How Stolen Goods End Up On Amazon, eBay And Facebook Marketplace

A Louis Vuitton with every item swiped from the shelves in San Francisco’s Union Square. A nearby Nordstrom robbed by 80 people the next day. Similar sprees on Chicago’s Magnificent Mile and Rodeo Drive in L.A. They’re actively looking for about 30 people who are trying to break into other stores.

Theft is nothing new, but a recent spree of coordinated, big scale robberies has law enforcement and retailers warning this is not simple shoplifting by those in need. The police say this is a professional crew connected to a six state crime spree. It’s organized retail crime by professional crews and it’s on the rise for one big reason.

What fuels this as an enterprise is the ease of reselling stolen merchandise on online marketplaces. While punishments for shoplifters are hotly debated, there’s growing consensus around a solution that holds an entirely different group accountable: the online sites where stolen goods are sold, primarily Amazon, eBay, and Facebook marketplace, which all say they’re already doing a lot to stop this.

EBay is not a place to hide yourself and try and offload some of this stuff. It used to be you have to go to a pawn shop. You have to go find a place to sell it at a flea market. Now you have the ability to ship it from your home. 20 major retailers, including Home Depot, Best Buy, Walgreens, and Kroger, sent a letter to Congress in December asking them to crack down on online marketplaces by requiring stricter verification of sellers.

My ask for the online community is just do more right. CNBC went to Home Depot to see the new tech and decades-old solutions it’s now using to stop theft. Generally, anything over $100 is typically behind the bars in this case. Here’s what major retailers and Amazon, Meta, eBay, and legislators say they’re doing to fight the big problem of stolen products being sold online.

Welcome to the Home Depot. Please enjoy your shopping experience. Surveillance from this tower of cameras watching over a parking lot in Hiram, Georgia, is one way Home Depot is trying to prevent and track down would-be thieves. We’re testing a couple of other things like license plate recognition.

If we could know in advance that John Doe, who potentially is a repeat serial organized retail crime offender, we’d know when they’re in the parking lot before they walk into the store. We can prepare. Scott Glenn has been in loss prevention for 26 years. Since he joined Home Depot four years ago, he says losses from organized retail crime, or ORC, have grown at double digit rates.

It’s in the billions of dollars a year. So now Glenn says Home Depot is spending millions to prevent theft with new ways and old. This area of the store per square foot is the largest loss area of the store in just total dollars. So what we’ve had to do, unfortunately, is put some barriers in between the customers and the product.

Something new is called Point of Sale Activation. A Bluetooth enabled chip embedded in some power tools keeps them from working unless they’ve been scanned at a register. And if you bought a stolen Milwaukee product that was activated with the POSA technology and you brought it home, it wouldn’t turn on.

Correct. Another new example are carts that lock up at the exit. If they haven’t been discretely scanned by going through a checkout lane. What it’s going to do is the cart’s going to lock up on me. Home Depot has hundreds of cameras in each of its stores, and it’s experimenting with technology that would allow them to keep track of items as shoppers put them in their baskets.

Particle recognition, computer vision, whatever you want to call it. We actually do have it in a couple of stores in terms of a pilot. In April, a San Jose Home Depot burned to the ground after a man attempting to steal a cart full of tools set a fire as a diversion. But even with extreme cases like this, it can take years for law enforcement to determine whether it was part of a larger crime ring or just an isolated, desperate incident, which makes tracking theft trends especially tricky.

It’s heavily dependent on self-reported data from retailers, and so this is a very, very squirrelly thing to actually be trying to track. Retailers say a total of $68.9 billion of products were stolen in 2019. In 2020, three quarters said they saw an increase in organized crime and more than half reported cargo theft.

Think those thousands of boxes strewn along the L.A. rail tracks after they were swiped from slow moving shipping containers. Some big chains say organized theft is the reason they’ve closed stores or limited hours, but they’re also facing steep competition from online shops and a drop in foot traffic because of the pandemic.

