SHOP SAFE Act of 2020 Targets Counterfeit Ecommerce Products

With U.S. Rep. Doug Collins, R-GA raising the alarm that consumers’ “lives are at risk” due to dangerous counterfeit ecommerce products, a bipartisan group proposed the SHOP SAFE Act to crack down on ecommerce fakes.

“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,” Rep. Jerry Nadler, D-NY, chairman of  the House Judiciary Committee, said in a Judiciary release.

Many counterfeits do not undergo safety testing and pose a substantial health and safety risk for consumers, the committee noted, listing cosmetics, baby formula, batteries, chargers, air bags and car seats among the potentially life-threatening counterfeits sold online. The Government Accountability Office found that 20 of 47 items purchased from third-party sellers on popular consumer websites were counterfeit.

SHOP SAFE stands for Stopping Harmful Offers on Platforms by Screening Against Fakes in Ecommerce. Among its key provisions:

  • Establishes trademark liability for online marketplace platforms when a third-party sells a counterfeit product that poses a risk to consumer health or safety and that platform does not follow certain best practices;
  • Incentivizes online platforms to establish best practices such as vetting sellers to ensure their legitimacy, removing counterfeit listings, and removing sellers who repeatedly sell counterfeits; and
  • Calls for online marketplaces to take steps necessary to prevent the continued sale of counterfeits by the third-party seller or face contributory liability for their actions.

Amazon told CNBC in a statement that it prohibits counterfeit goods, and eBay said counterfeits are not welcome. “We are reviewing the legislation and will continue to work with the Committee on this important issue,” eBay said.

The proposed legislation comes a little over a month after a Jan. 24 Department of Homeland Security report announcing a crackdown on counterfeit ecommerce products. That came in response to an April 2019 memorandum from President Trump on combating trafficking in a rogue economy that was valued at $509 billion in 2016.

In an explainer outlining the need for the SHOP SAFE act, the Judiciary Committee said:

  • More Americans are shopping online, with ecommerce sales expected to reach nearly 15% of total retail spending and more than $4 trillion in 2020
  • Counterfeiters frequently take advantage of the features of online platforms to appear as legitimate sellers. They may use false and unvetted credentials and make their counterfeit listings appear as authentic as possible to shoppers, often by lifting wording and images from the real brand owner.
  • Thus, it’s surprisingly easy for customers to be misled into buying counterfeits online. Some reports estimate that about 25% of U.S. consumers have unknowingly purchased a counterfeit good online
  • Most troubling, counterfeiters can escape the strict health and safety standards and regulations authentic goods must comply with, posing significant threats to Americans’ health and safety:
    • A CNN investigation found that a counterfeit children’s car seat purchased on an ecommerce platform broke into pieces in a 30-mph crash test, with the toddler-sized dummy twisting as the car seat fractured, failing federal regulatory requirements.
    • One company’s investigation of counterfeit cellphone adapters found several that were constructed so poorly that they had the capacity for lethal electrocution.
  • Brand owners currently have a limited set of options to police counterfeit versions of their goods, which are often resource intensive and ineffective at scale.
  • Untraceable sellers with fake aliases leave brand owners with little recourse against the third-party seller through the U.S. court system. Under current law, it’s nearly impossible to hold online platforms accountable when a seller disappears or cannot be located.

“Counterfeit products directly impact brands and consumers while also posing serious dangers to public health and safety. It is critically important that we combat the sale of these harmful products online,” said Rep. Martha Roby, R-AL and ranking member of the Subcommittee on Courts, Intellectual Property and the Internet. She joined Collins and Nadler in introducing SHOP SAFE, along with Rep. Hank Johnson, D-GA, who chairs the Subcommittee on Courts, Intellectual Property and the Internet.

According to the January DHS report, seizures of fake and counterfeit goods by CBP and U.S. Immigration and Customs Enforcement (ICE) increased from 6,500 to 33,810 between 2003 and 2018. During that period, the domestic value of seized merchandise in terms of MSRP increased from $94 million to $1.4 billion, the report said.

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