Amazon and eBay may wish to rethink their requirements around seller return policies in light of a criminal case in which the Feds charged a husband and wife of defrauding Amazon of over $1.2 million through returns fraud.
Prosecutors said the couple defrauded Amazon by falsely claiming that the electronics they ordered were damaged or not working, and then requesting and receiving replacements from Amazon at no charge:
"Amazon's customer service policy allows, under certain circumstances, customers to receive a replacement before they return a broken item. Amazon closely monitors customers' accounts and orders for possible fraudulent activity. The Finans allegedly went to great lengths to conceal their fraud, creating hundreds of false online identities to perpetrate the scheme. Eventually, however, Amazon and federal law enforcement caught up with them."
We took a look at the plea agreement petition signed by one of the defendants in May. (The court accepted the plea agreement on September 14th and adjudged him guilty, sentencing is set for November 9.)
According to one example provided in the document, the couple ordered a Samsung Gear Fit2 smartwatch from Amazon on September 12th with a retail price of $179.99.
"On or around September 13, 2016, before the original order had been delivered, the Finans fraudulently requested a replacement Samsung Gear Fit2 smartwatch, falsely claiming the item from the original order was damaged.
"Later that same day, before either the original order or the replacement order had been delivered, the Finans fraudulently requested a second replacement Samsung Gear Fit2 smartwatch, falsely claiming the first replacement was damaged."
The document states that Amazon sent replacements, despite the fact that the claims were made before the items were even delivered, and indicates the couple never returned either item. (Prosecutors charged them with fencing goods to a third party.)
Online sellers who sell on marketplaces like Amazon and eBay have little recourse when it comes to returns fraud - take a look at this one example
that demonstrates the powerlessness of an Amazon seller.
Unlike Amazon, which has skin in the game since it sells on its own platform, eBay makes money even in cases when a seller is defrauded - and it keeps increasing the pressure on sellers to offer ever more generous returns policy.
If two people can use returns abuse to allegedly defraud Amazon to the tune of $1.2 million, the monetary loss from returns abuse on online marketplaces must be staggering.
Raise your hand if you *haven't* experienced returns fraud as a seller.