YCD News – Following the entry into force of the Consumer Notification Act, a new e-commerce anti-counterfeiting bill is in the works in the U.S. On September 28, U.S. Senator Chris Coons, a Democrat from Delaware, and Senator Thom Tillis, a Republican, introduced the Shoplifting Security Act, which would require e-commerce platforms to conduct more scrutiny of counterfeit goods.
The Store Security Act was reportedly introduced on the floor in the last US session as a means of combating the sale of counterfeit products alongside the Consumer Notification Act. The latter, which was widely supported and passed by brands and marketplaces, requires e-commerce platforms to verify information about third-party sellers, including identity, contact information and bank account information.
The ShopSafe Act, which goes further than the Consumer Notification Act by requiring these platforms to conduct more scrutiny of counterfeit goods or be held liable for counterfeits appearing on their platforms, now has broad support from retail lobbying groups such as the American Apparel and Footwear Association, the Toys for Tots Association and the National Association of Manufacturers.
Legal Involvement Becomes Inevitable as Counterfeit Hazards Continue to Spread in the U.S.
The introduction of the Consumer Notification Act, the Safe Stores Act, and a number of other bills builds on the continued spread of the dangers of counterfeit goods in the United States. In particular, counterfeiting has intensified as e-commerce sales continue to grow in the U.S. and many brick-and-mortar sellers turn to major e-commerce platforms.
Counterfeit goods have cost the U.S. economy $131 billion, according to 2019 data from the National Association of Manufacturers. In the latest “Notorious Markets” review released by the Office of the U.S. Trade Representative, it was noted that many brands are noticing more counterfeit goods circulating on social media.
For brands, counterfeit goods are harmful first and foremost in terms of infringing on a brand’s intellectual property and affecting its reputation. This is because counterfeit goods are often made from lower quality materials that can be potentially harmful, and even if the product itself is safe, there is a concern that if it is of such poor quality, it may affect the brand’s image in the minds of consumers.
In addition, even if it does not rise to the level of IPR infringement, as these copycat goods are cheaper and widely distributed on TikTok, they attract a large number of consumers and capture the market share of the brand.
At the same time, the rampant availability of counterfeit goods in the e-commerce marketplace has harmed offline brick-and-mortar retail in the U.S., resulting in unfair competition. At brick-and-mortar retail, it is illegal to sell counterfeit goods, so many, including the American Apparel and Footwear Association, are calling for the same requirements to be imposed on e-commerce marketplace sales.
E-commerce platforms are one of the largest channels for counterfeit goods, and these platforms are also struggling to overcome the problem of counterfeiting. Amazon, for example, reported that it took down 6 million items from its platform last year.
Store Safety Act receives mixed reviews, final results inconclusive
YCD has learned that the Store Security Act was introduced as Senate Bill 2934 at last week’s Senate Judiciary Subcommittee hearing on Intellectual Property. There is currently a mix of opposition and support for the bill, so it is uncertain whether it will receive a vote.
The ShopSafe Act creates a trademark infringement liability law that would make platforms liable if they fail to review, remove, or take down counterfeit goods. Brands that also own trademarks would be responsible for providing information about counterfeit goods to platforms to help them remove them from the shelves.
Brands are mostly supportive of this bill. Currently, the responsibility for reporting dangerous, counterfeit or non-compliant products to platforms falls disproportionately on brands or consumers, and the Shop Safety Act lets platforms take proactive steps to ensure products are legitimate.
However, e-commerce platforms and many industry associations believe that the Act currently suffers from a number of shortcomings. Firstly, the definitions are too broad and vague, including how it defines an unsafe product and how it defines an “e-commerce platform”; secondly, the requirements for e-commerce platforms to take action are too rigid; and finally, trademark verification is the responsibility of the platform, not the brand. Lastly, trademark verification is undertaken by the platform, not the brand, and industry insiders believe that more cooperation on branding should be required.
In addition, many sellers are encountering obstacles in the identification process due to the fact that the implementation of the Consumer Notification Act, which came into force not long ago, is not progressing well. In regards to the passage of the Shoplifting Security Act, some believe that the implementation of the Consumer Notification Act should be optimized first before considering the passage of a new bill.
With the change in leadership in the U.S. House of Representatives, it is unclear when something like the Shoplifting Security Act will be pushed again. Nonetheless, the bill has received bipartisan support in the Senate.