Amazon Sues Social Media Influencers for Promoting Counterfeit Goods

Introduction

Social media has become the most important marketing tool of the 21st century and has revolutionised the entire system of buying and selling goods. While e-commerce websites such as Amazon provide platforms for sellers, social media websites, and specially social networking sites, such as Instagram have a huge hold over buyers. Therefore, there is a strong interdependence between the two platforms and in this internet era and during times when e-commerce has become the most effective and popular means, social media influencers have also emerged as the newest marketing agents.

Kelly Fitzpatrick and Sabrina Kelly-Krejci are two popular social media influencers who promote products on websites, including on their Instagram and TikTok accounts and generate sales for various businesses. However, recently, these two influencers became subject to a lawsuit in the United States as a result of their promotions, which involved promoting counterfeit products.

The Lawsuit

On 12th November, 2020, Amazon.Com, Inc. filed a joint lawsuit[1] in the U.S District Court, Western District of Washington against 13 defendants, including social media influencers Kelly Fitzpatrick and Sabrina Kelly-Krejci for promoting and facilitating the sale of counterfeit luxury fashion goods through Amazon.com. Amazon has claimed that these social influencers engaged in a ‘sophisticated campaign of false advertising’ for the purpose of evading Amazon’s counterfeit detection tools.[2]

This lawsuit seems to be a part of the initiative taken by the American company to take strong action against infringers. In June 2020, Amazon launched its Counterfeit Crimes Unit, a global team with specialised experience in investigating and bringing legal action against infringers of intellectual property. As part of its vigilant campaign, the company detected the activities of the Defendants and has filed this lawsuit. Amazon has alleged that the actions of the Defendants are not only violative of the law but also their own company’s policies. It is also pertinent to note that Amazon has an anti-counterfeiting policy[3] in place and the Defendants seem to have violated this policy by promoting counterfeit products on Instagram, TikTok and other websites and then ultimately selling them through a hidden link on Amazon.com.

Amazon claims that the two influencers posted side by side photographs of the generic, non-branded products and counterfeit products and captioned the picture “Order This, Get This”. While “Order This” referred to a generic product that was falsely advertised on Amazon, “Get This”, referred to the counterfeit luxury product. In their Complaint, Amazon has also alleged that the Defendants purposely promoted the counterfeit products and claimed that they were of “high quality”. Kelly Fitzpatrick operated an Instagram page (now defunct) under the name @styleandgrace and “explored the world of dupes.” Amazon claims that “these so-called “dupes” are obviously counterfeit goods that blatantly copy the registered trademarks of luxury brands.”[4]

Furthermore, it has been alleged that the influencers advertised counterfeit luxury items on their Instagram page to be sold under dummy listings on Amazon. Since the Defendants used hidden links for selling the products, it became difficult for Amazon to detect the infringing activities. The Defendants advertised their products on Instagram and then directed their followers to an Amazon link to make the final purchase. The products displayed on the links were not the products that they were actually ordering. In the Complaint filed, it is stated that Fitzpatrick herself explained to her followers that “hidden link” means “you order a certain product that looks nothing like the designer dupe in order to hide the item from getting taken down [by Amazon] and being cancelled”. Therefore, it seems that the Defendants were engaged in false advertising and purposefully conducted specific activities to avoid being detected in the first place.

Amazon has taken a bold step to uncover a sophisticated business operation. Amongst other defendants are the Chinese companies that were manufacturing the products being promoted by these influencers. From suing the manufacturers to the social media influencers who were promoting and selling the counterfeit products, Amazon has taken a positive initiative to enforce intellectual property rights as well as punish infringers. With this case as an example and a collaborative effort from the corporations, perhaps we can expect a more secure future for intellectual property holders on the social media and e-commerce front.[5]

The Position of Social Media Influencers and Trademarks Infringement

In 2020, the International Trademark Association (INTA)[6] published an article which states that U.S Federal Trade Commission is considering changes to its endorsement guidelines for advertising on social media platforms[7]. Given the fact that social media websites have now become the most important platform for advertising, especially in the fashion industry, perhaps more vigilance and up to date regulations are the need of the hour. A combined effort from international e-commerce websites and other online platforms along with state governments may be required for uncovering such international counterfeiting syndicates. Amazon, being such a well-known and trusted brand across the world ought to act in this regard and we should hope that other e-commerce websites shall follow suit.

The promotion of counterfeit products on social media has become a huge concern for brands because of the likely impact it can have on the consumers. Consumers are more likely than ever to buy the counterfeit products because they were promoted by social media influencers whom they follow. Given this current climate, a few suggestions have been made by the International Trademark Association who states that “in ***the modern advertising environment, the line between a sponsored social media endorsement and an unsponsored post can be unclear.*” This could affect the consumer a great deal. Therefore, guidelines that reflect the technological and behavioural changes are recommended.**

It has also been recommended that expert trademark counsel be involved in the policy-making process for websites. For instance, Amazon specifically has an anti-counterfeiting policy[8] in place to ensure that authentic products are sold on their website. According to this policy, if counterfeit products are sold through Amazon, they have the right to immediately suspend or terminate selling privileges or return, dispose of, or destroy inventory. Similarly, other websites should also put such policies in place to combat the sale of counterfeit products online.

