Amazon Project Zero – What Does it Mean for Sellers?

amazon project zero

Amazon recently announced its Project Zero Program as a solution to eliminate counterfeit on the platform.  While it sounds like a great deal for brands and private label sellers, traditional resellers on Amazon are nervous – and they have a right to be.

When Project Zero was announced a few weeks ago, it seemed more like a PR stunt to stave off critics than a new program. Several elements of Project Zero already existed and had been announced.  On closer examination, however, there is enough new here to warrant further investigation.  In combination with recent announcements about Vendor Central merging with Brand Registry , Project Zero is both encouraging and alarming for sellers.

Why is Amazon Acting on Counterfeit Now?

One of the largest problems that any well-known brand faces is the sale of counterfeit goods.   Amazon has been playing “whack-a-mole” for years against counterfeiters…and failing.  They acknowledged this for the first time in their most recent annual report

To make matters worse, programs that Amazon introduced to help with the problem, like Amazon Brand Registry, have had huge abuse issues that have been brutal on sellers.  It seems like anything Amazon introduces injures a lot of good sellers while we all wait for the “machine learning” to catch up.  So, color us skeptical about Project Zero.  We know it won’t be easy. 

Given Amazon’s “let them eat cake,” attitude towards its sellers, I was pleased (surprised) to see Project Zero…even though I know it is not about helping sellers.  It is about 1) the buyers and 2) public pressure.  Lately, the media has been aggressively calling out Amazon with story after story:

From ArsTechnica: Amazon caught selling counterfeits of publisher’s computer books—again

From Inc. :  Beware: Dangerous Counterfeit Toys for Your Baby Are Being Sold on Amazon

From the LA Times:  Extra inventory. More sales. Lower prices. How counterfeits benefit Amazon

Presidential candidate Elizabeth Warren is talking about regulating Amazon, and President Trump has begun to publicly call out Amazon and other online marketplaces about counterfeit (OK, we know it is politics, but it is still pressure):

Trump orders crackdown on counterfeit sales online

What is Amazon Project Zero?

Project Zero consists of automated tools and technology to help brand owners protect their intellectual property and shut down counterfeiters without having to beg/plead/grovel with Amazon for help.  At first glance there is a lot to love if you are a brand struggling with counterfeit issues on the platform:

  • Automated, 24/7 takedowns by Amazon for IP infringement on YOUR brand
  • Serialized codes on product packages means only authentic products will be accepted by the Amazon fulfillment centers
  • Brand owners can now take down infringing listings and sellers by themselves without having to petition Amazon first and waiting to see if Amazon agrees with them.  It is an advancement to current amazon brand registry takedowns.

Automated IP takedowns

Powered by Amazon’s machine learning, automated protections continuously scan the platform and proactively remove suspected counterfeits. They are taking the data from Amazon Brand Registry and training their algorithm to detect counterfeits and take sellers down proactively.

We’ve seen this for months now where the IP takedown is from Amazon and not the brand.  On the one hand, it is nice because you can make your case to Amazon and send them invoices and they will respond…which is often NOT true of brand takedowns.  Also, you don’t have to spend time – as we often do – teaching the brand how to properly submit a retraction.  Many Brand retractions are rejected by Amazon because the Brand is not following Amazon’s desired format and language for retraction.  And who gets screwed?  The seller.

Most brands don’t like to admit that they made a mistake in taking down a seller (liability and all that) and yet, that’s exactly what Amazon needs to see:

“We are retracting our complaint (complaint ID#) for ASINs: X,Y,Z; storefront name:  HotStuff Sellers.  We made a mistake because we did not recognize the seller’s storefront name.”

That’s one of several of our go-to retractions.  Yet many brands fill the retraction with legal language, conditions, etc.  Amazon wants none of that, nor cares.  You either retract or you don’t.  You either made a mistake or you didn’t.

A Project Zero takedown by Amazon is usually easier and faster. You don’t have to worry about the Brand doing it correctly…if they even talk to you at all.  Unlike a brand takedown, however, Amazon sometimes wants a plan of action.  It’s more work for the seller.

I was enlightened to see Amazon’s reference to: “Brands provide key data points about themselves (e.g., trademarks, logos, etc.) and we scan over 5 billion daily listing update attempts, looking for suspected counterfeits.”

