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Tesla’s dirty little secret: Its net profit doesn’t come from selling cars

Eleven states require automakers sell a certain percentage of zero-emissions vehicles by 2025. If they can’t, the automakers have to buy regulatory credits from another automaker that meets those requirements — such as Tesla, which exclusively sells electric cars.
It’s a lucrative business for Tesla — bringing in $3.3 billion over the course of the last five years, nearly half of that in 2020 alone. The $1.6 billion in regulatory credits it received last year far outweighed Tesla’s net income of $721 million — meaning Tesla would have otherwise posted a net loss in 2020.
“These guys are losing money selling cars. They’re making money selling credits. And the credits are going away,” said Gordon Johnson of GLJ Research and one of the biggest bears on Tesla (TSLA) shares.

Tesla top executives concede the company can’t count on that source of cash continuing.

“This is always an area that’s extremely difficult for us to forecast,” said Tesla’s Chief Financial Officer Zachary Kirkhorn. “In the long term, regulatory credit sales will not be a material part of the business, and we don’t plan the business around that. It’s possible that for a handful of additional quarters, it remains strong. It’s also possible that it’s not.”

Tesla also reports other measures of profitability, as do many other companies. And by those measures, the profits are great enough that they do not depend on the sales of credits to be in the black.

The company reported 2020 adjusted net income, excluding items such as $1.7 billion stock-based compensation, of $2.5 billion. Its automotive gross profit, which compares total revenue from its car business to expenses directly associated with the building the cars, was $5.4 billion, even excluding the regulatory credits sales revenue. And its free cash flow of $2.8 billion was up 158% from a year earlier, a dramatic turnaround from 2018 when Tesla was burning through cash and in danger of running out of money.

Its supporters say those measures show Tesla is making money at last after years of losses in most of those measures. That profitability is one of the reasons the stock performed so well for more than a year.

But the debate between skeptics and devotees of the company whether Tesla is truly profitable has become a “Holy War,” according to Gene Munster, managing partner of Loup Ventures and a leading tech analyst.

“They’re debating two different things. They’ll never come to a resolution,” he said. Munster believes critics focus too much on how the credits still exceed net income. He contends that automotive gross profit margin, excluding those sales of regulatory credits, is the best barometer for the company’s financial success.

“It’s a leading indicator,” of that measure of Tesla’s profit, he said. “There’s no chance that GM and VW are making money on that basis on their EVs.”

The future of Tesla

Tesla’s lofty stock performance — up 743% in 2020 — makes it one of the most valuable US companies in the world. Yet the 500,000 cars it sold in 2020 were a sliver of more than 70 million vehicles estimated to have been sold worldwide.

Tesla shares are now worth roughly as much as those of the combined 12 largest automakers who sell more than 90% of autos globally.

What Tesla has that other automakers don’t is rapid growth — last week it forecast annual sales growth of 50% in coming years, and it expects to do even better than that in 2021 as other automakers struggle to get back to pre-pandemic sales levels.

The entire industry is moving toward an all-electric future, both to meet tougher environmental regulations globally and to satisfy the growing appetite for EVs, partly because they require less labor, fewer parts and cost less to build than traditional gasoline-powered cars.

“Something most people can agree on is that EVs are the future,” said Munster. “I think that’s a safe assumption.”

While Tesla is the leading maker of electric cars, it faces increased competition as virtually every automaker rolls out their own EVs, or plan to do so. Volkswagen has passed Tesla in terms of EV sales in most of Europe. GM said last week it hopes to shift completely to emissions-free cars by 2035.

“The competition is rendering Tesla’s cars irrelevant,” said GLJ’ Resarch’s Johnson. “We do not see this as a sustainable business model.”

Other analysts contend Tesla’s share price is justified given how it can benefit from the shift to electric vehicles.

