Amazon.com, Inc. (NASDAQ:AMZN) Files Suit Against Fake Reviewers

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Amazon.com, Inc. (NASDAQ:AMZN) is fed up with people who are trying to taint its reputation with malicious reviews. As such, the company has taken the rare but possibly expensive step of suing dishonest reviewers, starting with the U.S. However, there are doubts as to whether Amazon’s fight against fake reviews would be won everywhere.

Amazon.com, Inc. (NASDAQ:AMZN) and Alibaba Group Holding Ltd (NYSE:BABA) are e-commerce giants fighting fakes, but each one has a unique case. While Alibaba is dogged with fake vendors, Amazon is feeling choked by fake reviewers. For Alibaba, it is mostly outsiders, especially vendors, who have been complaining about the impact of fake goods being sold on the Chinese giant online marketplace. However, in the case of Amazon, the pain is being felt from within.

After witnessing a wave of negative fake customer reviews, Amazon is pushed to act to defend its reputation. The company has filed lawsuits in its hometown of Seattle against more than 1,000 reviewers. According to Amazon, the reviewers took money to post the dishonest reviews, so it wants them punished.

Will Amazon fight to a successful end?

The battle front that Amazon.com, Inc. (NASDAQ:AMZN) has opened with dishonest reviewers could be costly. For a company that is still a lossmaking machine, the move also raises serous investor questions – is Amazon trying to bite off more than it can chew?

Amazon’s business generally has a low profit margin, which saw the company post a loss of $241 million on revenues of $90 billion last year. However, the campaign that the company has launched against fake reviews will demand substantial financial investment to be successful. That is coming at a time when investors are looking for the company to narrow spending where possible to shore up margins.

Complexity of fighting abroad

Even if Amazon.com, Inc. (NASDAQ:AMZN) were to convince doubting investors that fighting dishonest reviews is as important as improving profit margins, questions remain about how the company would deal with fake reviewers abroad. While Amazon might want to take its war against fake customer reviewers overseas, not every country out there has a vibrant legal system like the U.S., which complicates matters for the company.

Neha Gupta

Neha Gupta has been in the financial space for over six years now. Gupta earned her MBA degree from Symbiosis Centre of Distance Learning in 2009 and her passion for finance led her to pursue Chartered Financial Analyst (CFA) course. She has successfully completed Level II of her CFA. She is a veteran in article writing, which is depicted in her numerous pieces published on SeekingAlpha, Nextiphonenews, InsiderMonkey, MarketWatch, and Techinsider. Her crisp and eloquent writing finds its best place in Researchcows, where emphasis is given on developing rich content for various websites, products, business plans, trainings, and book writing.

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