Costs are lowered and the value of Amazon's brand is relatively increased. Similar to stocking own-brand product in a supermarket. This weakens the negotiating position of big name brands.
IMHO investing 1/2 of 1% of the KU pool is enough to fund human review via their Mechanical Turk program. It wouldn't be perfect but it would eliminate most of the fraud.
They must not be interested. After all, they still get paid and have a level of legal insulation due to how they've structure Amazon marketplace. I wonder how long it'll take for their overall brand to take a hit over this, though.
I don't know how many horrible sets of bath rugs and towels I went through on Amazon before I finally bit the bullet and bought an actual expensive brand and the difference is staggering. Before someone asks they're from Frontgate (not on Amazon).
Point being I'm just sending Amazon money over and over again.. It's definitely made me go back to stores where I can see the product for certain things.