Online Shoppers Go off 'Shopping Cliff' With $2 Billion in Counterfeit and Fake Goods Bought This Holiday Season According to Consumer Fraud Center

Noting how consumers have embraced online shopping this holiday season, the Consumer Fraud Center said holiday shoppers went off a "shopping cliff" in terms of being ripped off by counterfeit and fake goods sold by cybercriminals this year in excess of $2 billion for the period of November-December 2012.

"With a depressed economy and fears of the 'fiscal cliff' looming, shoppers went online with a vengeance this year looking for bargains and many fell prey to cybercriminals who racked up over $2 billion in fraudulent sales in counterfeit and fake goods," said James Lee, executive director of the Consumer Fraud Center. "We saw the heaviest counterfeiting in clothing, accessories, drugs, toys, electronics, personal care and beauty items and CDs, DVDs and video games."

Lee cited data from comScore which saw 16 percent growth in online shopping from last year with almost $40 billion in goods bought online by consumers this holiday season. He also noted the Consumer Fraud Center and other anti-piracy organizations, such as the International Anticounterfeiting Coalition, have tracked the steady growth in the global trade in counterfeit and fake goods as a percentage of total global trade from 1.85 percent in 2000 to almost 5 percent last year; amounting to $600 billion in counterfeit goods.

"It's staggering to see how quickly cybercriminals have adapted to online sales, especially exploiting weaknesses in the international supply chain such as using Amazon Marketplace's direct shipping initiative and Amazon Pages to build illegitimate stores on legitimate websites," Lee said. "We estimate the growth in counterfeit sales will double each year unless stopped either by retailers such as Amazon acting voluntarily to halt these sales or through federal and state governments enacting more rigorous consumer protections."

The Consumer Fraud Center detailed some statistics from this season's holiday shopping:

• The National Retail Federation (NRF) estimates total holiday sales to rise to $586 billion, even though it represents the smallest increase in sales since 2009, the growth in online sales surged and continues to grow;
• The NRF also estimated the retail industry will lose a whopping $2.9 billion this holiday season from fraudulent holiday returns involving online purchases, a total of 4.6 percent of holiday returns;
• According to MarketMonitor, one in five online bargain shoppers were duped into shopping on e-commerce sites selling counterfeit goods while looking for deals online. Especially troubling was the conversion rate -- putting an item into a shopping cart -- for these sites being higher than conversion rates for sites selling legitimate merchandise;
• With online sales accounting for almost 7 percent of total holiday sales, Amazon continues to be the largest e-tailer, accounting for over 11 percent of total holiday online sales, an estimated $3.7 billion;
• Amazon continues to spend heavily in expanding its fulfillment program (58.1 percent increase in 2011 alone to $4.57 billion), building new distribution centers where third-party sellers can direct-ship goods from notorious counterfeiting producers in China and Hong Kong.

"We've seen a considerable number of complaints come in from consumers who have purchased goods from what they thought were legitimate sellers who set up shop on Amazon," Lee said. "We have forcefully urged Amazon to revise its practices to join others in the industry such as eBay and Buy.com to adopt better consumer protections, but so far we've only been met by silence."

If a consumer did buy a counterfeit or fake item online, the Consumer Fraud Center urges consumers to immediately dispute the charge with their card issuer or PayPal and report it immediately to appropriate law enforcement agencies such as the Internet Crime Complaint Center (www.ic3.gov), a partnership between the FBI and NationAl White Collar Crime Center, and the Consumer Fraud Center's complaint system (www.consumerfraudcenter.com).