Product Knockoffs: Is Amazon Rigging Its Own System?

Updated: Sep 8


A display of product knockoffs for sale

2021 was, in many ways, one of the more interesting years for Amazon. Not only was it marked by a roller coaster ride of highs and lows, it saw entirely new markets develop to answer to the increased consumer demand in eCommerce—not the least of which included the Amazon aggregator market.


Retail market trends come and go. Some may have significant longevity, while others may be highly lucrative for just a short period of time. But if there's one trend which never seems to go out of style, it's the abundance of knockoffs.

The Global Knockoff Market: When is a Fake Actually a Fake?

Controlling the sale of knockoffs at an outdoor market

Despite the terms being frequently considered interchangeable, there's a subtle difference between knockoffs and counterfeit goods.


Both may skirt intellectual property law, but a knockoff isn't necessarily pirated merchandise. By definition, knockoffs are simply an imitation of an original item; a broad term which can encompass everything from counterfeits to private label merchandise sold at a discount.


The OECD has estimated that approximately $464 Billion worth of counterfeit goods were sold in 2019 alone. But with knockoffs, estimating the value of the market can be trickier. Unless a knockoff explicitly violates patent and trademark law, a knockoff can be sold under fair trade regulations. It's up to the decision of a retailer whether or not to stock them.


Knockoffs on Amazon

A market specializing in knockoffs from Korea

There's virtually no online platform which is free from the proliferation of knockoffs, with the likes of Alibaba and eBay being just two prominent examples.


There isn't a knockoff filter on Amazon. That's because their sale isn't necessarily prohibited, except in instances of explicit copyright, trademark and IP violations. Which can be more often than many people might expect.


While Amazon maintains programs designed to protect the integrity of brands and sellers, ranging from IP accelerators to a highly successful counterfeit crimes unit working in conjunction with federal authorities, there's no such regulation about selling knockoff goods. But they do have regulations about unfair manipulation of listings.


One of Amazon's key features has always been in providing sellers fair and equal representation in the market, relying on the strength of their product line as well as social proof to validate their inclusion. And while there's certainly no rule against methods designed to increase search frequency rank, for example, any attempts on behalf of sellers to rig Amazon's algorithms can and often will result in a permanent ban.


But what applies for sellers doesn't necessarily apply to Amazon's own in-house brands.

Is There a Double Standard for Amazon's In-house Brands?

Amazon's packaging stock

Despite growing concerns in Congress over potential violations of federal antitrust law, internal documents unearthed by Reuters last year appear to indicate that Amazon may be manipulating its own search results in at least one foreign market.


The report accused the eCommerce giant of creating competitive product knockoffs from marketplace sellers and manipulating its own A9 algorithm to rank for higher searches for their own product lines in India. The documents allege that Amazon employees studied proprietary data on third-party brands on Amazon's Indian site, including detailed information about customer returns, in order to identify key products for duplication.


The report came less than two months after a coalition of 2,000 third-party sellers based in the country filed an antitrust suit against Amazon, claiming the retailer gives an unfair advantage to larger distributors whose price discounts effectively drive independent vendors out of business.


A similar charge was also levied against the retailer in 2020 after the Wall Street Journal published a report detailing Amazon’s use of US marketplace brand data to develop competitive products—a practice seemingly at odds with their official seller data protection policy.


Amazon's Presence in India

While Amazon may have claimed to support over $10 Billion in investments to gain a foothold in India by 2025, they're also one of two domestic entities currently under a regulatory investigation from the Competition Commission of India into alleged anti-competitive law violations.


According to the Reuters report, Amazon's marketing executives in India not only knew about but endorsed the knockoff strategy, which included partnering with select third-party manufacturers in order to review development processes to be duplicated in their own private line.


“It is difficult to develop this expertise across products,” noted an internal document cited in the report. “To ensure that we are able to fully match quality with our reference product, we decided to only partner with the manufacturers of our reference product.”


Antitrust, Online Retail and the Dilemma of Knockoffs
A shopper showing off their latest buy

Amazon's not alone in co-opting top-selling products for duplication under their own private label. Competitive retailer Target has been accused of using similar tactics for their own private label line of some 45 different products; an accusation also levied against H&M, Zara, and Old Navy.


Current US copyright law can be vague when distinguishing between creative and intellectual property ownership and manufacturing clauses. While IP ownership grants owners the right to profit from their property, the ease of misappropriation implies that non-patented designs can be duplicated by competitive parties so long as they do not directly violate copyright laws.


There are currently over 23,000 different products from 406 private-label brands for sale which are owned by Amazon—a business line reportedly worth $25 Billion in sales. Yet according to a recent poll from YouGov, 33 percent of US customers were uncertain if items found during a search result were part of Amazon’s line, while over half of the respondents assumed top-ranking results were the result of popularity and reviews.


Knockoffs are hardly the purview of Amazon alone. They existed long before its rise, and their popularity isn't solely the domain of budget-conscious shoppers looking to save. A trip to your average brick and mortar retailer will reveal a plethora of knockoff goods of equal (at times better) quality, all at strategic price points.


But they're also easy to distinguish from name brand competitors. That's largely because eCommerce marketing operates differently from its physical counterpart, relying on optimizing search results as opposed to physical placement and packaging. But the Reuters report is one of the first times that an online retailer has been accused of manipulating their own search engine results for proprietary gain.


The Variable Selection of Amazon's Brand Line: Follow the Leader?

An Amazon store

As recently as 2019, Amazon testified in Congress that it does not offer its private brand products at a regular price below the cost of competitive goods and that search results do not take into account their proprietary ownership of a brand.


“We have a policy against using seller-specific data to aid our private label business,” former CEO Jeff Bezos stated at a House Judiciary Antitrust Subcommittee hearing in 2020 under questioning by Rep. Pramila Jayapal (D-WA). “But I can't guarantee you that that policy has never been violated.”


In response to the Reuters report, several members of the House Judiciary Antitrust Subcommittee have called on current Amazon CEO Andy Jassy to address the allegations, while Sen. Elizabeth Warren (D-MA) has publicly called for a breakup of Amazon, stating “[Amazon} is willing and able to rig its platform to benefit its bottom line while stiffing small businesses and entrepreneurs.”


Despite the increased negative attention they've been receiving over monopolization and anticompetitive practices, Amazon's not likely to give up their private label lines anytime soon. Third party sellers may command well over half of Amazon's gross merchandise volume, but they need to be aware that selling on the platform isn't always going to be a fair fight.


What sellers can do is optimize their own Amazon storefront, their own product lines and ensure that they're maximizing their ROI. And smaller brands simply won't see the returns that Amazon's in-house brands are receiving. That's the reality of online sales.


But smaller brands have one key advantage over Amazon's in-house brands: maintaining customer trust. Each day, more people are choosing to buy from smaller, independent businesses than ever before. And that includes on Amazon. Third party sellers may command a larger market share. But smaller brands are still the underdog.


And everyone wants to root for the underdog.

 

Smaller brands need all the help they can get in managing their Amazon accounts. That's where we come in. Find out more at Color More Lines.

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