Fakes Are Not Fashionable:
A BBB Study of the Epidemic
of Counterfeit Goods
Sold Online

BBB International Investigations Initiative

BBB
BBB
BBB
BBB
BBB

Chicago bbbinfo@chicago.bbb.org
Dallas info@nctx.bbb.org
Omaha info@bbbinc.org
San Francisco info@bbbemail.org
St. Louis bbb@stlouisbbb.org

BBB International Investigations Specialist

C. Steven Baker stbaker@bbbinc.org

Issued: May 2019

 Introduction

B

etter Business Bureau (BBB) has
received thousands of complaints
from people who have shopped for
goods online and received counterfeits
instead of what they ordered. Sales
of counterfeit goods have exploded
worldwide in recent years, and many of
them pose significant health and safety
risks. Organized criminals operating out of
China are behind the vast majority of this
fraud. These fraudsters are supported by
a large ecosystem of groups that arrange
for credit card processing. Without access
to the payment cards system, most of this
fraud could not operate.
Online sales in the U.S. reached $430
billion in 2017 and grew 15% annually
for the previous three years, according
to a New York University (NYU) study.
Roughly eight-in-ten Americans shop
online, according to a Pew Research
Center study.
The internet has revolutionized how
people buy goods by allowing them to
quickly find multiple sellers, compare
prices and read reviews on the reliability of
online sellers. But sites, goods and reviews
can all be faked. Anyone shopping online
is eventually likely to encounter fraudulent
sellers. Studies have found
that one in four people
have bought something
online that turned out to be
counterfeit.
Many counterfeit goods
are shipped directly from
China to consumers in the
U.S., but goods also may
be sent to the U.S. to be
reshipped domestically.
Brand names for products
are important indicators of
quality and reliability. While
many companies protect
their products through
trademarks and by copyrighting their products’ pictures
and descriptions, illegal trademark and copyright use is a
growing issue.
A massive number of deceptive web-sellers illegally use
copyrighted pictures of brand-name goods, and then send
fake items, low-quality substitutes or nothing at all. One
expert, Barry Elliott, a senior fraud investigator with the
Royal Canadian Mounted Police, estimates this happens in
70% to 80% of online orders.
Some fraudsters advertise with photos of goods, such as
handmade quilts, that are not copyrighted or trademarked.
They charge the consumer for the item, then send

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something substantially different
than depicted on the site— or
they may send nothing.
“Counterfeiting by Chinese
criminal gangs is a far larger
problem than most people
recognize, but concerted
efforts against the credit card
processing network that funds
them can make a real difference,”
Elliott says.
Almost anything that can be
shipped can be counterfeited
and sold online, including
everyday products such as
printer ink, headphones, phone chargers, athletic shoes,
cosmetics, and even car parts. It is difficult for the general
public to know if a site is real or is selling counterfeit goods.
Moreover, the prices offered are no longer a signal that the
product is counterfeit, since counterfeit sellers often use
selling prices that are close to the price of the real product.
This BBB study examines how widespread this problem
is, who is behind it, how scammers market their products to
the public, how criminal organizations behind this fraud get
money from victims, and what can be done -- and is being
done currently -- to combat this issue. The study focuses
mainly on counterfeit consumer goods purchased online.

 Counterfeit
goods industry
What goods are
counterfeited?

When people think of
counterfeit goods, they
tend to think of knock-off
luxury purses and similar
goods sold at flea markets.
In reality, any shippable item
with a reputation for quality
and sizable mark-up is a
candidate for counterfeiting.
Pirated intellectual content -- such as music,
movies, books or software -- is also a large
and important issue, as is the theft of trade
secrets, but these are beyond the scope of
this study.
A General Accountability Office (GAO)
study issued in February 2018 notes that the
market has changed significantly over the last
10 years or so. Now a wide variety of counterfeit goods are
sold to the public online. Websites use photos and graphics
for products that they claim are authentic. Their prices may
be lower than the real ones, but the price point is close
enough to that of authentic products that price does not
signal that the goods are counterfeit.
GAO bought four different kinds of goods online to learn
which were counterfeit. They went to a variety of sites, and
20 of the 47 products they purchased were counterfeits.
They found that all the Air Jordan sneakers they bought
were real; however, six of the nine Yeti travel mugs were
counterfeit, all 13 of the Urban Decay cosmetics they
bought were counterfeit, and one of the 10 phone chargers
was a fake. Interestingly, all of these goods were shipped
from U.S. addresses.
Today, common products that are sold by counterfeiters
include brand-name sunglasses, designer clothing, sports
jerseys and other equipment such as golf clubs, athletic
shoes, watches, jewelry, handbags, insulated mugs,
cosmetics, consumer electronics and dozens of other
kinds of products. Customs officials said that in 2017, the
top three categories of counterfeit goods that they seized
were apparel/accessories, watches/jewelry and footwear.
But they also detected and seized sizable quantities
of computer accessories, shoes, light fixtures, kitchen
appliances, toys and other goods.
The EU Intellectual Property Office also tried to break
down counterfeiting loses by different types of industries in
Europe.