“They’re not going to stay at 80-90% share of the EV market, but they can keep growing even with much lower market share,” said Daniel Ives, a technology analyst with Wedbush Securities. “We’re looking at north of 3 million to 4 million vehicles annually as we go into 2025-26, with 40% of that growth coming from China. We believe now they are on the trajectory that even without [the EV] credits they’ll still be profitable.”

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Gov. Cox becoming more optimistic about COVID-19 vaccine as Utah sees 1,761 more cases, no new deaths

SALT LAKE CITY — Utah Gov. Spencer Cox says he’s becoming more optimistic about COVID-19 vaccines as the weeks go by.

The state will now receive an increased allocation of the Moderna vaccine, bringing the total number of vaccines shipped to Utah each week to 40,000, including both the Moderna and Pfizer vaccines, according to the governor. Previously, the state was receiving about 33,000 doses per week.

Additionally, state leaders anticipate that the number of vaccines shipped to the state could reach 100,000 per week by March or April, Cox said. Federal approval of the Johnson & Johnson vaccine is expected in February, and AstraZeneca is also preparing to submit its vaccine for approval.

Approval of the Johnson & Johnson vaccine is expected to allow Utah to significantly ramp up vaccinations, especially among people who have comorbidities, Cox said. While it would take months to vaccinate every Utahn with a rate of 100,000 doses per week, it’s a still big improvement, the governor said.

“I’m more optimistic now than I was even a week ago,” Cox said Thursday.


On Thursday, Utah Gov. Spencer Cox, Lt. Gov. Deidre Henderson and Utah Department of Health state epidemiologist Dr. Angela Dunn provided a COVID-19 pandemic update at a news conference. Watch the replay of the news conference below.


New COVID-19 cases

Utah’s number of COVID-19 cases increased by 1,761 on Thursday, with no more deaths reported, according to the Utah Department of Health.

The rolling seven-day average number of positive cases per day is now at 1,710, according to the health department. The positive test rate per day for that time period is now 18.3%.

The health department estimates there are now 43,187 active COVID-19 cases in Utah.

Aside from several holidays where the state health department did not provide a COVID-19 statistics report, Thursday is the first day Utah has reported zero new COVID-19 deaths since September.

Additionally, the seven-day rolling averages for new COVID-19 cases and positive test results have also decreased from last week, health department state epidemiologist Dr. Angela Dunn said Thursday.

“All of these key indicators are definitely trending in the right direction,” she said.

Though Utah has seen those promising trends to start off the new year, Dunn urged people to continue doing what they’re doing to prevent the spread of COVID-19.

Utahns are being vaccinated but there are not enough people vaccinated yet for herd immunity, so people need to continue taking preventative measures to stop the spread, Dunn added. That means continuing to wear masks, socially distance, stay home when sick, and practice good hygiene, she said.

People are also urged to upgrade their masks from cloth to medical-grade face coverings if possible, Cox said. Utah leaders are working with President Joe Biden’s administration to potentially acquire more of those types of masks to distribute to Utahns, Cox said.

“The right quality mask protects the user,” the governor said.

Thursday’s new numbers indicate a 0.5% increase in positive cases since Wednesday. Of the 2,000,023 people tested for COVID-19 in Utah so far, 17.1% have tested positive for the disease. The number of total tests conducted increased by 18,134 as of Thursday, and 10,917 of those were tests of people who had not previously been tested for COVID-19, according to state data.

There are 444 COVID-19 patients currently hospitalized in Utah, including 157 in intensive care, state data shows. About 84% of Utah’s ICU beds are occupied Thursday, including about 89% of ICU beds in the state’s 16 referral hospitals. About 56% of Utah’s non-ICU hospital beds are occupied, according to the health department.

A total of 267,027 vaccines have been administered in the state, up from 250,448 Wednesday. Of those, 43,089 are second doses, state data shows.

Thursday’s totals give Utah 342,445 total confirmed cases, with 13,279 total hospitalizations and 1,620 total deaths from the disease. A total of 297,638 Utah COVID-19 cases are now considered recovered, according to the health department.

