This is one of the things they do that could be spun as "pro seller".
As a consumer, I don't like buying from vendors that I can't verify how much I trust them.
So "fulfilled by Amazon" convinces consumers to buy with confidence, and even a no-name seller can get sales without having to compete on reputation.
This means that consumers actually can't trust where they are buying from.
It's also pro-consumer since it means that you get your order faster. Instead of sending you the widget that was warehoused across the country by your seller, they can sell you the one that was warehoused near your house by a different seller.
(in theory they could always just ship it across the country, but then they'll have to raise shipping prices)
Mingling counterfeit products with genuine products is a problem, but since I rarely know Amazon merchants, I'm not sure that's considerably worse than not mingling at all, I could just as likely try to buy from a merchant that's selling counterfeits.
I very much don't like this as a consumer.