Why only listing update attempts?  There are plenty of infringing listings out there where inventory may not be updated for a long time if the seller has a lot of inventory.  This explains the phenomena we’ve noticed for months where sellers are suspended for infringement claims before they even send inventory to the warehouse, let alone sell anything.  We thought it was bad luck that they had a new listing in the system just when the brand decided to do a takedown.  Now we understand that it is at the point of listing that the scan/algorithm is happening.  It makes sense because Amazon wants to avoid counterfeit from reaching the fulfillment centers in the first place.

It is extremely frustrating to sellers, however, because they may have inventory on the way to the FC that they can’t sell, and because they are often being punished for listing authentic product. 

One of our drop-ship clients, for example, got an IP complaint for selling Keebler® cookies (in the snack machine size) to B2B office buyers.  He hadn’t sold a single unit, he just created the listing. There was no buyer complaint, nothing.  The takedown came from Amazon.  The algorithm decided in its infinite digital wisdom that if he was listing Keebler cookies, they must be counterfeit.  He was buying from an authorized and well-known drop-shipper.  Because there was no order or receipt, he had no proof that he was going to buy from this supplier. Apparently counterfeit edibles are a thing.  Who knew? This is a tough (cookie) situation for drop-ship sellers. 

We were able to get his account back and prove his relationship with his supplier, but can you imagine the chaos for Amazon resellers with thousands of MSKUs?  Some of our clients are already living it.  Soon, you might be too.

Self-service counterfeit removal: Brand Registry

Here’s what Amazon says, “Brands no longer need to contact us to remove counterfeit listings from our stores. Instead, they have the unprecedented ability to do so themselves using our new self-service tool. We also use this data to strengthen our automated protections to better catch potential counterfeit listings proactively in the future.”

At first, we thought they were just talking about Brand Registry here – causing seller heartburn since May 2017.  But it is a change.  Currently Brands fill out an online form which is then reviewed by the Amazon Brand Registry team.  If they agree with the takedown, then it goes through.  Brands find it frustrating because it is slow – especially if the Amazon Brand Registry team is overwhelmed – and they often get rejected for legitimate complaints.  Then they must appeal to Amazon and try again to make their case.  Occasionally they end up going through legal to get satisfaction.  If they file “too many” takedowns (how many is that???), Amazon may take away their enforcement privileges.  While imperfect processes like this keep companies like mine in business, I really hate it.  So much needless frustration and duplicate work.

If I’m interpreting Amazon correctly here, Brands will use Brand Registry to do takedowns – like before – but there’s no more approval delays for counterfeit takedowns. Those will be automatic.  I’m guessing – we’ve not taken a client through it yet – that Brands will easily take down listings where there is a picture on the listing of an obviously counterfeit product. I can see how this could be done where the offending listing has a fake UPC code, too.  But what about the many cases where the branded listing has sellers on it with counterfeit product?  That’s not clear to me.  Currently, brands must conduct time-consuming and expensive test buys.  Often, the product is never even delivered, or it takes weeks.  Bad actors are removed, and they pop up again immediately with new storefront names. It would be great if test buys were no longer required. 

As far as copyright and other, non-counterfeit, trademark enforcement actions?  Amazon doesn’t say, so I’m assuming for now that the process will be the same for these cases as it is now.  Stay tuned.

If the launch of Amazon Brand Registry taught us anything, it was that this aspect of the Project Zero launch will likely be a cluster and that abuse by brands will run rampant for a while.  Amazon’s history does not bode well for sellers who have suffered unfairly from rogue brands trying to enforce MAP or from those who want to kick everyone off because the Brand wants to go direct.

Product serialization: Transparency

I liken Transparency to when Wal-Mart introduced RFID codes 15 years ago as a way to enable just-in-time deliveries to all its stores.  It was revolutionary technology at the time and somewhat painful for the industry, but it was awesome. (Yes!  I’m THAT old!)  Transparency empowers Brands to track every item of inventory, manage/clean up their distribution channels, stop counterfeit dead in its tracks and to guarantee authenticity to buyers.

I’m very excited about what this program means to our private label and brand clients.  It’s been in beta quite a while and several of our clients are in it.  Folks, it works really well.

Brands apply a unique, non-sequential code on every unit they manufacture for an enrolled product, allowing Amazon to scan and confirm the authenticity of every one of those products sent to an Amazon FC (fulfillment center). Amazon refuses to allow products without the unique barcode into the warehouse.  Even if a counterfeit bad actor managed to duplicate the barcode, it would be rejected because EACH barcode is unique.  Amazon would already know that barcode XYZ had been used.  Amazon’s technology for generating these codes is proprietary and they keep a record of every barcode they generate.