Retailers have one goal, one fiduciary obligation to their shareholders, right? And that’s to increase profit and to increase shareholder value. Critics like Alec Karakatsanis, of the Civil Rights Corps, say that’s motivating retailers to make the problem sound worse than it actually is. By drawing attention to dramatic thefts, they redirect public sentiment toward policies that better protect their bottom line, like increased punishments for petty shoplifters, not just million dollar crime rings.

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The collateral damage from their campaign to stoke fear about retail theft is going to have profound effects and more severe punishments for the poorest people in our society and for people who are stealing from grocery stores and drug stores for basic necessities of life. I asked the CEO of Walgreens, Why do you have underarm deodorant under lock and key? They said, because it’s so easy to pull your arm on the shelf and sweep everything into a bag.

They put them online. They get certain quantities of them. It’s a massive operation. Prior to coming to Home Depot, I wasn’t really a believer. I thought maybe it was a little bit overblown. People were making too much of an issue out of it. Coming to Home Depot, I’ve seen it in real life.

I’ve seen it growing. I’ve seen the impact of it. And so it is not only growing over the last five years, I would say it’s grown incrementally over the last two. During the pandemic. While timely numbers are hard to pin down, Homeland Security says its organized retail crime investigations are on the rise.

Last year saw far more arrests, more indictments, and more value in stolen goods seized than in 2020. As long as there are resale markets that are not held accountable for the sale of stolen goods, then this kind of conduct is only going to get worse. Here’s how it works. A criminal network hires an individual or crew called boosters.

They can be professional thieves or even victims labor trafficked into the U.S. from other countries. After robbing a retailer, they turn over the stolen goods to someone waiting nearby called a fence. Boosters often hit multiple stores a day and they can even cross state lines and ship goods to a fence.

The fence pays the booster in cash or drugs, usually about a quarter of the retail value. The fence then takes the haul to a home or warehouse where a cleaner removes anti-theft devices or markings, then sends it to a larger criminal network which resells it, usually online. The National Coalition of Law Enforcement and Retail, or CLEAR, estimates that more than $500 billion in illicit, stolen, and counterfeit goods are sold on third party marketplaces like Amazon each year.

Very recently, a CVS manager was assaulted and remains in serious condition. These incidents are not uncommon. Reported violent events at CVS have doubled in the last year. Ben Duggan testified about this at a Senate hearing in November. He’s the president of CLEAR and also leads investigations at CVS Health.

There are far less obvious dangers to this crime, including infant formula. That’s a favorite target of these criminal organizations. They ignore or manipulate the expiration dates and they’re not storing it at proper temperatures. It compromises the product integrity and is endangering the health of an infant.

How do you know that these items are being sold on Amazon or elsewhere online? How do you track it on the back end? It’s just easy, right? So we sell proprietary products. We sell things that are our own brands and they end up being sold in mass on an online retailer. And they’re selling it at prices better than we can sell it at.

So we have a team of investigators that are kind of combing through the internet, looking for these types of things, and then we start the investigation from there. And we essentially backtrack it through the process. One example: an eBay shop called Tool King USA, where one man sold $3 million in stolen goods from Home Depot, Target, and Lowe’s.

Secret surveillance led to the arrest of this Atlanta man who’s reporting to federal prison in June after selling more than $6 million of stolen goods on Amazon, Walmart, and Sears, although he denies operating a well organized criminal network. Another example involves an Amazon top rated seller known as The Medicine Man.

In 2020, CVS ran surveillance on his boosters in San Francisco for weeks, leading to multiple Amazon accounts that sold more than $5 million of stolen over-the-counter drugs on Amazon each year. He was arrested along with four others. $8 million of stolen goods were seized in what law enforcement says is the biggest organized retail crime bust in California history.

To assist with the backtracking needed for investigations like these, Home Depot prints unique barcodes on some inventory item by item. If I see that number and I know that number is sitting on a website somewhere, I can actually track backwards through the supply chain. How did it get there? What store was it assigned to? Was it ever paid for? Was it ever returned? What distribution center did it come from? In fact, what factory did it come from? Some high-end apparel companies, like Lululemon, are doing something similar, putting RFID tags in 100% of their merchandise so it can be scanned to prove authenticity or to ID a stolen item once it’s recovered.

