E-Commerce: Consumer Protection Underscored
The first week of March saw new developments regarding the focus on the threats posed to American consumers arising from online commercial activity. The recent activity occurred in the House of Representatives, while in January 2020 it was the Department of Homeland Security (DHS) and the White House that issued a report and an executive order, respectively, that addressed e-commerce challenges arising from counterfeit goods.
Several members of the House Judiciary Committee co-sponsored the introduction of the SHOP SAFE Act of 2020 (H.R. 6058). The Committee’s chairman stated that “American consumers increasingly turn to the internet to shop. Counterfeiters have followed consumers, and it is clear more must be done to combat the rising trend in online sales of counterfeit products. 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.”
The Chairman added that “Counterfeit products pose significant threats to consumer health and safety” and he pointed out that “Platforms must do their part in ensuring that their sellers are reliable and that their products are authentic.” The SHOP SAFE Act of 2020 would impose trademark infringement liability on online marketplaces and platforms when a third-party sells a counterfeit product that poses a health or safety risk. The legislation also would encourage marketplaces and platforms to adopt best practices that include steps to vet sellers, ensure that products offered are authentic and remove sellers and their goods when found to be engaging in offering and selling counterfeit merchandise.
The introduction of H.R. 6058 prompted the Personal Care Products Council to issue a release in support of the legislation, stating that it wanted “Congress to establish a system that makes online marketplaces and others responsible for ensuring that products on their platforms comply with U.S. laws and regulations.” The American Apparel and Footwear Association indicated that the legislation is encouraging because, “much more needs to be done to prevent counterfeit products from unknowingly entering the homes of American families.”
On March 4, the Subcommittee on Consumer Protection and Commerce, under the House Committee on Energy and Commerce, held a hearing entitled Buyer Beware: Fake and Unsafe Products on Online Marketplaces. The Energy and Commerce committee chairman, addressing the convenience of online shopping, identified the negative effects of this convenience stating that it comes “at a devastating price: a proliferation of dangerous counterfeit goods that endanger consumers and property, and an army of counterfeit merchants from overseas that undermine American small businesses with unscrupulous tactics.”
The efforts to make marketplaces and platforms more accountable are strongly supported. Testifying on March 4, a director from Public Citizen said that platforms have taken the position that they “are not responsible for health and safety problems or false representations related to the products nor legally liability when consumers are injured”. Public Citizen recommended that there must be enhanced vetting of third-party sellers of products.
A corporate official from Consumer Reports told the subcommittee that marketplaces need to be motivated to place the interests of consumers first and aggressively police platforms to prevent dangerous and counterfeit goods as well as misleading and false information.
The DHS report, the White House executive order and these congressional activities demonstrate the government’s efforts to confront the threats posed by the availability of counterfeit goods and goods that pose a public health and safety risk. Unlike the fast-moving changes that occur on the internet as a result of technology, changes in government policies and law can take a significant amount of time to implement in the best of circumstances.
An example illustrating this point is the Trade Facilitation and Trade Enforcement Act of 2015 (the “Act”), which includes a provision that instructs U.S. Customs and Border Protection (CBP) to issue regulations outlining the procedures whereby CBP could accept donations (hardware, software, equipment, etc.) from the private sector in order to assist in the enforcement of IP. The Act was signed into law in February 2016 and CBP’s final rule implementing the donation procedures went into effect in January 2018. This is not a criticism, but a reality that the private sector community must recognize.
Given the growing concerns voiced about counterfeit and dangerous goods available in the e-commerce environment, it may be time for CBP to consult with the private sector to identify new technologies as stated in section 308(c) of the Act. The question is whether CBP could identify these technologies and require the private sector actors in the e-commerce ecosystem to adopt best practices for themselves as this would be a departure from the language of the Act’s section 308(d).
According to one technology media report, one company is challenging industry. PreClear’s founder stated that “PreClear is already identifying goods suspected of trademark and copyright infringements as well as items that are not in compliance with Food and Drug Administration rules, … and rules of other U.S. agencies … if a shipper or seller in China presents us with an item that the PreClear technology deems non-compliant, we reject the items.”
If a technology is available now and has the potential to reduce the trade in counterfeit and dangerous goods, then should the e-commerce discussion change from “when” things might improve to “what” new best practices must be adopted and by which actors in the e-commerce ecosystem?
This post was written by Timothy Trainer, a co-author of Customs Enforcement of Intellectual Property Rights, published by Thomson Reuters. Follow Trainer on Twitter @TTrainerglobal.