SPORTS GOODS:

(items such as rackets, golf clubs, and exercise equipment,
but not sports jerseys/memorabilia): 6.5% of sales lost by
the sector due to counterfeiting; with €500 M lost

COSMETICS AND PERSONAL CARE ITEMS:

7.8 percent of sales lost, €4.7B annually; 50,000 jobs

PHARMACEUTICALS:

4.4 percent of sales lost annually; €10.2 billion; 37,700 jobs
lost

TOYS AND GAMES:

12.3 percent of sales lost; €1.4B/year

HANDBAGS AND LUGGAGE

12.7 percent of sales lost; €1.6B lost annually

JEWELRY AND WATCHES

13.5 percent of sales lost; €1.9B lost annually

CLOTHING, ACCESSORIES AND FOOTWEAR
9.7 percent of sales lost; €26.3B annually

According to a recent article published in Associations
Now, for decades, the Imaging Suppliers Coalition (ISC) has
targeted the growing sale and manufacture of counterfeit
printer accessories, particularly ink. ISC says that more than
$3 billion is lost annually on such goods and now the White
House may get involved.

Who is behind the fake products?
Most of the counterfeit goods come from China and
Hong Kong. In fact, the GAO study found that 88 percent of
counterfeit goods come from China and Hong Kong. There
is broad agreement that these are operated by international
organized crime groups. The U.S. Joint Strategic Plan on
Intellectual Property Enforcement notes: “The growth of
illicit trade is being fueled by smart and organized criminal
networks …” while Interpol states, “The link between
organized crime groups and counterfeit goods is well
established.”
It is apparent that operating large-scale sales and
marketing of counterfeit goods requires central
coordination. Someone must develop the deceptive
websites and post them where victims are likely to see
them. And the credit card system that provides the money

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200

150

100

50

0

20-29

30-39

40-49

50-59

60-80

FTC Complaints by Complainant Age
(where age reported)
is organized and difficult to identify and combat. Finally,
there must be methods developed to ship products into the
U.S. and Canada and to attempt to evade customs.
The Strategic plan notes that international organized
crime groups, such as the Mafia and the Japanese Yazuka
groups, also are involved heavily in counterfeiting, and there
is a significant concern that at least some of the proceeds
are used to fund terrorist groups.

How common and costly is fraud involving fake
merchandise?
Although the sale of counterfeit goods is a massive
problem, many victims do not file complaints, making it
a challenge to get a firm grasp on just how often people
pay for goods that are counterfeit or different from those
ordered. Many people may not recognize at the outset
that the goods are counterfeit. Also, there are those who
intend to buy counterfeit goods and, therefore, would not
complain.
There are, however, government estimates on the size of
this problem, consumer complaints about receiving such
goods, data on the number of goods seized by customs
officials, and other research suggesting the scope of the
problem.
Two different international surveys, each done in the UK,
have found that a quarter of online shoppers have bought
a product that turned out to be fake: Global Consumer
Shopping Habits Survey 2015 and Counterfeit products
are destroying brand value.
A study by the Organization of Economic Cooperation
and Development (OECD) found that the U.S. is hit harder
by counterfeit goods than any other country. The OECD
found that counterfeiting went up 80% between 2008 and
2013, and is expected to continue to grow. A consumer

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guide issued by the International Trade Administration at
number ofestimated
complaintsin 2016 that counterfeiting and
stopfakes.gov
piracy cost the U.S. economy, annually, between $200
billion and $250 billion and 750,000 jobs. There are roughly
251 million adults in the U.S., translating to losses of roughly
$1000 per person every year. This includes not only the
direct cost of a counterfeit purchase, but also lost jobs and
lost sales.
The Government Accountability Office (GAO) says that in
fiscal 2016, customs agents seized 31,560 shipments with a
value of $1.38 billion. That number dropped slightly in 2017
to $1.2 billion. Figures for 2018 are not yet available.
The International Trademark Association (INTA) and the
International Chamber of Commerce released a report
on the Economic Impacts of Counterfeiting and Piracy in
February 2017. It found that in 2013, the total international
trade in counterfeit and pirated goods was $461 billion and
was projected to reach $991 billion by 2022. The report
also looked at secondary effects from counterfeiting. For
example, it estimates that in 2013, this resulted in the loss of
as many as 2.6 million jobs. They also found an additional
loss in 2013 for digital piracy in movies, music and software.
BBB has received 2,003 complaints about counterfeit
products and an additional 513 BBB Scam Tracker reports
over the last three years. This does not necessarily include
situations where an order was placed at a site offering
counterfeit goods, but victims never received anything.
The Federal Bureau of
Investigation (FBI) Internet Crime
Complaint Center (IC3) and the
Federal Trade Commission (FTC)
have each attempted to identify
complaints specifically mentioning
counterfeit goods.
The Canadian Anti-Fraud Centre
(CAFC) has made some innovative
efforts to fight counterfeit goods,
which may account for a recent drop in complaint numbers
in Canada. The CAFC says that over the last five years they
have helped 42,000 victims of counterfeit fraud recover
$14,700,000, and in 2018 they helped 12,130 victims recover
approximately $4.2 million.
FBI’s Internet Crime Complaint Center
(includes pirated goods)
Year  
Complaints
2015 
1931
2016 
2572
2017 
2644
2018 
2249
Federal Trade Commission
Year  
Complaints  
2016  
505 
2017  
567  
2018  
552 