Apart from e-commerce websites, even social networking websites need similar policies where the promotion of counterfeit products could lead to cancellation of the account. Brands have urged that social media websites consider “wetting advertisers” for online shopping. Sponsored advertisements need special attention and care should be taken in this area to ensure that not all types of goods are easily promoted without any consequences.

Amazon Brand Registry

In its pursuit to minimize counterfeiting on its virtual market, amazon introduced the “Amazon Brand Registry”. The same essentially allows registered brand owners access to enhanced marketing and reporting tools and gives them more control over listed branded products on Amazon. The prerequisite for being a part of the registry is to have a *“registered and active text or image-based trademark”**[9]*.

Some of the benefits of registering a trademark with Amazon Brand Registry include:

· It allows sellers to list their products with the brand name using Amazon-issued product IDs [Global Catalog Identifier (GCID)] without buying standard product identifiers such as UPCs or EANs.

· Enhanced control over brand content, product detail pages such as titles, descriptions, details, images and other attributes which maximize chances to best represent the products online under seller’s ownership.

· Speedier removal of hijackers and counterfeit products.

· Tools to search for infringing brand name/trademark and thereby prevent intellectual property rights violations.

U.S Legislation

It is also worth noting that there is a Bill in the U.S Parliament which could make e-commerce companies liable for counterfeits sold on their platforms[10]. The Shop Safe Act of 2020[11] outlines a series of steps that e-commerce platforms must take in order to prevent the sale of counterfeit products by third-party sellers on their websites. A failure to take these measures may make them liable for infringement. Such legislative initiatives around the world would certainly help curb the sales of counterfeit goods online.

The Position in India

With the exponential growth of online shopping in India, India needs a robust plan to curb the sale of counterfeit products online and their promotion on social media. The Department of Industrial Policy and Promotion (DIPP) and the Consumer Affairs Ministry have recognized this issue and have made attempts to address it.

In this regard, there are a few regulations and guidelines in the pipeline, which once in place, would ensure greater protection against infringers, especially regulating e-commerce entities in India. For instance, the Draft Information Technology [Intermediaries Guidelines (Amendment Rules), 2018[12], may bring about certain changes as they propose to extend the scope of liability for intermediaries, especially covering social media platforms as well. The Draft E-Commerce Guidelines for Consumer Protection, 2019 also provide guidelines for e-commerce websites to follow, including the deployment of tools for removing unlawful content and goes further to state that the e-commerce entity may be ‘guilty of contributory negligence or secondary liability if it makes an assurance vouching for the authenticity of the goods sold on its marketplace or it guarantees that the goods are authentic’[13]. Moreover, the Draft National E-Commerce Policy, 2019[14]** proposed by the DIPP aims to promote the growth of e-commerce portals as well as protect consumer interests. Part III(c) of this provision, deals with anti-counterfeiting measures and requires e-commerce entities to take several steps in this regard.

COMMENT:

India is likely to see substantial changes in the law relating to online shopping and social media platforms, in the interest of curbing sales and promotion of counterfeit products and enforcing the rights of trademark holders. A collaborative effort from all ends would be required to achieve the desired outcomes and the Amazon case has certainly set an example for other platforms to follow.

For any questions, you may write to the author, Ms. Vrinda Sehgal, Associate @ vrinda@iparattorneys.com.

[1] https://beta.documentcloud.org/documents/20404680-document8 [2]https://press.aboutamazon.com/news-releases/news-release-details/amazon-files-lawsuit-against-counterfeiters-using-social-media?ots=1&ascsubtag=[]vg[e]21326799[r]google.com[t]w[d]D [3] https://sellercentral.amazon.com/gp/help/external/201165970 [4] https://www.cnbc.com/2020/11/12/amazon-sues-influencers-for-allegedly-marketing-counterfeits.html [5]https://www.worldtrademarkreview.com/anti-counterfeiting/amazon-sues-influencers-over-fakes-renews-call-social-media-companies-step [6]https://www.inta.org/wp-content/uploads/public-files/advocacy/committee-reports/Recent-Developments-in-Influencer-Marketing-and-Unfair-Competition.pdf [7]https://www.inta.org/unfair-competition-committee-recent-developments-in-influencer-marketing-and-unfair-competition/ & https://www.inta.org/influencer-incentives-the-future-of-brand-marketing/ [8]https://sellercentral.amazon.com/gp/help/external/G201165970?language=en_US&ref=efph_G201165970_cont_521 [9] https://brandservices.amazon.in/ [10] https://www.venable.com/insights/publications/2020/05/shop-safe-act-2020-a-new-tool [11] https://judiciary.house.gov/uploadedfiles/shop_safe_-_one_pager.pdf [12] https://www.meity.gov.in/writereaddata/files/Draft_Intermediary_Amendment_24122018.pdf [13]https://consumeraffairs.nic.in/sites/default/files/file-uploads/latestnews/Guidelines%20on%20e-Commerce.pdf [14] https://dipp.gov.in/sites/default/files/DraftNational_e-commerce_Policy_23February2019.pdf