Manufacturers can embed data into the code like manufacturing date, location and “enhanced product information” such as ingredients. Consumers can scan the code on their phone through the Amazon app or the Transparency app.  If they see a green checkmark pop up, they know their product is genuine. If a red checkmark appears, they know it is counterfeit. I’m already thinking what a boon this will be to arbitrage sellers.  If they find a product with the code that they want to sell, they can know before they buy if the product is legit.

We’ve already had clients who were warned when they sent inventory in for a transparency brand.  In the beginning, Amazon warned them and there was no other repercussion to the seller beyond having their inventory destroyed or returned.  It never makes it into FC inventory.  Amazon also sends out warnings to sellers on a listing that is switching to Transparency giving them time to sell out of current inventory and warning them that all future goods must have the code.

We’ve seen 1 month’s warning and 2 month’s warning.  I’m not sure how Amazon determines the right amount of time, but at least sellers get a warning.  The 1 month was the most recent so that may be the current policy.  Amazon recognizes that there is a lot of old inventory out there that won’t have the code on it.  It isn’t necessarily counterfeit, it is just old.  This means that sellers will have to be more careful when buying closeouts and liquidation to make sure that what they are selling isn’t a brand in the Transparency program.

Wouldn’t it be nice if we knew all the brands in Transparency and all the brands that were brand registered?  Super nice.  Highly unlikely.

Internally, brands can use these codes to identify where inventory is going.  So, if a product bound for Target® ends up at Amazon, they know it is authentic.  Could this be the end of inauthentic complaints for RA/OA sellers?  That would be nice.  I’m holding my breath (not).

More importantly, if brands have distribution agreements that forbid their channel partners from selling to online sellers, they can instantly know which partner is violating the agreement.  It is as simple as making a test buy and scanning the code.  Amazon didn’t say, but I imagine – just like we can get bin checks now – that a Brand could possibly ask for a bin check scan from a suspicious seller and get the information without buying product and waiting for delivery.  (Amazon, are you listening?)

Anyway, whether they do that or not, it will be MUCH easier for brands to clean up their distribution channels with this technology and plug the leaks.  These codes are generated BY Amazon and sold to the transparency brands.  Depending on the volume of codes the prices can be quite cheap per product and easily absorbed by most sellers.  This, by the way, is how Amazon knows all the legit codes and who they belong to.

One requirement my Brand clients don’t like is that they must apply codes to ALL their inventory for the enrolled product.  So many Brands want to apply the codes to product going to Amazon only.  Denied.  From Amazon’s perspective this makes sense.  Like I mentioned above, it allows for sales under the first sale doctrine, among other things.  Amazon only cares about counterfeit.  Brands care about other things.

If a shipment of product falls off the back of a truck or is otherwise stolen, it is easier for the brand to track when/if that exact inventory arrives at Amazon or any of their other channels and notify the authorities.  Amazon didn’t mention this in their announcement, but I speculate that there will be a way for brands to notify Amazon of missing/stolen coded inventory such that it can be confiscated by authorities before being sold.  That makes sense to me at any rate.

Right now, this is not a required piece of the Project Zero program, but I highly recommend it to my clients that are having counterfeit problems.  Transparency won’t stop MF sellers (at least, there’s been no discussion of that to date), but we all know that FBA is the way most people buy on the platform.  If someone is selling a Transparency product MF, Amazon or the Brand will probably ask them to verify with a scan code.  This doesn’t address the theft issue, but it is a really good start on shutting down bad actors. For all I know, Amazon has the theft issue covered as well, they just aren’t going to tell us what they’re doing.

Project Zero is currently by invite only. However, any Brand can apply for the program at Amazon’s website. Our clients who were early users had a demonstrated problem with counterfeit.  I suspect that sellers with ongoing problems that are not fixed by Brand Registry alone are going to get priority on this program.  And, the bigger Brand you are, the more likely you’ll be invited sooner.  Here’s what you need to do to participate:

  • A USPTO registered, live trademark
  • Enrolled in Brand Registry
  • Have a demonstrated counterfeit problem (this is not a requirement but will likely help you get in sooner) with cases filed with seller support showing pictures from test buys and/or counterfeit takedowns in brand registry.

Is Project Zero a Good Program for Sellers?