Losses
$147,178
$1,611,904
$752,377 

 In some complaints, victims are charged but never
receive anything. These complaints often involve websites
by counterfeit gangs from China. Because the complainants
do not know that the goods they paid for were sold to
them by counterfeiters, they do not include that fact in their
complaints.
The FTC has a category called “Shop at Home/Catalog
Sales” where these types of complaints reside along with
many other scams. Every year it is one of the largest overall
complaint categories. It was the seventh largest fraud
complaint category in 2017.
FTC Shop at Home/Catalog Sales Complaints
Year  
Reports
2015 
104,861
2016 
120,654
2017 
133,072
2018 
149,707
BBB Scam Tracker has a similar category for “online
purchases” and has received 20,543 such reports since
2015. This includes many complaints about goods different
from those promised or that never arrived at all. The
2018 BBB Scam Tracker Risk Report, published by BBB’s
Institute for Marketplace Trust, found that online purchases
were the second riskiest scam in 2018.
There’s reason to believe that crimes involving counterfeit
goods are underreported. Some studies suggest that less
than 10% of fraud victims ever take the time to complain to
BBB or law enforcement.

Who are victims of counterfeit goods fraud?
Anyone shopping online faces the risk of buying
counterfeit goods. For the complaints that the FTC was
able to identify, the most common age group registering
complaints was 30-39. The U.S. Joint Strategic Plan on
Intellectual Property Enforcement suggests that those in
their 20’s are at the most risk. The CAFC states that 53%
of the victims it encounters are female, while 47% are
male; the average loss is $350.

Consumer
Narratives
Myra, from the
Dallas area, is a fan
of the television
show Yellowstone.
While watching
the show, she
noticed the jacket
one of the main
characters, Rip
Wheeler, was
wearing, and she
thought it would be
nice to have one.

She did an internet search for a Rip Wheeler jacket and
found celebjacket.com. The site does not list an address or
phone number and does not have a privacy policy.
She paid $109 for the jacket through her PayPal account.
The jacket she received came from Pakistan. She says it
looked nothing like the photo and was made from thin
cotton with poor stitching. Because there is no contact
information on the seller’s website, she contacted PayPal to
return it. The company told PayPal that they wouldn’t give
a refund or accept a return because the jacket was made
specifically for her.
She still has the jacket, though she has never tried to
wear it. She eventually got her money back from PayPal.
She reached out and complained to BBB to try and warn
others about this company.
Andrew, from St. Louis, saw a Facebook ad for a Mavic
Pro drone. He is not a drone hobbyist, but he says it looked
like something that would be fun to have, and he knew
Mavics were very good and popular drones. He went to
the website being advertised, which he thought was run
by DJI, a well-known drone company. The site was very
professional, with pictures and videos that he now believes
were taken from the real DJI site. The site also had many
positive comments
and reviews. The
drone he was
interested in was
listed as part of a
clearance sale, so the
price was enticing. He
paid about $200 with
his credit card.
A week later, he received a package from Bakersfield,
California. It contained a cheap plastic toy drone, which
Andrew estimates was worth about $10. He sent an email
to complain, but never got a response. Andrew then
contacted BBB.
Jennifer, from Oakland, California, was interested in
purchasing two Hydro Flask water bottles for herself and
her daughter. She had done a bit of online searching to see
where she could get them.
She saw an Instagram ad for Hydro Flask at a discount.
She clicked on the website being advertised, which looked
very professional, and ordered two mugs for $72. After
a couple of weeks, they had not arrived. She went back
and looked at the website again, and she saw that it was
actually hydroflsak.com, a misspelling. And when she
clicked on the “about” section of the site, the explanation
was in poorly written English.
When she received the products, which were shipped
from China, she was very disappointed. The mugs were
not insulated. When she put cold water in one of them, the
exterior quickly showed condensation. The lids were lowquality plastic, and the rubber rings that stop leaks from the
inside would fall out. She compared them to her authentic
mugs and saw that they had different finishes and different
logos.

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 Jennifer emailed the company to ask for a refund. The
company at first refused to take them back, then said that
she would have to pay shipping herself, and finally offered a
refund of $9.99 if she returned them. She filed a complaint
with BBB. Jennifer advises consumers to always look at
websites carefully before buying.

company to complain but got no answer.
She called her credit card company to complain when
the quilts did not arrive, but even though she was initially
successful in disputing the charge, the credit card restored
the charge once the quilts arrived. She also complained to
PayPal, and she has not yet received a refund.
Carolyn filed complaints with BBB and the Nebraska
Attorney General’s office. She hopes those behind this
fraud can be stopped.

What are the consequences of
counterfeit goods purchases?
Lost money

The greatest harm to those buying counterfeit goods is
the money victims lose paying for goods that are different
from those advertised. Victims pay almost as much for fake
products as they would for authentic ones, but the quality
may be very different from the authentic goods. And these
products will not have a valid warranty.
In addition, there is a substantial risk that either the victim
will receive nothing at all or that what they are shipped is
dramatically different from what they ordered. The CAFC
recounts situations where people paying for a snow blower
received only an ice scraper, or those buying cordless drills
received only a screwdriver.

