> how do you prevent someone from repeatedly returning items just to hurt a competitor and/or making frivolous defect/warranty claims against them?

Seems like a subset of the fake-review problem. Except with money exchanged, tangible costs to the retailer and more documentation.

Faking a product defect is probably way harder than just submitting a fake review. Eventually the retailer will notice that something is off as you have to send the product back and it has to be defective. How do you create a plausible warranty defect in a TV, for example?

There are hidden reputation and anti-fraud mechanisms at play in a lot of consumer areas (incentives, reviews, etc.), it would be trivial to apply them to this too.

Most fraudulent activity isn't attacking competitors, as it's prohibitively expensive, but instead propping up their own reputation. i.e. Amazon's fake reviews are mostly five-stars.