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Amazon closes third-party store in China over fake cosmetic report

A parcel moves on the conveyor belt at Amazon's logistics centre in Graben near Augsburg December 16, 2013. REUTERS/Michaela Rehle
A parcel moves on the conveyor belt at Amazon's logistics centre in Graben near Augsburg December 16, 2013. REUTERS/Michaela Rehle

SHANGHAI (Reuters) - U.S. e-commerce giant Amazon.com Inc's China unit will strengthen regulation of its online sales channels and has closed down a third-party store, the online retailer said on Thursday, after state media criticized Amazon and smaller local rival Dangdang for selling fake cosmetics.

A report on China Central Television (CCTV) said that third-party sellers on Amazon and Dangdang were re-selling fake cosmetic products, some of which were sourced from local grey-market wholesalers.

Consumer protection has moved up on the agenda in China after the country strengthened consumer rights laws last year, dragging local and international firms into the spotlight including Apple Inc, Nikon Corp and Wal-Mart Stores Inc.

Amazon's China unit said in a statement on its official microblog account that it was taking the 30-minute CCTV report "extremely seriously" and took a "zero tolerance policy" towards fake goods. It added it had agreed to refund shoppers who had bought the relevant products.

"We will strengthen the process of scrutiny and regulation of our sellers," Amazon said on China's Twitter-like Sina Weibo, adding that any merchants who sold fake products would be immediately closed.

Fake goods sold online abound in China, which has caused a headache for e-commerce firms trying to regulate their platforms. Market leader Alibaba, with more than 45 percent of the market, has previously cracked down on fake sellers.

Dangdang said on Weibo it had investigated the issue and would continue to work hard to regulate sellers on its platform. However, it also called for brands to give online sellers more sales rights to prevent them going through grey-market channels.

Amazon and Dangdang both hold small shares of China's fragmented Internet retailing market. Amazon had 1.6 percent of the market in 2013, while Dangdang had 1.1 percent, according to data from Euromonitor.

(Reporting by Adam Jourdan; Editing by Matt Driskill)

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