Health and Safety Risks
Pam, from Chicago, saw
an ad on Facebook for a peasant blouse with a peace sign
print. The ad directed her to a site was called Kohlsheart.
com, which she assumed was operated by Kohl’s
Department store. She ordered the shirt, paying about $30
via PayPal.
After nearly two months, the shirt had not arrived, so
Pam emailed the seller. The shirt later arrived, shipped
from an apartment in New Jersey. The shirt she received
was made of cheap fabric and did not resemble the shirt
that was pictured. It had a tag saying “Made in China.” She
didn’t even try it on.
Pam did some research online and found 10 other sites
that she thinks are connected, with many other unhappy
customers. She called BBB to complain about this company
and is trying to work with PayPal to obtain a refund. Pam
has decided to simply not shop online anymore.
Carolyn, from Nebraska, and her family are farmers. Late
in 2018, she saw a Facebook ad for handmade quilts from
Ameliaquilts.com. She thought they would make great
Christmas gifts for her grandchildren, so she ordered six
quilts. She paid $360 with Paypal, which was tied to her
credit card.
Although she did not receive the quilts by Christmas,
she eventually received all six, shipped separately, during
January and February. They were nothing like the website
described; each was made from only two pieces of cloth
sewn together, and they were very thin. She emailed the

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In addition, GAO notes that consumers may face health
or safety risks from counterfeit contact lenses, perfume,
hair removal devices, condoms or skin cleaning products.
They note that of the products seized by customs officials
in 2016, 16% posed potential threats to health and safety.
For example, counterfeit cosmetics may contain ingredients
that can cause problems with the eyes or skin. In December
2015, U.S. Customs and Border Protection (CBP) seized
1,378 counterfeit lithium batteries for hoverboards that
carried a serious risk of bursting into flame. As another
example, phone chargers may carry the UL label even
though they do not meet safety standards for electrical
power.
A representative for
watch company Fossil
Group, Inc. says she is
worried about those who
buy the counterfeits,
because while watch
cases and metal bands
by Fossil are mainly made
of stainless steel, they
have seen counterfeits
that use metals that
contain unsafe levels of
cadmium and lead. These
are potential health
hazards because they are
in direct contact with the
skin.

 Lost jobs, sales and other costs
In addition, there are large secondary effects from this
type of fraud. Legitimate businesses want to protect the
reputation of their brands. Businesses spend a great deal of
time improving the quality of their products and advertising
those features to the public. They hope to recover those
costs through product sales. But if a significant portion of
their sales is diverted to counterfeiters, it can have a serious
effect on their willingness to invest in innovation or to
remain profitable.
The presence of counterfeit goods also inhibits
consumers’ trust in authentic branded products. One study
found that those who have encountered counterfeit goods
are 34% less likely to buy the actual goods, and 65% said
they had lost trust in that brand.
Businesses spend significant time identifying those
selling counterfeit versions of their products. It can be
expensive to identify counterfeit sites and to hire lawyers to
take action. In addition, lost sales also reflect lost jobs in the
U.S. and Canada for those who make these goods.

Online counterfeiting fraud
practices
How are counterfeit goods marketed
to the public?

Most people find fake products from internet
searches. Thousands of deceptive websites
inundate the internet. They are not easy to
detect and remove. Even trademark holders
or brands may have difficulty determining
legitimacy unless they actually buy the
goods from the websites to determine their
authenticity.
There are also counterfeit goods that find their way into
brick-and-mortar stores and businesses. Some stores may
be aware that they are selling counterfeits, while others
may not realize that the products they have purchased for
resale are counterfeit. Customs has noted that car repair
and body shops may themselves obtain counterfeit brake
pads or other counterfeit products that pose real safety

dangers. However, these sales are
beyond the scope of this study.
To set up a deceptive website,
someone must first develop the
content, which typically involves
photos and descriptions taken from the
sites of authentic sellers. Counterfeit
gangs typically use false names and
contact information to disguise who is
really behind the site. These sites look
professional, and it is difficult for the
average consumer to tell if they are
legitimate.
So how do counterfeiters get
consumers to visit their website and
make a purchase? How do they market
their goods? There are a wide variety of
methods of drawing traffic to websites.

Internet searches
Many people use an internet search to locate products
they are interested in. Counterfeit gangs employ methods
of increasing the chances that their goods will appear in
a search by gaming the algorithms used by the search
engines, a process known as “Black Hat SEO.” These
complicated tricks are often effective in exposing victims to
sites where counterfeit goods are sold.
Another method of attracting consumers is to pay for
sponsored links – paid ads that show up at the top of
the results in search engines like Google. However, major
brands have detected and reported these types of ads to
the search engines which have policies prohibiting sales of
counterfeits and rapidly remove them. Thus, there has been
some success in fighting this tactic. However, this problem
has not been eliminated. Jon Liney, vice president of the
American Bridal and Prom Industry Association (ABPIA),
says that anyone looking at the thumbnail photos that
appear near the top of search engine results for prom or
wedding dresses is almost assured of finding a counterfeit.
Facebook and Instagram:
Perhaps the most common
place to find sites selling
counterfeit goods is
social media, particularly
Facebook and Instagram. A
study by two Italian cybersecurity experts found that
24 percent of all Facebook
ads for fashion and luxury
goods are linked to websites
selling counterfeits. INTA has warned about social media.
Many counterfeit online goods are sold through ads
on Facebook and Instagram, which share the same ad
network. Researchers report difficulty in distinguishing real
from fake items based on Instagram images.
Additionally, Facebook also maintains Facebook
Marketplace, an online destination for buying and selling
goods from other Facebook users. This is another portal