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But while thefts of luxury goods get a lot of attention, it’s tricky to offload them as authentic products on Amazon. That’s because Amazon has tight restrictions on selling certain brand names. But former Amazon product safety manager Rachel Greer says sellers can easily get around those restrictions.

You don’t even have to label it as Coach. As long as the picture says coach and you drive traffic from Google to the Amazon listing, you don’t even have to call it Coach anywhere on the listing on Amazon. It’s really easy to game a system once you know how it works when there’s no person checking anything.

It’s all automated, so as soon as you know how the system works, it’s like, Okay, turn this way here. Turn this way here. And done. Now we’re selling our stolen Coach bags. Amazon says it uses advanced machine learning to hold bad actors accountable, including if they use other companies’ services to try and get around its safeguards for trademarked items.

In May, 41 people were arrested after a three year investigation uncovered $3.8 million of stolen goods from stores like Bloomingdales and Duane Reade. They were being sold on eBay, which says it helped authorities with the investigation. The key is getting that intelligence to recognize when an item is stolen.

Since 2007, eBay’s had a unique program that retailers told us is particularly helpful for catching criminals. The PROACT is essentially a two-way reporting system where retailers warn eBay when they’ve had a significant theft. Then eBay watches for matching items to appear for sale on its site.

PROACT team lead Mike Carson says the millions eBay spends on staff and back end tech to run the program is well worth it. If people are hearing stories about stolen goods being sold on eBay, if they’re receiving stolen goods and then get contacted by law enforcement, we’re certainly going to lose customers.

But we also have risk models that will detect things that look suspicious. If you’re a brand new seller and you list 15 iPhones on the site all at once and you’ve never sold anything perfectly, we’re probably going to flag you. And we’ve asked for years for Facebook and Amazon to implement a similar program to eBay.

Ebay’s also got a proven track record of assisting law enforcement with investigations. So we worked with the U.S. Secret Service Task Force back in May of last year now, which resulted in the indictment of seven individuals related to an organized retail crime ring. They ended up seizing about 50,000 stolen goods.

These stolen products are repackaged, distributed, and distributed to the largest online marketplace sellers. At Amazon, cooperation with law enforcement hasn’t always been as smooth. In the Medicine Man case, for example, Duggan says Amazon claimed not to have any of the information subpoenaed by the local sheriff’s department, so it had to issue warrants to banks instead.

In response, Amazon told CNBC it provided extensive information for the case, but that law enforcement never requested sales data. The online marketplaces, like Amazon and Facebook, they need to do something to proactively identify stolen and counterfeit product on their platforms. And we need them also to do more so that law enforcement has line of sight into what’s happening on these online marketplaces.

In 2021, Amazon says it spent more than $900 million and employed more than 12,000 people to prevent fraud and abuse. In a statement, Amazon told CNBC, Amazon does not allow third party sellers to list stolen goods in our store, and we work closely with law enforcement, retailers, and brands to stop bad actors and hold them accountable, including withholding funds, terminating accounts, and making law enforcement referrals.

Another big way to stop ORC sales? Make sure sellers are who they say they are. Amazon says the vast majority of sellers are required to complete a one-on-one video verification during which they show a government ID, a requirement it started rolling out in 2020. It also verifies seller addresses by mailing a postcard with a unique code to the seller, who then manually enters it on Amazon.

But Greer says criminal organizations easily find ways around this. They’ll advertise on Craigslist for someone to own the business. And it’s a business opportunity, right? And so they sign up, and they think that they’re doing something really cool. And they get on the phone with Amazon, and do the the phone video call to validate that they’re a legitimate person.

They have a passport, they have a U.S.-based address. The products flow through the account, and they get 2% of everything that goes through. Amazon says it removes sellers associated with bad actors, but the problem gets even more complicated when you factor in international sellers governed by different legal systems.

