"So then the next question is why would a retailer use Amazon Fulfillment"
You implied that sellers are required to use it.
Edit: it's a different user that replied to me, my mistake.
Also, Amazon tracks which order came from whose inventory, so if it's reported as fake they can punish the right seller. Any system of that size is going to have some slip through, but Amazon does a lot to vet sellers for specific products, categories, and so on. Just recently certain iPads were restricted, and I couldn't get approved with retail receipts, they wanted invoices from authorized distributors, for example.
As a buyer you can't do much about comingling, but that shouldn't be relevant except for products with an abnormally high counterfeit rate. And you will get your money back with very little hassle when buying FBA (they refund you immediately and then require you to return it), and it helps hurt the bad seller. The fact is the vast majority of purchases on Amazon are legitimate. I agree Amazon needs to do something about their image, but it doesn't seem to be hurting their sales. And who else are you going to go to? eBay is even worse, and retailers are more expensive most if the time.