Feds Hound E-Commerce Counterfeiters on Cyber Monday

In one swoop, a Justice Department-led group of federal law enforcement agencies seized 150 domain names of commercial websites that it claims have been selling counterfeit goods.

The seized domains are now under federal custody. Taking place on Cyber Monday, the timing of this raid was not likely an accident. The federal government has been targeting counterfeit online sales and piracy since last year, seizing a total of 350 domains. It is widely assumed the Justice Department wanted to coordinate the takedown on one of the biggest online shopping days of the year. It also happens to be a day when online shopping fraud is at its peak.

Online Sting

The sting operation entailed federal agents purchasing products from these sites — which were marketing a range of goods from professional sports jerseys, golf equipment and DVD sets to footwear, handbags and sunglasses.

Once the goods were received, the agents turned to the actual trademark holders to confirm that the products were counterfeit. At that point, seizure orders for the domain names were granted by federal magistrate judges.

Also participating in the raid were the Immigration and Customs Enforcement’s Homeland Security Investigations group, the FBI’s Washington field office, the Computer Crime and Intellectual Property Section of the Justice Department’s Criminal Division, and the offices of eight U.S. Attorneys, including the District of Maryland, Southern District of Texas, Western District of Texas, District of Minnesota, Eastern District of Michigan, Eastern District of Louisiana and District of Colorado.

Called “Operation In Our Sites,” the anticounterfeit and antipiracy initiative, was launched in 2010. That year, 82 website domains were seized on Cyber Monday.

The owners can file a petition with the court to contest the seizures. If no petitions or claims are filed, the domain names become the property of the U.S. government.

The Department of Justice’s public affairs office did not respond to our request for further details.

Little Impact

Despite the scale of the takedown, not to mention the symbolism of its timing, it is not likely to have much of an impact on the online sale of counterfeit goods, Joseph Steinberg, CEO of Green Armor Solutions, told the E-Commerce Times.

“Seizing Web domains will barely make a dent, unless you can catch the actual people behind the operations and put them in jail,” he said. Setting up a new website “takes a matter of minutes, because the code can easily be ported to another site.”

Not that the government should allow the domains to continue to conduct business, he added. “They have to do it, to enforce the law, however they can.”

The feds must also contend with foreign governments that don’t take counterfeiting as serious as the U.S. does, Steinberg continued.

On the other hand, the raid could have a significant impact, Peter Toren, a partner with Shulman Rogers, told the E-Commerce Times.

“It is a large number of websites and it represents a fairly major step in the right direction,” he said.

Innocent Shoppers

Even if the long-term impact of the site takedowns is negligible, the operation will hinder fraud on the most important online shopping day of the year — Cyber Monday — which is prime hunting season for fraudsters, Toren argued. “People go online expecting to see bargains, so their guard might be down if they come across one of these sites.”

These counterfeit sites can be very devious, Steinberg said. “They won’t necessarily offer products at deep discounts — just at slightly lower prices to lure in people looking for bargains.”

Once someone makes a purchase from one of these sites, Toren said, the outcome is not likely to be a happy one for the consumer. “The quality of the product is bound to be poor, or maybe not even anything close to what the consumer was expecting. Also, you can bet there are no return policies or warranties as part of the purchase.”