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Amazon started inviting Chinese sellers to its marketplace around 2013. They’ll advertise for people in the U.S. who will front these Chinese-based companies. So, it’s really not very difficult to do. There’s whole conferences on how to do this in China. Amazon says it analyzes hundreds of unique data points to identify possible risks, including if an account changes hands after registration, and that investigators also review applications.

In a statement, Amazon told CNBC, We are the only online marketplace to publish seller contact information publicly and any retailer can see the identity of any professional seller in our store. On Meta’s Facebook Marketplace, it’s even simpler to start selling. While selling stolen items is against commerce policies, Meta doesn’t typically require proof of identity to sell on Facebook marketplace beyond the basic name and verifiable email or phone number needed to open a Facebook account.

But under pressure from legislators and retailers, Meta says it’s started to collect and verify business information from some sellers and display that information to buyers. We don’t want people to be selling anonymously. If we as Home Depot have to understand who our suppliers are, then Amazon, eBay, whomever is selling, should also have to understand who their sellers are as well.

One Ohio man said he was making $2,500 a day posting stolen power tools on Facebook Marketplace, then meeting customers in a parking lot to sell the tools for nearly half price. In a statement, a Meta spokesperson told CNBC, We prohibit the sale of stolen goods and use a number of tools to prevent this kind of illicit activity on our platform.

We encourage people to report suspicious listings to us via our on-platform tools. As for cooperating with investigations, Meta says in 2021, it received government requests for data on more than 700,000 user accounts, and it provided some information for more than 70% of those. But retailers say Meta and Amazon can do more to leverage data to stop bad actors ahead of a sale.

We’ve got a lot of pushback. And, frankly, if the online marketplaces are not going to proactively do anything on a voluntary basis, well then, we’re going to need to push to have them compelled to do it. Now, a federal bill called the Informed Consumers Act has passed the House and is awaiting a vote in the Senate.

It would require high volume sellers doing north of $5,000 in sales every two years on sites like Amazon, eBay and Facebook Marketplace to provide a verifiable bank account, tax ID, and a working email and phone number. Back in 2008, I introduced my first bill to address the problem of illicit products sold online.

And the marketplaces told me, Don’t worry, we’re taking care of this. You don’t need a legislation. Well, here we are 13 years later, and this problem hasn’t gone away. It’s gotten much, much worse. Senator Dick Durbin says he had to rewrite the bill several times, primarily because of pushback from the marketplaces.

They make money on the sales and they don’t want to make it harder for their sellers. They want to make it easier. They don’t care, I’m sorry to say, some of them don’t care what happens once the sale is made. The bill also requires marketplaces to give consumers two recourse options: a way to contact high volume sellers after making a purchase and a system for reporting suspicious seller behavior or illicit goods.

We feel it does a good job of of raising the bar for the industry as a whole. Now, eBay, Amazon, and Mehta all say they support the bill in its current form. I think they finally came to the conclusion that we were just never going to stop bothering until they did it. Us cracking down on the organized retail crime industry will not put Amazon or any other online platform out of business.

Illinois Attorney General Kwame Raoul is leading another national effort, a task force of attorneys general that meets regularly to make sure crackdowns can efficiently cross state lines. Raoul met with Amazon’s general counsel to ask for cooperation in stopping the sale of stolen goods. I think I may have said at some point something to the effect of, Hey, I’m inviting you into the kitchen.

But, you know, if you don’t come into the kitchen in good faith, you’re going to be on the menu. Illinois, Arkansas, Colorado, and Ohio have already passed their own legislation requiring seller verification for the online sale of goods, although big tech advocacy groups and an Amazon-hired lobbying firm argued against the Ohio bill, saying it would impede business for law abiding sellers.

I’m hoping Amazon and Facebook will finally come to the table and do behind closed doors what they’re claiming they are doing publicly. At the end of the day, we’re not asking them to do anything more than what we already do as brick and mortar retailers. And that’s what our ask would be, is just be a good partner for us.

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