6

 that can be used to sell counterfeit goods.
Both Facebook and Instagram have online complaint
forms for people who encounter counterfeit goods.
eBay: This has traditionally been a major way to sell
counterfeit goods, but eBay has been taking strong
measures to keep fake products off of its site. The U.S.
Joint Strategic Plan on Intellectual Property Enforcement
(page 72) says that social media has overtaken online
auction sites as the channel of choice for counterfeiters.
eBay has a policy against counterfeiting and works hard
to keep such goods off its site. eBay has a money back
guarantee itself.
PayPal: No longer
owned by eBay, PayPal
is still a major payment
system at the site.
Refunds are available
to consumers who use
PayPal when goods
are “Significantly
Not as Described”.
This covers not only
counterfeit goods, but
also goods that do
not carry a trademark
but are advertised
deceptively.
Amazon: Many people
believe that Amazon is a
safe place to shop online.
In 2018, nearly half of all online sales in the U.S. took place
at Amazon.
Some goods are acquired by Amazon for resale and
shipped or fulfilled by the company. However, Amazon
also allows third-party sellers to advertise on its site and
ship themselves. Over half the goods sold by Amazon
are by third parties. Amazon collects payments and then
reimburses the third parties. There are reports that Amazon
gets 15 percent of sales by these third-party sellers.
In February 2019, Amazon announced Project Zero,
a new effort that may help stem counterfeit sales on its
platform. In a CBS interview announcing these efforts,
Amazon conceded that counterfeiting is a problem on
its site. According to CBS, “the company caught 3 billion
suspicious listings last year before buyers even saw them
but can’t say how many counterfeits actually made it onto
the site.”
Retailers are adding new codes to their products that
can be scanned when they arrive at an Amazon warehouse.
When this is implemented, Amazon should have a high
degree of confidence that the goods it fulfills itself are
genuine.
Amazon is working with trademark holders to address
this problem. Brands will be allowed to log in to Amazon’s
system and take down sites selling counterfeits. They
have tested this with 15 brands and are in the process of
expanding it to many others. There are appeal rights for
third parties that believe they have been removed unfairly.

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Made in the USA
One way for consumers to try and be sure that
goods are not counterfeit is to look for a “Made
in USA” label. According to FTC guidelines and
standards for marketers and manufacturers, it
is deceptive for goods to be promoted with an
unqualified “Made in USA” (MUSA) claim unless they
are “all or virtually all” made in the U.S. with domestic
materials. Unfortunately, crooked retailers sometimes
cheat, importing products but advertising and labeling
them as “Made in USA”. In September 2018, the FTC
announced enforcement actions against three
companies violating these standards by importing
goods from China and labeling them “Made in USA”:
•  Sandpiper/PiperGear USA: Sandpiper/PiperGear
USA (“Sandpiper”) built its brand of militarythemed backpacks and gear on patriotism. In
reality, Sandpiper imported the vast majority of its
products from China or Mexico.
•  Patriot Puck: Patriot Puck claimed it had “The
only American Made Hockey Puck!” In reality,
Patriot Puck imported all of its pucks from China.
•  Nectar Sleep: Nectar Sleep falsely represented
to consumers that the mattresses it sold were
assembled in the US. However, its mattresses were
wholly imported from China, with no assembly
operations in the U.S.
On April 12, 2019 the FTC announced a settlement
with a Georgia water filtration company over claims
that its products were “Made in USA” even though
they were imported from China.
The FTC encourages people who know of false
MUSA claims to report them.

 express shipping companies or the mail. These now account
for the majority of seizures. Moreover, these inspections also
have found that large numbers of parcels coming from
China contain opioids such as fentanyl.
In addition, there has been a recent increase in counterfeit
goods shipped from U.S. addresses. Some counterfeit
goods are shipped to the U.S., and separate shipments
contain counterfeit tags and packaging. The tags and labels
are attached, and the counterfeit goods are then sent
domestically. This practice helps evade customs inspections
and reduces the likelihood that the recipient will realize that
the products they receive are counterfeit.

Other internet marketplaces: Walmart, Sears, and
Newegg also sell goods online and permit third-party
sellers to operate and market goods on their platform, so
they also pose a risk of counterfeiting. These other online
markets are sizable, but they have a much smaller share
of the market than Amazon. A study found that eBay
processed 6.6% of all online sales; Walmart had 3.7%; Home
Depot had 1.6%; and Best Buy had 1.3%. Each has policies
against counterfeiting.
Shopify: Recently, a new business model has been
developed by Canadian company Shopify. It allows people
to set up simple web-based stores and have goods
customers purchase drop-shipped directly to consumers,
often from China. Obviously this has the potential for sales
by counterfeiters. Shopify reports that it investigates and
takes action when it learns of problems, and victims can
complain online here.
Affiliate advertising: One common deceptive marketing
method, explored in BBB’s 2018 investigative study on free
trial offer scams, involves hiring affiliates to place ads on
popular websites, such as the ubiquitous “one trick to a tiny
belly.” However, a study of the counterfeit area found that
this method is not commonly used by counterfeit gangs.

How do people pay for fake merchandise?
Researchers at NYU note that counterfeit goods are
almost always paid for with a credit card. Therefore, the
bogus websites selling these goods must have access to
the credit card and banking system. The research shows
that almost all of these transactions are handled by a small
number of banks in China.
The NYU study looks at how credit card payments are
processed for counterfeit goods. Over two years, they
purchased 424 branded products. All of the goods were
drop-shipped from China, and all were of poor quality. They
concluded that the criminal gangs that produce counterfeit
goods outsource fulfillment and payment processing.
The study tried to determine who handled the credit
card processing. They found that 90% of the purchases
were processed by either the Bank of China or the Chinese
Bank of Communications. The researchers found that five
intermediary payment processors were responsible for 68%
of the payments. Seven payment processors confirmed to
the undercover researchers that they were willing to handle
processing for counterfeit goods. The study concludes
that these are criminal operations, and that the companies
are very organized – they were affirmatively attempting to
identify test buys undertaken by the researchers.

