Tech

Amazon sues two influencers for peddling counterfeit goods on Instagram and TikTok

Key Points
  • Amazon on Thursday filed a lawsuit against two influencers and nearly a dozen third-party merchants for allegedly advertising, promoting and facilitating the sale of counterfeit goods.
  • The influencers and sellers worked together in a sophisticated scheme to skirt Amazon's anti-counterfeit tools by promoting the knockoff goods via Instagram and TikTok accounts, among other means.
Amazon on Thursday filed a lawsuit against two influencers and nearly a dozen merchants for allegedly marketing and selling counterfeit goods like the knockoff Gucci belt pictured above.

Two influencers allegedly teamed up with nearly a dozen third-party sellers to advertise, promote and facilitate the sale of counterfeit luxury goods on Amazon, according to a lawsuit the company filed Thursday.

Amazon accused Kelly Fitzpatrick and Sabrina Kelly-Krejci of using Instagram, Facebook and TikTok accounts, as well as their personal websites, to promote counterfeit products being sold on Amazon. The suit, which was filed in U.S. District Court for the Western District of Washington, also names 11 individuals and businesses based in the U.S. and China that allegedly listed the counterfeit products on Amazon.

Fitzpatrick and Kelly-Krejci declined to comment on the lawsuit.

Amazon's marketplace, launched in 2000, now accounts for more than half the company's overall sales. While it remains a critical component of Amazon's business, the marketplace has also faced a number of issues related to the sale of counterfeit, unsafe and expired goods. Fake products can be particularly harmful to credible brands that sell on Amazon because they siphon away business and can force businesses that already survive on low margins to further lower their prices to compete.

The company has pursued counterfeiters in court, rolled out various programs to seek and detect sales of counterfeit goods, and in June launched the Counterfeit Crimes Unit, made up of former federal prosecutors, investigators and data analysts, to mine the site for fraudulent activity. 

How the scheme worked

This complaint alleges the defendants orchestrated a sophisticated scheme to deceive Amazon's counterfeit-detection systems. Beginning last November, the sellers and influencers fueled purchases of knockoff purses, bags, belts and wallets, which were falsely branded as luxury goods from the likes of Gucci and Dior, the suit claims.

Fitzpatrick was previously a member of the Amazon Associates program, which allows members to advertise and link to Amazon products in exchange for a percentage of the sales. Amazon removed Fitzpatrick from the program after it discovered she was advertising counterfeits, the company says.

Fitzpatrick and Kelly-Krejci continued to promote the Amazon listings on their social media accounts and websites via photos and videos, then directed consumers to purchase them using a "hidden link." The "hidden link" referred to an Amazon listing, run by a seller in on the scheme, for a non-infringing, generic item.

Here's what an Instagram post from the influencers looked like:

The influencers would post side-by-side photos of the generic, non-infringing product and the counterfeit product on their Instagram Stories.

And this is what an Amazon listing would show:

The influencers would link to an Amazon listing for a generic product that appeared harmless to the company's counterfeit detection tools.

After placing the order, sellers would ship out the counterfeit product instead of the generic item, Amazon says. On her website, called "Stylee and Grace," Fitzpatrick described how they were disguising counterfeits as non-infringing products in an attempt to skirt past Amazon's anti-counterfeit tools, the lawsuit says.

"As Fitzpatrick explains to her followers, a 'hidden link' means 'you order a certain product that looks nothing like the designer dupe in order to hide the item from getting taken [by Amazon] and orders being cancelled,'" according to the complaint, which quotes from a post on Fitzpatrick's website.

Amazon confirmed the products were fakes by purchasing a series of them, then shut the offending accounts down.

An example of one of Fitzpatrick's Instagram posts allegedly advertising a counterfeit Dior bag.

As of Wednesday evening, Fitzpatrick and Kelly-Krejci were still sharing "hidden links" to Amazon products via newly created Instagram accounts, despite previously instructing their followers to purchase counterfeits on other e-commerce websites, including Etsy and DH Gate, a Chinese wholesale marketplace.

Dharmesh Mehta, Amazon's vice president of customer trust and partner support, said in an interview that the case stood out to him due to the alleged counterfeiters' brazenness on social media platforms.

"Every piece of data that you'd look at Amazon, or that we had, might have looked fine," Mehta said. "But the smoking gun here was sometimes lying in plain sight on a set of social media sites."

Mehta said the case illustrates the need for collaboration between online platforms, which could simplify and expedite the process of catching fraudsters.

"Certainly with the social media sites, we've had efforts where as we detect abuse that we think is happening on their sites, we report this to them," Mehta said. "I think this is going to require continued investment from those parties as well, because I would expect any of these critical social media sites would not want a set of crime being perpetrated or organized or advertised through their platforms."

Amazon declined to answer questions about how the influencers connected with the third-party sellers. Cristina Posa, associate general counsel and director of Amazon's Counterfeit Crimes Unit, said the investigation is still ongoing.

The company is seeking unspecified damages from Fitzpatrick and Kelly-Krejci, as well as an injunction against the influencers and sellers that would bar them from selling or promoting any products sold on Amazon.

Counterfeits aren't just a problem on Amazon's marketplace. CNBC previously reported that dupe and designer lookalike videos are flourishing on TikTok, as teens look to wear items that appear similar to Gucci or Lululemon, but may not want to pay full price for those products.

VIDEO1:4101:41
Amazon CFO says holiday shopping capacity will be tight industry-wide