While Some Residential Proxy Providers Accelerate Spread of Ecommerce Fraud, Others Help Brands Prevent and Detect Intellectual Property Violations

Tech-savvy retailers are utilizing IP address hopping to improve their website performance and grow their operations scale. While the technology helps genuine brands thrive, it could simultaneously be giving away a significant share of their business to counterfeit frauds.

April 6, 2021. With most physical stores closing down due to COVID-19 and online traffic rising, retailers have been looking for ways to successfully move their operations online. While web scraping and its applications in business intelligence, testing site performance, and ad verification have helped many genuine companies thrive, it has also become an essential tool for counterfeit fraud.

While the exact figures of online fraud increase are still being determined, the European Payments Council reports an uptick in ecommerce fraud. Simultaneously, according to the FTC, Americans have already lost more than USD 145 million to fraud related to the coronavirus.

Among many types of fraud, ecommerce website cloning is one type of malicious activity that the increasingly available web scraping services have enabled. The way it works is fraudulent actors identify a high-demand retailer, use a residential proxy to copy its website rapidly, and upload it to one or several website domains similar to the original. These cloned websites then present identical merchandise as the original.

To tempt shoppers into committing to a swift purchase, the owners of these fraudulent websites often reduce the prices and present it as the ‘big sale.’ Consequently, unsuspecting buyers purchase these items and receive counterfeit products.

In response to these pernicious trends, some residential proxy providers have taken security measures to prevent ecommerce fraud. To avert the potential dangers, residential proxy providers like IPRoyal have enabled their users to utilize web-scraping to detect potential intellectual property violations.

“One of the services we provide at IPRoyal is allowing our users to scan the web for copies and counterfeits of their products. This way, if the user suspects that malicious actors are running a copy of their website and are selling counterfeit items, they can immediately take measures to protect their customers from fraud,” said Karolis Toleikis, CEO at IPRoyal.

Offering a way to obtain and process large amounts of data quickly, residential proxy providers help companies get a better overview of their competition and boost their customer conversions. However, at the same time, they could be unsuspectingly (or voluntarily) assisting fraudulent users in reaping millions in profit.

“We’ve always worked with genuine companies and individuals only. To make sure that stays the case, we have implemented an advanced user identity verification process and have been checking to make sure that we are not enabling website replication, DDoS attacks, and other forms of illegal activity,” commented Mr. Toleikis.

If the situation persists and more businesses move online, there will be more instances of ecommerce fraud. And while industry-wide regulations are non-existent, it will be up to network infrastructure providers how far this issue escalates.