How do counterfeit goods get to the United
States and Canada?

What is being done to stop counterfeiting
practices?

There are clever and complicated methods of smuggling
counterfeit goods. These include creating false bills of
lading, hiding goods inside other items like air conditioning
units, and shipping
goods through transit
points like Hong
Kong and Singapore.
Counterfeit goods
travel by routes
similar to those used
for smuggling drugs,
firearms and people. All
of these tactics create
big challenges for
customs officials.
Customs has seen a
large increase in small
packages sent through

Active efforts are being made to fight the flood of
counterfeit goods. BBB attempts to identify and report on
bogus businesses, especially if they claim to be located
in the U.S. and Canada. Trademark
holders also do a great deal of work
and spend a considerable amount of
money trying to fight counterfeits.
This is a major priority for customs
enforcement as well.

Better Business Bureau
BBB tries to identify businesses,
evaluate them and post information
about them online. To check out
a business or website, go to bbb.
org and do a free search. BBB notes
whether there are complaints and

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 how they are resolved. In addition, BBB takes fraud reports
in its Scam Tracker system and shares them with the FTC’s
Consumer Sentinel database. Tracker has a category
specifically on counterfeit goods. As noted earlier, BBB
receives thousands of complaints about goods that are
counterfeit or misrepresented or that are never delivered.
For example, BBB Northwest-Pacific has received nearly
2,000 complaints and Scam Tracker reports since October
2018 about bogus quilts sold online. They have identified
more than a dozen related websites offering “handmade”
quilts for sale. In most cases, victims saw these offered on
social media. Most victims never receive anything, and those
who do say that the products were drastically different from
the ones pictured on the sites. This enterprise claims to be
located in Salem, Oregon, but BBB could find no actual
business in that state, and victims say that their emails to
the company are answered from China. As of this time, at
least one of these websites is still active. BBB warnings
about this enterprise have been the subject of stories in the
news media.
A BBB Accredited Business also can display the BBB
seal on its website, so shoppers may want to look for that
as a way of determining whether they are dealing with
an honest business. The BBB seal is trademarked and can
only be used with permission, usually by BBB Accredited
Businesses that agree to BBB’s standards of conduct.
BBB finds hundreds of cases every month where there is
unauthorized use of its seal. If companies do not respond
to BBB’s request to remove the seal, BBB notifies the
company that hosts the internet content for the website,
and in the majority of cases this is effective in getting the
seal removed. Clicking on a legitimate seal will take the
viewer to the business’s BBB Business Profile. If this link is
not live, the seal is probably a fake.

Trademark Holders/Brands
Counterfeit goods are a big problem for those
manufacturing consumer products. Victims who
unknowingly receive shoddy counterfeit goods may blame
the manufacturer. In addition, the brands that invest in
innovation and quality find that they lose substantial sales
to those selling counterfeit products, and this can have
a real effect on their bottom-line ability to keep making
goods and their ability to hire people to make them.
It is expensive to track and fight counterfeiters. Amber
Barnes, a brand protection specialist at Fossil Group,
reports that they regularly do internet searches for
counterfeits of their watches and other products and do
test buys.
As with BBB, brand holders can try to shut down
websites, but this is difficult to do if they are hosted by
companies outside the country. In addition, shutting down
websites may require going to court and getting a court
order, which can take time and is also expensive.
One area that has had a serious counterfeiting problem is
the prom and wedding dress industry. There are legitimate
sellers that market these items on websites, but counterfeits

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Danger from counterfeit medicine
People also have turned to the internet in an attempt
to save money on their prescription drugs. It should
be no surprise that popular medicines are a flourishing
area for counterfeiters who can create websites and
product packaging that may be difficult to distinguish
from legitimate sites and products. The World Health
Organization says: “In more than 50% of cases,
medicines purchased over the internet from illegal
sites that conceal their physical addresses have been
found to be counterfeit.” And the Strategic Plan on
Intellectual Property Enforcement (page 35) suggests
that as few as 3% of websites selling medicine online
are legitimate pharmacies.
These drugs may contain none, too much or
not enough of the active ingredient. Some contain
Fentanyl, which is highly addictive, or other harmful
substances. And unlike drugs manufactured in the
U.S., the labs are not supervised or tested by the FDA.
Companies based in China, Hong Kong, Singapore or
India shipped 97% of the counterfeit medicines seized
in the U.S.
In March 2019, Europol announced the results of a
seven-month effort to combat illegal medicine, seizing
13 million doses
or 1.8 tons of
counterfeit
medicine with
a value of €168
million. They
also arrested
435 people.
Products
seized included
opioids as
well as cancer
and heart
medications.
Europol noted
that this type of counterfeiting is on the rise, saying,
“Organized crime groups are increasingly turning
to this crime area as it provides very high profits for
perpetrators and relatively low risk regarding detection
and criminal penalties.”
The Food and Drug Administration (FDA) has
serious concerns about counterfeit medicine. They
issued a warning about buying online, noting that even
if the seller claims to be in Canada, that does not mean
that they really are, and that there are major risks to
these purchases.
Counterfeit medicine is a huge problem for
developing countries. The World Health Organization
says fake or substandard drugs are often sold to
pharmacists in sub-Saharan Africa, with large volumes
of counterfeit malaria and pneumonia drugs. They say
this has resulted in tens of thousands of deaths.