Amazon Resellers Might Feel Like This Right Now
Amazon Resellers Might Feel Like This Right Now

If you are a private label seller or a Brand, this program is very good news.  It is a back door to brand gating for PL sellers and brands who sell mainly on Amazon and it gives the brand tools with real bite to fight back against counterfeiters.  Some of my clients are plagued by bad actor counterfeiters…frequently the SAME counterfeiter with many stealth accounts.  I’ve been urging them to join Transparency ever since it went into beta.

If you resell closeouts and liquidated merchandise, this is a nightmare.  Not only do you have the ongoing worry of providing proof of authenticity to Amazon when they ask where you bought your inventory, now you could have it turned away at the warehouse with no recourse. On the flip side, if your inventory has the code, you can sell it on Amazon.  That won’t be helpful to most sellers until Transparency is widely adopted by brands, however.

Gray market goods sellers will find this program VERY frustrating because it not only stamps out counterfeit, it allows Brands to stamp out unauthorized distributions channels that many sellers rely on.  Nike®, for example, has a strict export policy. It does not want to deflate the price of its brands by releasing a lot of liquidated products onto the US market. Thus, it requires its liquidated product resellers to export the goods out of the country.  

Because of the gray market, a lot of that inventory ends up for resale on and other marketplaces. With the Transparency piece of Project Zero, Nike will now be able to find out which exporter violated the agreement and take them out of the equation.  A few highly public takedowns by Nike will add teeth to its contract and they will have hard evidence that stands up in court.  Good news for Nike.  Bad news for resellers.

For years Amazon has been telling resellers to make sure they are buying either from the brand or an authorized distributor.  Now it will be able to enforce that.  On the one hand, if you are buying from a legit source, your barcode will clear you.  That’s nice for resellers because it will greatly reduce the invoice BS we have to go through now to prove authenticity to Amazon. On the other hand, if you are buying from the gray market?  Time will tell how problematic that will be.  Amazon may not care, but the Brand surely will.

It is too early to tell about the easier takedowns and the Amazon-sponsored takedowns.  I imagine it will be good for the Brands, but the potential for abuse makes me cautious.  Too many innocent resellers have been hurt by Brand Registry abuse in the past for me to get excited.  I’ll revisit this program in the future once we have some experience.

However, we can look to precedence from other platforms and it’s not a pretty picture.  eBay’s VERO (Verified Rights Owner) Program has allowed Brands to report counterfeit listings for over 10 years now.  The program is littered with abuse by Brands toward sellers, oftentimes killing legitimate listings.  Like Amazon, eBay also inflicts punishment on sellers, such as limiting sales, banning categories or brands, or blocking PayPal payouts to sellers with zero recourse available to the seller.  There are so many stories of bad Brand experiences with eBay that most sellers consider the program a total failure. Let’s hope that Amazon approaches Project Zero differently.

When a brand adopts Transparency, it will create a fire sale on the platform that temporarily guts the price of that product as resellers desperately try to sell off their inventory before the transition deadline.  Sellers may only have 30 days to sell off their inventory.  Big brands may have hundreds of resellers on their listings.  And what if the reseller has a MAP agreement with the brand?  Now is the time to examine all your supplier contracts.  Look and see if there is a clause that requires the brand to buy back your inventory in certain circumstances.  You might need that clause very soon.

It’s easy to imagine a future where it becomes VERY difficult to buy inventory for resale on Amazon.  Which brands are in Project Zero? Which aren’t? Which are GOING to be in Project Zero? How are we supposed to buy product for resale now?  This is going to be a major issue throughout the entire secondary market.

Project Zero is a Game Changer

There is no question that Project Zero will make a significant impact on counterfeit sales on Amazon and I applaud Amazon’s efforts on behalf of all our private label and Brand clients. I am nervous, however, for our reseller clients.  As new developments progress, we will be talking about them in our Facebook group: Amazon Seller Advocates.  Please join us.

Please note that this blog is my opinion.  It is based on publicly available materials from Amazon, trends, past announcements and our experiences at eGrowth Partners with Amazon.  When I discuss client cases, I may change minor details, gender or combine cases to make my point without revealing my client.  Clients have often asked me, “was that me in the blog?” and the answer is often no.  Our volume of business is such that we will see many similar cases in a short amount of time.  This blog does not constitute legal or business advice.  We strongly urge that sellers requiring advice about their specific situation contact us.

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