This story will be updated.

Methodology:

Test results now include data from PCR tests and antigen tests. Positive COVID-19 test results are reported to the health department immediately after they are confirmed, but negative test results may not be reported for 24 to 72 hours.

The total number of cases reported by the Utah Department of Health each day includes all cases of COVID-19 since Utah’s outbreak began, including those who are currently infected, those who have recovered from the disease, and those who have died.

Recovered cases are defined as anyone who was diagnosed with COVID-19 three or more weeks ago and has not died.

Referral hospitals are the 16 Utah hospitals with the capability to provide the best COVID-19 health care.

Deaths reported by the state typically occurred two to seven days prior to when they are reported, according to the health department. Some deaths may be from even further back, especially if the person is from Utah but has died in another state.

The health department reports both confirmed and probable COVID-19 case deaths per the case definition outlined by the Council of State and Territorial Epidemiologists. The death counts are subject to change as case investigations are completed.

For deaths that are reported as COVID-19 deaths, the person would not have died if they did not have COVID-19, according to the health department.

Data included in this story primarily reflects the state of Utah as a whole. For more localized data, visit your local health district’s website.

More information about Utah’s health guidance levels is available at coronavirus.utah.gov/utah-health-guidance-levels.

Information is from the Utah Department of Health and coronavirus.utah.gov/case-counts. For more information on how the Utah Department of Health compiles and reports COVID-19 data, visit coronavirus.utah.gov/case-counts and scroll down to the “Data Notes” section at the bottom of the page.

Jacob Klopfenstein

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Gov. Spencer Cox provides COVID-19 update Thursday as Utah sees 1,761 more cases, no new deaths

SALT LAKE CITY — Utah’s number of COVID-19 cases has increased by 1,761 on Thursday, with no more deaths reported, according to the Utah Department of Health.

The rolling seven-day average number of positive cases per day is now at 1,710, according to the health department. The positive test rate per day for that time period is now 18.3%.

Also Thursday, Utah Gov. Spencer Cox and other state leaders are providing a COVID-19 pandemic update at a news conference. Lt. Gov. Deidre Henderson and Utah Department of Health state epidemiologist Dr. Angela Dunn also spoke at the event.

The event started at 11 a.m. Watch the replay of the news conference below.

New COVID-19 cases

The health department now estimates there are now 43,187 active COVID-19 cases in Utah.

Aside from several holidays where the state health department did not provide a COVID-19 statistics report, Thursday is the first day Utah has reported zero new COVID-19 deaths since September.

The new numbers indicate a 0.5% increase in positive cases since Wednesday. Of the 2,000,023 people tested for COVID-19 in Utah so far, 17.1% have tested positive for COVID-19. The number of total tests conducted increased by 18,134 as of Thursday, and 10,917 of those were tests of people who had not previously been tested for COVID-19, according to state data.

There are now 444 COVID-19 patients currently hospitalized in Utah, including 157 in intensive care, state data shows. About 84% of Utah’s ICU beds are occupied Thursday, including about 89% of ICU beds in the state’s 16 referral hospitals. About 56% of Utah’s non-ICU hospital beds are occupied, according to the health department.

A total of 267,027 vaccines have been administered in the state, up from 250,448 Wednesday. Of those, 43,089 are second vaccine doses, state data shows.

Thursday’s totals give Utah 342,445 total confirmed cases, with 13,279 total hospitalizations and 1,620 total deaths from the disease. A total of 297,638 Utah COVID-19 cases are now considered recovered, according to the health department.

This story will be updated.

Methodology:

Test results now include data from PCR tests and antigen tests. Positive COVID-19 test results are reported to the health department immediately after they are confirmed, but negative test results may not be reported for 24 to 72 hours.

