Counterfeit liability bill clears House committee stage

Legislation that could make e-commerce companies like Amazon and eBay liable for counterfeit goods sold via their websites has been passed by the Judiciary Committee of the US House of Representatives.

The bipartisan SHOP SAFE Act would establish trademark liability for online marketplaces when a third-party sells a counterfeit that poses a risk to consumer health or safety.

Under the proposals, marketplaces would be required to take steps necessary to prevent the continued sale of counterfeits by a fake-selling third-party – or face contributory liability for their actions.

The requirements include verifying a third-party seller's identity and asking them to confirm that they can verify or vouch for the authenticity of their goods.

"Whether a purchase is made online or in a brick-and-mortar store, consumers must be able to be confident that what they see is what they will get," said committee chair Jerry Nadler (D-NY), the lead sponsor on the bill.

More and more Americans are shopping online and as a result, counterfeiters have moved online too. The SHOP SAFE Act will make families safer by requiring marketplace platforms to take a larger role in preventing the sale of counterfeit products to consumers.

— House Judiciary Dems (@HouseJudiciary) September 29, 2021

Under the proposals, marketplaces would be required to take steps necessary to prevent the continued sale of counterfeits by a fake-selling third-party – or face contributory liability for their actions.

The requirements include verifying a third-party seller's identity and asking them to confirm that they can verify or vouch for the authenticity of their goods.

"Whether a purchase is made online or in a brick-and-mortar store, consumers must be able to be confident that what they see is what they will get," said committee chair Jerry Nadler (D-NY), the lead sponsor on the bill.

It has proved to be divisive however, with some suggesting that it runs the risk of being interpreted too broadly, hindering consumers' ability to resell their own goods via a broad range of platforms – not just the likes of Amazon and eBay but also Craigslist and a growing number of app-based platforms like Shpock and Vinted.

Taking that approach could actually strengthen Amazon and eBay's dominant position in the market at the expense of smaller players who will be unable to meet the new requirements, and that would lead to reduced choice and increased costs for purchaser, say the critics, who include Eric Goldman, a law professor at Santa Clara University.

eBay said in a statement that: "now is not the time to place harmful regulatory burdens on small businesses continuing to economically recover from the pandemic."

Other groups however – including the American Apparel & Footwear Association (AAFA) – are adamant that the legislation is needed to protect consumers from online counterfeits, but acknowledge some of the working in the bill needs refining.

"The proliferation of counterfeit products on some of our most trusted online marketplaces hampers American business and puts American consumers in harm's way," said Christina Mitropoulos, director of brand protection and manufacturing initiatives at the AAFA.

"We are glad to see Congress prioritise the protection of American intellectual property with this bipartisan bill, and look forward to working with members of the House Judiciary committee to improve the language of the bill ahead of its vote on the floor," she added.