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Federal Lawmakers Have Counterfeit-Riddled Platforms Like Amazon in Their Sights

Federal lawmakers have taken a big steps toward cracking down on online counterfeits.

On Monday, four members of the House Judiciary Committee introduced the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act, a bill that would change business as usual for major online marketplaces like Amazon, eBay and Walmart, which traffic in products sold by loosely regulated third-party vendors.

Digital platform marketplaces have increased in popularity with online shoppers seeking a breadth of choice, and “helped fuel the growth of counterfeit and pirated goods into a half trillion-dollar industry,” the Department of Homeland Security said in January when releasing its “Combating Trafficking in Counterfeit and Pirated Goods” report, which suggests steps industry and government can take to combat the rising tide of unauthorized products.

With the release of the DHS report, “all of the bad actors in e-commerce who have been taking a free ride on the pocketbooks of consumers, the backs of American workers, and the innovations of IP rights holders are officially on notice that DHS and this administration will immediately begin taking the strongest steps possible to combat counterfeit trafficking,” said Dr. Peter Navarro, director of the Office of Trade and Manufacturing Policy and an assistant to President Trump.

Knockoff goods not only deprive brands of rightful profits but also threaten the health and well-being of unsuspecting consumers. “Consumer lives are at risk because of dangerous counterfeit products that are flooding the online marketplace,” Rep. Doug Collins (R-Ga.), ranking member of the House Judiciary Committee, said in a statement.

“Congress must create accountability to prevent these hazardous items from infiltrating the homes of millions of Americans,” he added.

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In addition to Rep. Collins, chairman of the House Judiciary Committee Jerrold Nadler (D-N.Y.), Martha Roby (R-Ala.), ranking member of the Subcommittee on Courts, Intellectual Property and the Internet, and Hank Johnson (D-Ga.), chairman of the Subcommittee on Courts, Intellectual Property and the Internet introduced the bill.

If enacted, the bill would heighten the risks for marketplaces found to play host to fakes and frauds. Beyond introducing trademark liability for companies caught selling unsafe goods, the measure also stipulates that marketplaces tighten up their third-party practices. This means digital platforms would have to establish and enforce best practices that verify sellers’ legitimacy, delete listings promoting confirmed counterfeits and blacklist repeat offenders.

American Apparel & Footwear Association president and CEO Steve Lamar applauded the SHOP SAFE Act as the “latest in a string of proactive efforts by Congress and the administration to address the growing counterfeit problem.”

“Unless we are continuously improving in the fight against counterfeits, we are falling behind,” he said in a statement. “While many online marketplaces are directing increased resources towards this issue, much more needs to be done to prevent counterfeit products from unknowingly entering the homes of American families.”

Lamar agreed with Rep. Collins’ assertion that the crux of the counterfeit matter lies with protecting shoppers from “potential product safety hazards.”

“This is about the safety of your family, whether that means ensuring the pajamas you buy for your child meet flammability standards or that the protective footwear you wear on the job site works as intended,” he said. “As such, we believe this should be a top priority for e-commerce platforms going forward.”

The illicit counterfeiting business has exploded recently, doubling in size to reach $509 billion in 2016 from the decade prior as stated in the landmark DHS report, said Jed Nelsen, senior compliance manager for Etailz, which helps retailers and brands increase their success on e-commerce marketplace platforms.

Counterfeits, he added, “pose an existential threat” to the reputation of small and mid-size brands, jeopardizing not just sales but also the likelihood of keeping their businesses afloat. The vast majority of bogus products fail to undergo the most routine safety screenings, Nelsen noted, and are frequently made with a material mix that puts people at risk.

“More needs to be done to address the scourge of counterfeits found on online marketplaces,” he said.

As more Americans migrate to e-commerce for their shopping needs, “counterfeiters have followed” in their wake, Rep. Collins said.

“Consumers should be able to trust that what they see and purchase online is what they will get, but counterfeiters continue to join platforms with ease and masquerade as reliable sellers in order to infect American households with dangerous and unsafe counterfeit products,” he added, applauding the act’s “commonsense measures” that “tackle the gaps” in marketplace platforms’ systems.