The total number of cases reported by the Utah Department of Health each day includes all cases of COVID-19 since Utah’s outbreak began, including those who are currently infected, those who have recovered from the disease, and those who have died.

Recovered cases are defined as anyone who was diagnosed with COVID-19 three or more weeks ago and has not died.

Referral hospitals are the 16 Utah hospitals with the capability to provide the best COVID-19 health care.

Deaths reported by the state typically occurred two to seven days prior to when they are reported, according to the health department. Some deaths may be from even further back, especially if the person is from Utah but has died in another state.

The health department reports both confirmed and probable COVID-19 case deaths per the case definition outlined by the Council of State and Territorial Epidemiologists. The death counts are subject to change as case investigations are completed.

For deaths that are reported as COVID-19 deaths, the person would not have died if they did not have COVID-19, according to the health department.

Data included in this story primarily reflects the state of Utah as a whole. For more localized data, visit your local health district’s website.

More information about Utah’s health guidance levels is available at coronavirus.utah.gov/utah-health-guidance-levels.

Information is from the Utah Department of Health and coronavirus.utah.gov/case-counts. For more information on how the Utah Department of Health compiles and reports COVID-19 data, visit coronavirus.utah.gov/case-counts and scroll down to the “Data Notes” section at the bottom of the page.

Jacob Klopfenstein

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Donovan Mitchell says he’s ‘honored’ the Utah House of Representatives would pass a resolution for him

SALT LAKE CITY — Donovan Mitchell didn’t really know what to think when he heard the news. The Utah House of Representatives had passed a resolution in honor of him? Why? And what exactly did that mean?

When House Resolution 3 was introduced by Rep. Kera Birkeland, R-Morgan on Tuesday to recognize “the exemplary service of Donovan Mitchell to the Utah Jazz and the Utah community; and suggests consideration of making the ‘Spida’ (Mitchell’s nickname) the official state arachnid” it caused some people to raise their eyebrows.

The resolution was drafted after Mitchell’s now infamous postgame exchange with Shaquille O’Neal last week. It was a way of backing up the Jazz star.

“In Utah, we support our players when they face awkward abuse during postgame interviews disguised as pep talks,” the resolution states while also getting in some jabs at O’Neal’s free throw percentage and off the court ventures like movie “Kazaam” and the video game “Shaq Fu.”

“I think it is appropriate for the great state of Utah to award Shaquille O’Neal with a technical foul,” said Birkeland, sporting a ref jersey.

That little bit of detail was something Mitchell appreciated.

“That was pretty fun,” Mitchell said.

Birkeland and her fellow representatives passed the resolution in a landslide 67-5 vote. No surprise that Utahns support one of their biggest stars.

The resolution, though, did face some opposition.

“Not only has he gotten into the head of Donovan Mitchell, but I’m sure everyone who votes yes on this, he would rent some space in your head, as well,” House Majority Leader Francis Gibson, R-Mapleton, said about O’Neale. “But I do support our Jazz. I do support Donovan Mitchell.”

Now, whether or not such a matter should have been brought to the house floor — House Speaker Brad Wilson even sported a Mitchell jersey for the discussion — is a whole other matter. But Birkeland and the other representatives voting yes, simply wanted to cast an official show of support for the All-Star.

And as Mitchell sat in his car reading about it and pondering about the unique show of support, he couldn’t help but smile. Sure it was easy to laugh at, but it also was pretty moving.

“I looked at it in a different light,” Mitchell said. “Growing up being a kid you always want to be that guy that’s beloved and I really appreciate the support. I think it’s special and it’s an honor. It’s kind of funny.”

But he did have a question: “Is it like the state spider?” Mitchell asked. “I don’t know how that works, to be honest with you. I was asking around, we don’t really know.”

It doesn’t appear to be. The Utah State Legislature website states that resolutions “are considered an expression of the Legislature and are printed in the annual session laws (Laws of Utah) but are not codified.”