 are a huge problem for the industry. ABPIA says that the
industry engages in active (and expensive) efforts to fight
this scourge, filing court cases and taking down thousands
of sites at a time. Liney, the ABPIA vice president, estimates
that they have removed 25 million URLs and says all of
these sites were selling from China and located on servers
there. The same sites also sell goods that aren’t delivered
or are completely different from what was ordered. He
says that through this work, the industry has reduced
counterfeiting of these products from China from $400
million per year to about half that amount.
However, dress counterfeiting still remains a serious
problem. Liney says that instead of copying and posting a
photo of a brand-name dress (the photos are copyrighted),
the counterfeiters now simply find a photo of a woman
wearing a brand-name dress on social media and use those
on their websites. He notes that it is difficult to tell if a site is
selling counterfeit goods, but suggests that if a site doesn’t
list a phone number, or if it lists a large number of different
color options for a dress, these are good signs that it is
selling deceptively.
Liney says that his association regularly hears from
victims. People reach out to ABPIA asking for help,
particularly in getting refunds when they receive nothing or
receive a dress that is very different from what was offered
online. The association recommends to victims that they
seek chargebacks on their credit cards.
There are services that can be hired to search for
counterfeit sites and attorneys who can shut down bogus
sites. One website that had deceptively advertised RayBan sunglasses was recently closed after a lawsuit was
filed in Chicago.

Law Enforcement
Intellectual property issues, including copyright,
trademark infringement and theft of trade secrets, are
priorities for the U.S. government. In Canada, these issues
are handled by the Canadian Border Services Agency.
The White House issued an executive order on April 3,
2019, focusing on the problem of counterfeit goods. The

President directed government agencies working with
brands to prepare a report in seven months examining
this area, making it an enforcement priority, and to make
recommendations. This Order also asks for an examination
of “third party online marketplaces, carriers, customs
brokers, payment providers, vendors and others….”
The two main U.S. agencies involved in enforcement are
Customs and Border Protection (CBP) and Immigration
and Customs Enforcement (ICE). Both are part of the
Department of Homeland Security. CBP is mainly in charge
of bulk cargo coming into the country at seaports and
other points of entry. The agency is responsible for 11 million
containers entering the country on ships each year, as well
as 10 million arriving by truck and 3 million by rail. CBP
seizures of counterfeit goods are up 125% over the last five
years.
ICE typically handles packages coming into the country
by mail or package delivery businesses, with some 260,000
such packages entering the U.S. every year. Eighty-nine
percent of counterfeit seizures in 2017 involved small
packages entering the country.
A number of other agencies handle intellectual property
issues. The White House has a U.S. Intellectual Property
Enforcement Coordinator, which has issued a U.S.
Strategic Plan on Intellectual Property Enforcement. In
addition, there is a National Intellectual Property Rights
Coordination Center (IPR Center) where 23 different
agencies, including the Postal Inspection Service and the
FBI, work together with partners from Interpol, Europol,
Canada, and Mexico to share intelligence, develop cases,
and combat counterfeiting and other intellectual property
issues. The IPR Center works with private industry in
its efforts and issues a monthly newsletter and yearly
enforcement statistics. They have a website with consumer
and business education materials at stopfakes.gov.
In 2017, the most recent year for which data is available,
U.S. customs agencies seized $1.2 billion in counterfeit
goods. They also arrested 457 individuals and secured 242
convictions. More than 80% of the goods seized came from
China or Hong Kong.
Many prosecutions target people in the U.S. that have
goods shipped from China and then sell them online. For
example, in March 2019 a man was sentenced to prison in
Mississippi after investigators searching his home found
more than $2 million in counterfeit Yeti-branded products,
LifeProof and OtterBox phone cases, RayBan sunglasses,
Beats by Dre, and Apple and Bose products. These items
were sold online and from a brick-and-mortar store.
In April 2019, two Chinese men attending college in
Oregon were arrested for fraud involving counterfeit
goods. They were having counterfeit
iPhones sent to them from China,
which they sent to Apple with repair
requests. Apple usually sent them
new, genuine phones in return, which
the pair sent back for resale in China.
Apple estimates that they gave these
men 1,493 new phones, with a value of
roughly $895,000.

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 Tips for consumers

How to spot counterfeit goods
It is difficult for the general public to identify websites
selling counterfeit goods. Bogus websites may use real
photos and descriptions of actual products so it may be
difficult to spot fake or substandard products before you
receive them. Here are some tips to help identify suspicious
websites and to see if the
goods received are real.
Know who you’re buying
from. Check the website
with BBB or do an internet
search of the URL. Look
in the “About” section for
typos, grammatical errors
and information about the
business or website location.
Fraudulent sites often do not
provide physical addresses. If
the site does not list a phone
number, that is often another
red flag that fraud is afoot.
Watch for quality issues. It
is a good idea to look closely
at goods received and make
sure they are authentic. Items
sold without packaging or with blurry images are red flags.
Watch out for fake reviews. Scammers often post fake
reviews, even on sites such as Amazon. Don’t rely only on
reviews. Make sure to look for reviews that report that they
are counterfeit goods. BBB accepts and attempts to verify
customer reviews, but there are no review sites that can
screen out all fake reviews.

