The coronavirus outbreak has prompted more people to shop online at a time when the number of counterfeit goods sold on the web has also increased. The combination potentially puts more shoppers at risk of buying defective or even dangerous products.
Lawmakers from both political parties recently joined forces to clamp down on the growing problem of counterfeit goods being peddled online by trying to make companies such as Amazon and eBay liable for the fake products sold on their websites.
Their bill, dubbed the Shop Safe Act, puts companies on the hook for trademark infringement if they sold fake goods online from third-party suppliers and failed to confirm the legitimacy of the supplier. The legislation’s recent introduction comes as online sales from brick-and-mortar stores have increased 52% from shopping behaviors a year ago, according to a March report by Quantum Metric, a firm that monitors online shopping behaviors. The report states that the increase is due in part to the “overall desire to limit in-store exposure” because of the coronavirus.
Meanwhile, the number of fake goods sold online has also trended upward. The Organization for Economic Cooperation and Development reported in 2019 that counterfeit and pirated goods account for 3.3% of international trade, up from 2.6% in 2013.
Other reports show that purchasing counterfeit goods online is widespread. The Better Business Bureau recently reported that 1 in 4 people has bought something online that turned out to be counterfeit. And a 2018 Government Accountability Office report on intellectual property found that 20 of 47 items the GAO purchased from third-party sellers online were fakes.
The GAO report also noted that “counterfeit goods may pose risks to the health and safety of consumers.”
Republican Rep. Doug Collins from Georgia sees making online companies accountable for their sale of fake products instrumental to clamping down on these transactions.
“Consumer lives are at risk because of dangerous counterfeit products that are flooding the online marketplace. Congress must create accountability to prevent these hazardous items from infiltrating the homes of millions of Americans,” he said in introducing the Shop Safe Act.
Collins, the ranking member of the House Judiciary Committee, joined the committee’s chairman, Jerry Nadler, a New York Democrat, and two other committee members, Hank Johnson, a Democrat from Georgia, and Republican Martha Roby from Alabama, to introduce the bill.
Their legislation would essentially require online companies such as eBay and Amazon to police the authenticity of the products they sell online, a mammoth undertaking given the number of products that are sold by these websites. In a statement on the bill, eBay stated that “counterfeits are not welcome on eBay. We are reviewing the legislation and will continue to work with the Committee on this important issue.” Amazon did not respond to an inquiry from the Washington Examiner.
Alan Behr, an attorney specializing in intellectual property at the law firm Phillips Nizer, said the bill’s enactment would be a significant change in how the online companies run their businesses.
“It would be a material increase in their burden in terms of what they would need to do mechanically. It would be making them do something that physical retailers don’t physically have to do at the same level,” he told the Washington Examiner.
Amazon sells more than 600 million products a year in the United States. Behr expects that online companies will push back against the enactment of the bill.
“That’s a likely event because anything that materially alters the level of monitoring that any business has to do, a food safety issue for a restaurant or, in this case, counterfeiting online, you better believe that there is going to be a real question in the industry about the extra cost of doing business,” he said.
The Judiciary Committee would be responsible for ushering the bill through the House. The committee did not respond to questions about the legislative outlook.
The perils of purchasing counterfeit products were the focus of a March 4 House Energy and Commerce hearing. New Jersey Democrat Frank Pallone Jr., who heads the committee, offered a few examples in which purchasing fake products wound up being a life-threatening event.
“Hoverboards with counterfeit batteries have caught on fire while charging, burning down someone’s house. Fake beauty products have reportedly caused people’s eyelashes to fall out in clumps. And counterfeit products can result in chronic health effects that do not present until years later, like water filter cartridges that not only don’t remove contaminants but actually add new carcinogens to water,” he said.
The congressional effort to stop counterfeit goods from being sold online comes on the heels of recent attempts by the Trump administration to do the same thing.
White House trade adviser Peter Navarro said in February that sales of counterfeit goods on e-commerce platforms harm consumers and businesses and pose a risk to national security when counterfeit products are used by defense employees or contractors in secure systems. Navarro also called on Amazon CEO Jeff Bezos to testify before Congress on counterfeit goods.
The Trump administration in January teamed with the Department of Homeland Security and asked the Justice Department to create civil fines for businesses that sell fake goods. The Commerce Department was also instructed to launch a campaign instructing consumers on how to identify counterfeit products.
Until Washington successfully addresses this problem, counterfeit purchases are estimated to cost the U.S. economy between $29 billion and $41 billion annually by diverting sales away from purchases of legitimate products, according to a report by the Senate Finance Committee.