So for now, it’s just a way for the house to have expressed an opinion. The opinion that Mitchell is the best player — and spider — around.

“I’m just blessed that people think of me that way,” Mitchell said. “I’m just honored.”

Ryan Miller

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US coronavirus numbers drop, but race against new strains heats up

WASHINGTON (Reuters) — Coronavirus deaths and cases per day in the U.S. dropped markedly over the past couple of weeks but are still running at alarmingly high levels, and the effort to snuff out COVID-19 is becoming an ever more urgent race between the vaccine and the mutating virus.

The government’s top infectious-disease expert, Dr. Anthony Fauci, said the improvement in numbers around the country appears to reflect a “natural peaking and then plateauing” after a holiday surge, rather than the arrival of the vaccine in mid-December.

The U.S. is recording just under 3,100 deaths a day on average, down from more than 3,350 less than two weeks ago. New cases are averaging about 170,000 a day after peaking at almost 250,000 on Jan. 11. The number of hospitalized COVID-19 patients has fallen to about 110,000 from a high of 132,000 on Jan. 7.

States that have been hot spots in recent weeks such as California and Arizona have shown similar improvements during the same period.

On Monday, California lifted regional stay-at-home orders in favor of county-by-county restrictions and ended a 10 p.m. curfew. The shift will allow restaurants and churches to resume outdoor operations and hair and nail salons to reopen in many places, though local officials could maintain stricter rules.

Elsewhere, Minnesota school districts have begun bringing elementary students back for in-person learning. Chicago’s school system, the nation’s third-largest district, had hoped to bring teachers back Monday to prepare for students to return next month, but the teachers union has refused. Illinois announced that that more counties will be able to offer limited indoor dining.

“I don’t think the dynamics of what we’re seeing now with the plateauing is significantly influenced yet — it will be soon — but yet by the vaccine. I just think it’s the natural course of plateauing,” Fauci told NBC’s “Today.”

Ali Mokdad, a professor of health metrics sciences at the University of Washington, said that a predicted holiday surge was reduced by people traveling less than expected, and an increase in mask wearing in response to spikes in infections has since helped bring the numbers down.

Caitlin Rivers, an epidemiologist at the Johns Hopkins Center for Health Security, said too few people have been vaccinated so far for that to have had a significant impact on virus trends. She said she can’t predict how long it will take for the vaccines’ effects to be reflected in the numbers.

Rivers said she is concerned that the more contagious variants of the virus could lead to a deadly resurgence later this year.

“I think we were on track to have a good — or a better, at least — spring and summer, and I’m worried that the variants might be throwing us a curveball,” she said.

Nationwide, about 18 million people, or less than 6% of the U.S. population, have received at least one dose of vaccine, including about 3 million who have gotten the second shot, according to the Centers for Disease Control and Prevention. Only slightly more than half of the 41 million doses distributed to the states by the federal government have been injected into arms, by the CDC’s count.

The virus has killed over 419,000 Americans and infected more than 25 million, with a widely cited University of Washington model projecting the death toll will reach about 569,000 by May 1.

And health experts have warned that the more contagious and possibly more deadly variant sweeping through Britain will probably become the dominant source of infection in the U.S. by March. It has been reported in over 20 states so far. Another mutant version is circulating in South Africa.

The more the virus spreads, the more opportunities it has to mutate. The fear is that it will ultimately render the vaccines ineffective.

To guard against the new variants, President Joe Biden on Monday added South Africa to the list of more than two dozen countries whose residents are subject to coronavirus-related limits on entering the U.S.

Most non-U.S. citizens who have been to Brazil, Ireland, Britain and other European nations will be barred from entering the U.S. under the rules re-imposed by Biden after President Donald Trump had moved to relax them.

Fauci said scientists are already preparing to adjust COVID-19 vaccines to fight the mutated versions.

He said there is “a very slight, modest diminution” of the effectiveness of COVID-19 vaccines against those variants, but “there’s enough cushion with the vaccines that we have that we still consider them to be effective” against both.

