Amazon.com, Inc. (NASDAQ:AMZN) faces a fresh set of allegations from German automaker Daimler AG (DE:DAIGn) over sale of counterfeit products in its marketplace.
In a lawsuit filed in the U.S. District Court in Los Angeles, Daimler alleged Amazon of trademark infringement and claimed that the company sells fake Mercedes-Benz wheel center caps. The lawsuit also claimed that Amazon has not taken steps to handle the infringement issue.
“Amazon’s sale of the infringing products causes significant damage to Daimler,” the complaint states. “For example, sales of the infringing products decrease sales of authentic Mercedes-Benz wheel center caps, and tarnish Daimler’s reputation for quality and excellence. The infringing products are of substantially inferior quality than authentic Daimler wheel center caps.”
The companies have been at loggerheads since April last year when Daimler sued Amazon in a district court and then the U.S. International Trade Commission (USITC) for selling fake Mercedes-Benz wheels from 10 distributors. Both the companies decided to stay the district court case until the USITC case reaches conclusion.
In August this year, Daimler asked for a resumption of the lawsuit in a Washington federal court stating that the USITC case was resolved with key issues still undecided.
Though there are no comments from Amazon on the current lawsuit, the company usually argues that it cannot be held responsible for infringing activities of its third-party sellers. The company claims that it has zero tolerance for the sale of counterfeit items.
We observe that Amazon shares have gained 52% year to date, underperforming the industry’s 62.9% rally.
Our Take
The growth of the e-commerce industry, with consumers increasingly buying things online, is a dynamic going in favor of Amazon. While big brands may build their own online stores over time, a platform like Amazon allows discovery of new buyers.
Amazon.com, Inc. Net Income (TTM)
Smaller players are far more dependent on Amazon as they don’t have the resources to invest in technology and fulfillment to generate the kind of reach that Amazon can deliver. Amazon’s platform is currently being used by more than 2 million independent sellers.
Moreover, the market is in the early growth phase (considering opportunities in international markets. So, the company’s high growth rates are likely to be sustained over the next few years.
But that should not make Amazon overly confident about its online business. When brands hit by counterfeit charges lose sales and potential customers, the ripple effect will also be felt by Amazon and earn it a bad name.
Zacks Rank and Stocks to Consider
Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here
Better-ranked stocks in the broader technology sector include Activision Blizzard (NASDAQ:ATVI) , Applied Materials (NASDAQ:AMAT) and Alibaba (NYSE:BABA) , each carrying a Zacks Rank #2.
Long-term earnings per share growth rate for Activision, Applied Materials and Alibaba is projected to be 13.8%, 13.3% and 30.7%, respectively.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Alibaba Group Holding Limited (BABA): Free Stock Analysis Report
Activision Blizzard, Inc (ATVI): Free Stock Analysis Report
Applied Materials, Inc. (AMAT): Free Stock Analysis Report
Original post
Zacks Investment Research