by the plaintiffs include profits and treble damages in the amount of a sum equal to three times such profits or damages. Alternatively, the plaintiffs are seeking statutory damages in the amount of not more than $2 million per counterfeit mark infringed. The plaintiffs are also demanding that the court order Amazon to destroy all infringing products along with advertising and promotional materials.

A pretrial hearing has been set for Feb. 15, 2017. If the complaint isn’t thrown out, as was in the case in previous efforts to sue Amazon for infringement, expect to see many other industry players jumping on the bandwagon to have their day in court. If you have concerns about infringing products being sold on third-party marketplaces like Amazon, we’d love to hear your story. Watch this space for updates.

Sales platforms such as Amazon, eBay and Alibaba are great channels to sell products to the masses; however, unless monitored on a regular basis, these sites enable third-party sellers of counterfeit, and in some cases, damaged or expired goods, to cut into your profits.

Alibaba should be of particular concern for many sellers because counterfeit goods are sold on a colossal scale.  For example, consumer electronic sellers (e.g., Bose, Beats by Dre) can easily have tens of thousands of counterfeit listings on Alibaba.  This not only makes it difficult for consumers to identify who the underlying seller is and whether the product is legitimate, but it also makes it difficult for you to know whether your authorized distributor is behind the listings.

Policing the sale of your goods online can be daunting and time consuming if your product is being heavily infringed upon. It also doesn’t help that each marketplace has a different system, some more user friendly than others, for reporting and ultimately removing counterfeit goods, and at times, storefronts.

This holiday season, make sure your customers are buying from you or your authorized sellers.  Digital Law Group has extensive takedown experience and knows how to most efficiently navigate each platform’s reporting system.