Shopify in the gun for fake stores
Merchants target e-commerce company for enabling online fraudsters
Every day, start-ups all over the world set up websites in the hope of becoming a runaway success. Many of them turn to Shopify, a Canadian company that makes it a snap to open a web store. Shopify charges a mere US$30 ($45.50) a month to maintain the site and can help with shipping, payments, even inventory. More than 600,000 merchants have signed on, and most have no complaints.
Then there are people like Mike Lindell. He runs My Pillow, which makes pillows, sheets and mattresses. This year, Lindell noticed that a scammer had used Shopify tools to set up a near facsimile of mypillow.com which claimed to sell My Pillow products. In April, My Pillow sued Shopify, alleging it supported trademark infringement. Shopify took down the site, but My Pillow is demanding damages plus any money Shopify made running the bogus store.
Shopify declined to comment on the suit, but says it has a team focused on identifying and taking down sites like the fake pillow store. Still, the fake site problem could sully the reputation of the fast-growing company that is on the cusp of generating US$1 billion in annual sales.
Shopify’s fight against fake users echoes similar battles being waged at Facebook, Twitter and YouTube. And like those companies, Shopify is contending with the same conundrum: is a so-called platform company responsible for the behaviour of those who use it?
My Pillow is one of many companies battling fake web stores built with Shopify software. The Pokemon Company International subpoenaed Shopify in 2016 after a merchant offered Pokemon-branded products without permission. This year alone, at least four lawsuits have targeted Shopify-built sites for alleged trademark or copyright infringement.
It’s dead simple for a criminal to set up a fake storefront using Shopify’s software. Signing up, designing a store and uploading products takes minutes. Payments and order processing are all handled by Shopify. Algorithms hunt for suspicious behaviour, but even if a store gets shut down, someone can always open another with a new email address.
“You get up and running within minutes, selling t-shirts, teabags, etcetera. The bad part is, so can a fraudster,” says Don Bush, vice president of marketing at Kount, which sells software that helps prevent e-commerce fraud.
Shopify’s basic argument has been that market forces would weed out merchants using unsavoury sales tactics. But as lawsuits pile up and defrauded consumers complain, the company has begun to take a more active role. It has beefed up the team focused on merchant misbehaviour and responds to clear notices of copyright and trademark infringement. The company built software to spot potential fraud.
Shopify’s chief operating officer Harley Finkelstein defends his company’s easy-to-use strategy. “Do we make it really easy to start businesses?” he says. “Absolutely. But what we also do simultaneously is we ensure there are these gates and these checks and balances.”
You get up and running within minutes . . . The bad part is, so can a fraudster.
Don Bush, Kount