Legislators have reintroduced the SHOP SAFE Act to protect shoppers from counterfeit products being sold on digital marketplaces.
The Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce Act, introduced by U.S. Senators Chris Coons (D-Del.) and Thom Tillis (R-N.C.) on Tuesday after they originally proposed the bill in 2021, aims to incentivize online platforms to engage in best practices for vetting sellers and products, and stop repeat offenders from selling counterfeits.
The bill would implement infringement liability for e-commerce operations that allow third-party vendors to sell counterfeits that risk consumers’ health or safety, and allow brands to hold them accountable if they fail to do their due diligence. The law would in turn require brand owners to provide platforms with advance notice about their trademarks and other identifying product information, as well as a point of contact to help them enact proactive measures against offending sellers. Complying with the SHOP SAFE Act through these measures would protect marketplaces from liability.
In July, Coons, who serves as Chair of the Senate Judiciary Committee’s Intellectual Property Subcommittee, held a hearing on oversight of the U.S. Patent and Trademark Office (USPTO) to ensure that existing U.S. intellectual property (IP) laws are being properly enforced—including exploring the USPTO’s current actions to tamp down the rising sales of counterfeit goods online. Coons and Sen. Chuck Grassley (R-Iowa) then introduced a bipartisan resolution recognizing the month of August as National Anti-Counterfeiting and Consumer Education and Awareness Month, aiming to underscore the importance of trademark compliance in protecting shoppers.
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The SHOP SAFE Act has been endorsed by several U.S. trade organizations whose members have been impacted by the proliferation of counterfeits online. If passed, the law would complement the INFORM Consumers Act. Effective on June 27, it requires that marketplaces collect, verify and disclose certain information about high-volume third-party sellers on their sites.
“We appreciate the leadership and unwavering commitment of U.S. Senators Chris Coons and Thom Tillis as we work to stop counterfeiters from evading rules of product safety, social responsibility, sustainability, and other measures of commitment to consumer well-being,” said Steve Lamar, president and CEO of the American Apparel and Footwear Association (AAFA), a longtime supporter of the legislation.
“With this bill, online platforms must meet the same requirements, and face the same accountability, as brick-and-mortar retailers when it comes to stopping the sale of counterfeit or illicit products that alarmingly are landing on the doorsteps of Americans all day, every day,” he added. The trade group’s 2022 counterfeit study, which tested 47 products for compliance with U.S. safety standards, found that 17 products contained dangerous amounts of chemicals like lead, arsenic, cadmium and phthalates.
Footwear Distributors and Retailers of America (FDRA) president and CEO Matt Priest said that counterfeits threaten jobs in the shoe industry, while also putting consumers at risk. “As these illicit goods become more sophisticated, it can be impossible for customers to distinguish a legitimate product from a knockoff,” he said.
Priest believe the passage of legislation like the SHOP SAFE Act is a “key step” in reining in counterfeits. “It will incentivize e-commerce platforms to implement best practices to prevent bad actors from selling counterfeit goods on their sites,” he added.
During 2022, U.S. consumers spent $1 trillion online, setting a new record. But they must be careful about what they buy, as counterfeit luxury goods, toys, electronics, safety gear, car parts and personal care products populate popular marketplaces.
The Organization for Economic Co-operation and Development (OECD) estimates that the value of counterfeits sold online has tripled in the past nine years to $3 trillion globally. Illegitimate imports to the U.S. have cost the economy $54.1 billion in retail sales, $33.6 billion in lost wages and benefits, and $13.5 billion in personal revenue and business tax revenue, according to a report released by luxury certification group Entrupy last year.
During 2022 alone, Customs and Border Protection (CBP) and Immigration and Customs Enforcement (ICE)-Homeland Security Investigation (HSI) seized 20,812 shipments that violated intellectual property rights (IPR), amounting to nearly 25 million counterfeit products worth an estimated $2.98 billion, had they been genuine.
“As Americans have increasingly turned to e-commerce for convenience, selection, and safety, some third-party sellers have begun to exploit consumers’ trust in established online marketplaces to trick them into purchasing dangerous counterfeit goods,” Coons said. “These counterfeit goods pose health and safety risks, damage the reputations of legitimate brands, and line the pockets of organized crime.”
“The number of Americans using e-commerce platforms to purchase basic and necessary goods is growing and so is the number of counterfeit goods being sold by third-party sellers on these platforms,” Tillis added. “With Americans continuing to rely on online shopping, it’s crucial that we do all we can to protect consumers from dangerous counterfeit sales which are often coming from China.”
This story was reported by Sourcing Journal and originally appeared on SourcingJournal.com.