Moderna, the maker of one of the two vaccines being used in the U.S., announced on Monday that it is beginning to test a possible booster dose against the South African variant. Moderna CEO Stephane Bancel said the move was out of “an abundance of caution” after preliminary lab tests suggested its shot produced a weaker immune response to that variant.

The vaccine rollout in the U.S. has been marked by disarray and confusion, with states complaining in recent days about shortages and inadequate deliveries that have forced them to cancel mass vaccination events and tens of thousands of appointments.

New York Mayor Bill de Blasio said shortages are preventing the city from opening more large-scale vaccination sites.

“Here you have New York City ready to vaccinate at the rate of a half-million New Yorkers a week, but we don’t have the vaccine to go with it,” de Blasio said. “A lot of other places in the country are ready to do so much more.”

Associated Press writers around the U.S. contributed to this report.

Find AP’s full coverage of the coronavirus pandemic at https://apnews.com/hub/coronavirus-pandemic

Copyright © 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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Health department reports 1,516 new COVID-19 cases Sunday in Utah

SALT LAKE CITY — In its daily update of COVID-19 statistics in Utah, the state health department reported 1,516 new positive tests and another 13 deaths from the disease Sunday.

Four of those deaths happened before the new year, officials said, but were still under investigation. Overall, that brings the state to 336,405 total confirmed cases and 1,595 deaths since the pandemic began.

Currently, 461 Utahns are reported hospitalized due to COVID-19, including 182 in intensive care. Sunday’s numbers came as 14,575 more test results were reported and 7,331 Utahns were tested for the virus for the first time.

Over the past week, the state is averaging 1,794 new reported cases per day and a positive test rate of 19.4%.

The health department says 6,073 more vaccines were administered since yesterday’s report, for a total of 228,348 so far. More than 28,000 Utahns have received a second dose of the vaccine.

The deaths reported Sunday include:

  • A Salt Lake County man between ages 65 and 84 who was hospitalized when he died
  • A Salt Lake County woman between ages 65 and 84 who was the resident of a long-term care facility
  • A Salt Lake County man over age 85 who was the resident of a long-term care facility
  • A Salt Lake County man between ages 45 and 64 who was not hospitalized when he died
  • A Uintah County man between ages 65 and 84 who was not hospitalized
  • A Utah County man between ages 25 and 44 who was the resident of a long-term care facility
  • Three Utah County men between ages 65 and 84 who were hospitalized
  • A Utah County woman over age 85 who was the resident of a long-term care facility
  • A Washington County woman between ages 65 and 84 who was the resident of a long-term care facility
  • A Washington County woman over age 85 who was not hospitalized
  • A Weber County woman between ages 65 and 84 who was not hospitalized

Together, Salt Lake and Utah counties now account for 62% of the state’s reported cases and 58% of its deaths.

There is no coronavirus news conference from state leaders scheduled for Sunday. Gov. Spencer Cox and health officials will update the public in a conference later this week; it usually occurs on Thursdays.

Last week

  • Saturday: Gov. Cox says getting more vaccines shouldn’t be like ‘Hunger Games’; 1,771 more COVID cases reported Saturday
  • Friday: 2,649 more COVID-19 cases, 24 deaths reported Friday in Utah
  • Thursday: Utah using nearly all COVID-19 vaccine doses as state sees 2,089 new cases, 30 deaths
  • Wednesday: 2,159 more COVID-19 cases, 10 deaths reported Wednesday in Utah
  • Tuesday: 1,302 more COVID-19 cases, 7 deaths reported Tuesday in Utah
  • Monday: 1,082 new COVID cases reported Monday as Utah marks 1,500 deaths during pandemic

Methodology:

Test results now include data from PCR tests and antigen tests. Positive COVID-19 test results are reported to the health department immediately after they are confirmed, but negative test results may not be reported for 24 to 72 hours.

