This article is mixing three issues, all of which should concern any online retailer.
The first is counterfeit or fake goods - a customer buys a product, but instead gets an item that doesn't match what they ordered. This is clearly fraud, and makes it difficult to trust online purchases. This doesn't seemed to have happened here. Most customers must have known they were buying the product from someone else, not the "original".
The second is that the signal to noise ratio drops very low because a lot of vendors flood the marketplace (perhaps automatically) with products that are supposed to grab the top spot (due to low price, for example). The product might not even exist - say I print a t-shirt when someone makes an order, but I can digitally generate a million t-shirt slogans and create a million different t-shirts to show up on search. This isn't fraud - I know exactly what I'm getting, but the marketplace experience as a whole is terrible.
The third is gaming the review system. I tend to read the content of the reviews carefully (I don't trust the rating system as much) to gain information, rather than checking the ratings. In this case, it seems as if the "inferior" product had a lot of fake reviews. If true buyers were returning the product in large numbers, however, Amazon might even pull the product.
I do agree that it isn't the merchant's job to track down fraud/fakers (which this particular example is not); Amazon should be careful that they don't become the next ebay or craigslist.