Online counterfeiting is a unique vector

The unique circumstances surrounding counterfeits on Online Marketplaces make online counterfeiting more likely.73 The Department of Homeland Security identified four factors that increase the likelihood of counterfeiters going online: (1) “Lower Startup and Production Costs,” (2) “Lower Marketing Costs,” (3) “Lower Distribution Costs,” and (4) “Consumer Attitudes and Perceptions.”74 Online counterfeiters have lower startup costs because online storefronts are much easier and cheaper to create than traditional brick and mortar stores, especially given the Online Marketplaces’ incentives to increase the accessibility to new sellers.75 Lower startup costs also make it harder to eliminate counterfeiters because of the ease of creating alternative stores or accounts.76 Online counterfeiters reap much of the benefit of lower production costs—increasing profit margins and the ability to undercut legitimate options— that most counterfeiters achieve.77

Online counterfeiters are also able to leverage lower marketing costs through stealing online promotional materials and by using the algorithms of Online Marketplaces and social media to funnel traffic to their fraudulent goods.78 The anonymity given to online sellers also makes it easier for them to use the same stolen promotional materials in other accounts, further driving down marketing costs.79 This ability to use cheap promotional materials across accounts also makes it easier for online counterfeiters to run multiple counterfeiting accounts simultaneously.80

Online counterfeiters are also able to leverage the user-to-user sales format of Online Marketplaces to better facilitate sales of counterfeit goods.81 Unlike with traditional counterfeiting, where goods (especially foreign ones) are shipped en masse to distribution centers, many online sales are sent by mail to the user directly.82 Large shipments typically get more inspection compared to air parcels.83 In light of these realities, online counterfeiters are increasingly shifting to distributing counterfeit items through air parcel delivery to great success.84

Consumer respect and trust for many Online Marketplaces also assist online counterfeiters.85 Online Marketplaces typically lack the red flags that consumers often associate with counterfeit goods, leading to an implicit trust in the legitimacy of the listings they encounter on Online Marketplaces.86 Some red flags for the presence of counterfeit goods are “suspicious location of the seller, poor quality packaging, or discount pricing.”87 The first two of those examples do not apply to online sales at all and the discount pricing can be shifted from a red flag to an inducement of counterfeit sales. This can happen because consumers who trust the platform may see discounted prices as a way to save or as a benefit of shopping online, not as an indication that the goods are counterfeit. Online counterfeiters are also able to effectively disguise their listings to look legitimate, leading to third-party sales on Online Marketplaces comprising 39% of all unwitting purchases of counterfeited goods.88