The total number of cases reported by the Utah Department of Health each day includes all cases of COVID-19 since Utah’s outbreak began, including those who are currently infected, those who have recovered from the disease, and those who have died.

Recovered cases are defined as anyone who was diagnosed with COVID-19 three or more weeks ago and has not died.

Referral hospitals are the 16 Utah hospitals with the capability to provide the best COVID-19 health care.

Deaths reported by the state typically occurred two to seven days prior to when they are reported, according to the health department. Some deaths may be from even further back, especially if the person is from Utah but has died in another state.

The health department reports both confirmed and probable COVID-19 case deaths per the case definition outlined by the Council of State and Territorial Epidemiologists. The death counts are subject to change as case investigations are completed.

For deaths that are reported as COVID-19 deaths, the person would not have died if they did not have COVID-19, according to the health department.

Data included in this story primarily reflects the state of Utah as a whole. For more localized data, visit your local health district’s website.

More information about Utah’s health guidance levels is available at coronavirus.utah.gov/utah-health-guidance-levels.

Information is from the Utah Department of Health and coronavirus.utah.gov/case-counts. For more information on how the Utah Department of Health compiles and reports COVID-19 data, visit coronavirus.utah.gov/case-counts and scroll down to the “Data Notes” section at the bottom of the page.

Graham Dudley

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Got a package you didn’t order? It could be a scam

NEW YORK (CNN) — Most people who buy things online just have to worry about their deliveries being delayed or never arriving. But some people are dealing with a different problem altogether: getting weird stuff like hair clippers, face creams and sunglasses they never even ordered at all.

The Federal Trade Commission and cyber experts have been warning consumers about these deliveries, which can be part of something known as “brushing” scams.

Here’s how these scams work: Third-party sellers on Amazon, eBay and other online marketplaces pay people to write fake, positive reviews about their products, or do it themselves. To be able to post the reviews, these so-called “brushers” need to trick the site into making it appear that a legitimate transaction took place. So they’ll use a fake account to place gift orders and address them to a random person whose name and address they find online. Then, instead of actually mailing the item for which they want to post a review, the brushers will send a cheap, often lightweight item that costs less to ship.

Sending an item (even the wrong one) creates a tracking number, and when the package is delivered, it enables brushers to write a verified review. If you’re on the receiving end, you usually aren’t charged for the purchase and your real account isn’t hacked — but you are left in the dark as to who is repeatedly sending the mystery packages. In many cases, there’s no return address. You don’t need to worry that anything bad has happened to you or will happen to you if you get a package that might be part of a brushing scam, experts say. But we all need to be concerned about the scams affecting reviews we rely on when buying products.

Brushing scams reportedly took off on e-commerce sites in China around five years ago. They resurfaced in headlines last summer, when all 50 states issued warnings about mysterious, unsolicited packages of seeds that people across the nation received in the mail.

But it’s not just seeds. Unsuspecting recipients have also found boxes with goods ranging from dog pooper-scoopers to power cords to soap dispensers on their doorsteps.

Jen Blinn of Thousand Oaks, California, told CNN Business she has been receiving random packages since June, including most recently a briefcase, a backpack, a hair straightener and a coffee-cup warmer.

“Every two weeks … I get another package in the mail of just random stuff I never ordered,” she said. Blinn notified Amazon of the issue, but a customer service agent “didn’t really understand what I was saying. She obviously didn’t know about it,” she said. The agent looked at Blinn’s account and found nothing wrong with it.

It’s not illegal to send customers unordered merchandise. But “the [Federal Trade Commission] has long gone after marketers that use fake reviews,” said David Vladeck, a former director of the FTC’s Bureau of Consumer Protection and a law professor at Georgetown University.

Amazon says its policy prohibits sellers sending unsolicited merchandise to customers, and that sellers can be removed from the site for doing so.