Refunds for victims from their credit cards
Credit card companies offer refunds if goods are
counterfeit or sold fraudulently. Those who have received
counterfeit goods – or who get either nothing or goods
that are very different from those ordered – should call the
customer service number on the back of their card to ask
for a refund, a process known as a chargeback. Credit card
companies have anti-fraud policies. Consumers can find the
policies for Visa, MasterCard, and Discover online.
Victims should act quickly to dispute charges with their
credit card company. They typically have 120 days (four
months) from the date they receive the goods OR from
when they learn that they were counterfeit. Those with Visa
cards have a maximum of 540 days (18 months) from the
original transaction.
However, victims must have some proof that the goods
are counterfeit. They can obtain that from the company
that sells authentic goods, from customs or another law
enforcement agency, or from a neutral third-party expert.
Fossil Group, which sells watches, recommends that
victims call their customer service number for help with
counterfeits. Simply providing the website where the goods
were purchased might be enough to get the help needed
to obtain a chargeback.

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Canadian victims have an easy alternative to getting a
chargeback. When victims contact a Canadian bank, the
bank will refer victims to the Canadian Antifraud Centre
(CAFC). With Operation Chargeback the CAFC identifies
the website where the victim purchased the counterfeit in
question and contacts the brand — that is, the trademark
holder — to see if it is an authorized seller. If it is not, the
brand notifies the CAFC. The CAFC then provides this
information to the victim
in an email, and the
victim can then provide
that email as proof to
their bank and get a
chargeback. The CAFC
also informs victims
that they do not need
to return the counterfeit
goods; rather, they
ask people to destroy
them. eBay and PayPal
similarly say that they do
not require that victims
return the goods.
Over the last five years,
the CAFC has used this
quick and easy process
to get chargebacks for
42,000 people and obtain $14.7 million in refunds. They
have also identified 36,000 websites selling counterfeit
goods. Similar programs are operating in the UK by the
London Metropolitan Police in conjunction with the UK
Intellectual Property Office. Other countries have expressed
interest, with Italy expected to be the next to try this model.
Unfortunately, there is no program like this in the United
States.
Through this work, the CAFC has also been able to
gather data on 12,000 merchant accounts used to accept
payment for counterfeit goods. Those selling these goods
must have a merchant account from a bank that allows
them to accept credit card payment. The CAFC says that
almost all of the counterfeit merchant accounts are linked
to four state-run banks in China. In addition, the information
on websites and merchant accounts that the CAFC obtains
is useful to law enforcers and credit card processors.

What should victims do?
Ask for a refund.

Victims who don’t receive anything when buying online
with their credit card, or who receive goods that are
counterfeit or not as described, should call the customer
service number on the back of their card and request a
refund. They may need to try and contact the seller first,
but they should not delay since they only have a limited
time to try a chargeback on their credit card. Unless
otherwise instructed, they do not need to return counterfeit
goods to the seller; they should destroy them.
If the bank requests proof that the goods are counterfeit,
victims should call the customer service center for the real

 manufacturer, explain the situation, and request that they
send an email indicating that the site where the goods were
purchased is not an authorized seller. It may help to take a
screenshot of the website where the order was placed, as
well as a photo of the item actually received.
This process also helps brands and trademark holders
identify sites counterfeiting their goods. Notifying the
credit card companies helps the payment processors, such
as VISA and MasterCard, identify merchant accounts used
for illegal conduct.
Those who have a credit card with a Canadian bank
and call customer service will be referred to the CAFC,
expediting the process of getting their money back.

Report counterfeit goods.
Contact one or more of the following:
•  National Intellectual Property Rights Coordination
Center: ICE asks victims of counterfeit goods to file a
complaint with the IPR Center here.
•  Better Business Bureau: Victims can file complaints
about online sellers that claim to be in the U.S. or
Canada. BBB tries to resolve complaints and may help
in getting a refund. There is no cost for this service.
BBB also looks for and reports patterns of complaints.
Victims can report scams at BBB Scam Tracker.
•  Online markets: Victims can complain directly to
eBay, Amazon, Facebook and Instagram or other
online marketplaces. In addition, Amazon has an “A-Z
guarantee” for goods sold by third parties on their site;
victims who have purchased counterfeit items from a
third-party seller can seek a refund here.
•  Internet Fraud Complaint Center (IC3): The FBI takes
complaints about counterfeit goods. Complain here.
•  Federal Trade Commission: You can complain to the
FTC by calling 877/FTC-Help or file a complaint online.

Recommendations
•  BBB urges the credit card payment processors to
engage their full efforts in combating those that
provide merchant accounts to sellers of counterfeit
goods.
•  U.S. consumers would benefit from a program to help
counterfeit victims with chargebacks like the one
operated in Canada by the CAFC. Such a program
would also help identify crooked credit card merchant
accounts, bogus websites, and possibly locations from
which such goods are being shipped.
•  Law enforcement agencies could make better use of
complaint information obtained by BBB, the FTC and
IC3.
•  More study and investigation is needed for websites
in China that deliver nothing or where goods are sold
deceptively – even if there is no trademark or copyright
involved.
By Steve Baker, International Investigations Specialist, BBB

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