The team of ex-prosecutors is battling Amazon's counterfeit issue from behind the scenes.

In October 2018, authorities arrived at an unremarkable industrial facility in the Brooklyn Navy Yard to probe alleged fakes.

An investigation into California Surplus, a distributor that secured a $20 million contract to supply the U.S. military with specialized uniforms, led federal agents to search for knockoff military gear. They had already recovered thousands of boxes of the stuff from a nearby New Jersey warehouse, as per court documents.

It was discovered that California Surplus was selling counterfeit goods that resembled gear from Crye Precision, a top military outfitter in America, whose headquarters was located nearby in Brooklyn.

In 2019, Ramin Kohanbash, the owner of California Surplus, and co-conspirator Bernard Klein pleaded guilty to trafficking counterfeit goods and were sentenced to jail time.

Crye is losing millions of dollars annually due to counterfeiting of its patented camouflage, MultiCam, by unlicensed mills overseas that print it on ponchos, pants, shirts, and hats sold on Amazon and other marketplaces without permission.

Since its launch in 2000, Amazon's marketplace has enabled businesses to sell their products on the company's website. With millions of sellers, the marketplace accounts for more than half of Amazon's overall retail sales volume. Although the marketplace has contributed significantly to Amazon's revenue, it has also been discovered to host counterfeit, unsafe, and expired goods.

In 2016, Amazon's counterfeit problem was becoming increasingly apparent, with sellers speaking out about the company's efforts to work with Chinese manufacturers. Sales from Chinese-based sellers on the site had more than doubled in 2015.

The pandemic has intensified the issue of counterfeits on Amazon and other online platforms, as more people shop online, according to Jason Goldberg, the chief commerce strategy officer at Publicis. Unlike physical stores that can offer up to 150,000 products, online marketplaces like Amazon have a much larger selection of hundreds of millions of items, making it harder for them to regulate.

He remarked that there is ample room on the digital shelf for fake products.

'Disrupting and dismantling' counterfeiters

In 2020, Amazon established a Counterfeit Crimes Unit that collaborates with brands and law enforcement agencies to combat fraudsters.

The CCU, comprising 35 individuals, is a team of data analysts, investigators, and former federal prosecutors who previously worked for the Justice Department and FBI. Amazon invited CNBC to its second headquarters in Arlington, Virginia, to learn more about how the CCU investigates counterfeits on the company's marketplace.

Kebharu Smith, head of the CCU, stated that the division was launched at the request of Jeff Bezos, the former CEO of Amazon, who felt the need for a team of former prosecutors and experts to "disrupt and dismantle" counterfeiting organizations.

"The counterfeiting industry generates approximately $500 billion in sales, necessitating a collaborative effort among brands, law enforcement, and partnerships with stakeholders to effectively combat these illicit actors on a large scale, according to Smith. Rather than solely targeting identified bad actors in the Amazon store, our focus is on dismantling the entire supply chain to eradicate the network."

In 2023, Amazon collaborated with law enforcement globally to confiscate 7 million fake items and conduct over 50 raids, investing $1.2 billion and utilizing 15,000 individuals to achieve this goal.

Amazon's anti-counterfeit efforts were mainly handled by its customer trust team prior to the CCU's launch, which is responsible for managing various abuse and fraud issues, such as fake reviews and individuals attempting to bypass its policies.

Amazon partners with companies such as Prada, Hanesbrands, and Yeti through the CCU to combat counterfeiters. In March, Amazon filed a lawsuit against Crye, accusing six companies and 16 individuals of selling fake versions of Crye's MultiCam product on Amazon's marketplace. The items included camping, hunting, and traveling bags and backpacks with fake versions of Crye's camouflage pattern.

In August 2023, federal agents from Homeland Security and the Department of Defense acted on information from Crye and Amazon to raid facilities in Texas and California. Agents seized "multiple tractor trailer loads" of counterfeit MultiCam products, estimated to be worth $8 million, according to court documents.

Online test purchases are a common initial step for many brands in identifying counterfeits.

"Although it may seem like MultiCam to the untrained eye, it doesn't look right to us. So we will purchase some tests and analyze them to determine if it is counterfeit."

Crye presented CNBC with evidence of fake MultiCam products sold by retailer L&Q Tactical on Amazon. These products included tactical vests, backpacks, and plate carriers, which Crye identified as counterfeit due to inconsistencies in coloring with its MultiCam pattern. L&Q included the term "MultiCam" in some of its Amazon product listings, even though it was not affiliated with Crye, according to the evidence.

"In an interview, Crye's MultiCam brand manager, Ernesto Rodriguez, stated that the company's competitors were attempting to win military contracts with counterfeit items. However, Rodriguez noted that these competitors were not successful in replicating MultiCam's unique pattern."

Fake backpacks, Apple chargers

Fake products posted online, such as those on Amazon, can harm a brand's reputation and pose a risk to consumers. In Crye's case, counterfeit versions of its product could endanger the lives of soldiers and police officers. Rodriguez stated that Crye tested the L&Q items with night vision goggles and found they did not properly conceal a soldier on a battlefield.

"Rodriguez stated that the bag glows solid white under night vision, making it visible from miles away if a soldier is carrying it."

Some brands have stopped selling directly on Amazon due to the prevalence of counterfeits and the unregulated nature of the platform.

In 2016, Amazon was sued by a seller for selling fake chargers with its logo, which posed a significant risk of overheating, fire, and electrical shock. Rachel Greer, who worked in Amazon's fraud and product safety departments from 2007 to 2015, recalls a case around 2013 where a U.K. consumer died after being electrocuted from a knockoff Apple charger.

"Greer stated in an interview that the charger would plug in, but it would cause a severe shock because there was no insulation."

Apple products are now subject to approval from the brand before resellers can sell them on Amazon, as they have been designated as a restricted category. Amazon has not commented on the incident in the U.K. Smith stated that the company has identified individuals who use fake identities to establish accounts and sell in gated categories.

Smith stated that we have identified tactics like "un-gating schemes," where malicious actors submit false invoices to bypass our proactive measures.

While the number of counterfeits on Amazon has decreased, the prevalence of "dupes," or cheaper imitations of popular products, has increased. A 2023 Morning Consult study found that roughly one-third of U.S. adults have intentionally purchased a dupe. Buying a knockoff is now less taboo than it used to be, according to Goldberg.

"More and more consumers are saying, 'I am financially responsible and frugal. I wouldn't buy an expensive bag with a Coach logo, but I like the aesthetic. I found a bag without the Coach logo that had the same aesthetic on Temu for 10% of the cost," he stated.

In recent years, Temu, Shein, and TikTok Shop have emerged as popular shopping destinations in the U.S., attracting American consumers with their affordable prices on clothing, electronics, home goods, and other products. The merchandise sold on these platforms is largely unbranded and sourced directly from China.

Amazon is introducing a new storefront for low-priced fashion and lifestyle items, allowing Chinese sellers to ship directly to U.S. consumers. The company has set caps on product pricing, such as a $20 limit for couches and $9 for bedding sets, in an effort to remain competitive, as previously reported by CNBC and The Information.

Goldberg stated that the increase in online marketplaces has made it more challenging for companies to maintain "complete brand safety."

"He stated that the new reality in retail is that consumers are increasingly discovering products on TikTok rather than in physical stores and are purchasing across multiple platforms. The world is becoming increasingly complex and chaotic, and achieving perfection is now more distant than ever before."

Watch the video for a behind-the-scenes look at how Amazon is fighting counterfeits.