“Third-party sellers are prohibited from sending unsolicited packages to customers and we take action on those who violate our policies, including withholding payments, suspending or removing selling privileges, or working with law enforcement,” an Amazon spokesperson said in an email. Amazon would not say how how many brushing scams have been found on the site or how many sellers have been removed due to these scams.

An eBay spokesperson said in an email that brushing schemes “do not appear to be highly prevalent” on the site. It violates eBay policy to send unsolicited merchandise to customers or falsify reviews and can result in eBay restricting sellers’ accounts or suspending them from the site.

Experts also say it’s difficult to quantify the frequency of such scams because it can be hard for companies to know whether reviews are fake, and scams often go unreported by consumers.

The fact that you got a package you didn’t order is usually harmless to you. The harm is to people who rely on reviews when deciding on a purchase, said Chris McCabe, a former policy enforcement investigator at Amazon tasked with stopping scams and fraud. He is now a consultant to sellers on the site.


The real losers here are the consumers who are possibly believing many of these fake positive reviews, or this artificial padding of reviews, because they might see 100 positive reviews, and then there may only be 60 or 70 of them that are legitimate.

–Chris McCabe


“The real losers here are the consumers who are possibly believing many of these fake positive reviews, or this artificial padding of reviews, because they might see 100 positive reviews, and then there may only be 60 or 70 of them that are legitimate,” he said.

The likelihood that a consumer will buy a product that has five reviews is 270% higher than the likelihood they will buy a product with zero reviews, according to a 2017 report by Northwestern University’s Spiegel Research Center.

Some fake reviews are also being driven by Facebook groups where sellers offer buyers money if they write positive product reviews, said McCabe. Amazon and Facebook should work together to crack down on these groups, he said.

An Amazon spokesperson said that the company analyzes more than 10 million reviews every week to try to keep fake ones from being published and that it provides details of its investigations to social media companies “so they can stop these bad actors from abusing their platforms.”

A Facebook spokesperson said in an email that when the company is told of groups that may encourage fake reviews, it reviews them and removes them if they violate its policies.

Unwanted sheets and Shiatsu massagers

For consumers, the unexpected deliveries can be jarring. The packages Ashanté Nicole never ordered started arriving at her home in Fort Lauderdale, Florida, in 2019.

iPhone and portable car chargers. An iPad case. A heated shiatsu massage. A nail cleaning brush and a blow dryer. Sheets. A mattress cover. A floppy fish toy.

They didn’t have return addresses, so Nicole wasn’t sure who was sending the packages. She reached out to Amazon to try to stop them from coming, but they still keep arriving at her doorstep.

“It was just kind of a little bit concerning because I don’t know who has my information,” she said. “I don’t know what they’re going to send me. Like they could send something illegal and then I’m in trouble because I didn’t know whoever that person was or what they were sending me.”

If you get merchandise you didn’t order, it could mean that scammers have created an account in your name or taken over your account, an FTC spokesperson said in an email. Scammers may have even created new accounts in other names tied to your address, allowing them to post lots of seemingly-real reviews.

“We recommend keeping an eye on your online shopping accounts. If you spot activity that isn’t yours, report it to the site right away, and think about changing your password for that site,” the spokesperson said.

Nicole feels she has done all she can by alerting Amazon each time unsolicited packages from the retailer arrive at her doorstep.

“There’s literally nothing I can do besides tell Amazon every time it happens. And that hasn’t really done much,” she said.

Amazon declined to comment directly on Nicole and Blinn’s accounts, but said if a customer receives a package that was unsolicited, they should contact Amazon’s customer service team.

Nicole said she hopes Amazon will do more to stop brushing and ban sellers who participate in the scams.

“I just think they need to be a little bit more concerned with shutting those stores down and making sure those sellers can’t use the platform.”

The-CNN-Wire™ & © 2021 Cable News Network, Inc., a Time Warner Company. All rights reserved.

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