It used to be that counterfeit goods in the United States came from well-known places like Canal Street in New York City, or perhaps other places in a city near you. At the time, getting a Rolex sold from someone’s jacket or Chanel handbag from a peddler’s coat hanger made it easy for buyers and law enforcement alike to tell what was a fake.
But detecting a counterfeit today is much more difficult, in large part due to the Internet.
With the anonymity afforded to online retailers through e-commerce platforms, there has been a steady flow of synthetic merchandise on platforms like Amazon, Facebook, and other retailers that many consumers may find trustworthy. Their selling of counterfeit products has not only angered consumers who spent their hard-earned money on bad goods, but it has also caused huge financial damage to retailers, costing $54.1 billion in lost revenue and about 283,400 retail jobs, according to one study.
There were even some cases where the problem was really serious. Achievement 2019 by The Wall Street Journal I found that Amazon had thousands of fake items listed that were deemed unsafe or misclassified by a third party seller. Another report pointed to problems with counterfeit cosmetics, which often use dangerous, unsafe and illegal chemicals or ingredients in their blends.
With an ever-expanding counterfeit market, the question becomes: What can be done? So far, not much.
The first – and perhaps the most logical – thought that comes to mind might be the question of why online retailers are not stopping counterfeiting. It’s in large part because they don’t have to.
In the US, there are very limited laws that hold e-commerce sites responsible for filtering illegal products from their platforms, something that has been reaffirmed by several notable court decisions, including Tiffany vs eBayAnd the coach vs gataand others that fail to hold online platforms responsible.
The result is that the e-commerce giants are largely self-regulatory when it comes to fake products, which makes it hard to know how effective the companies really are. For example, last year Amazon promoted itself when it said it had blocked 10 billion counterfeit listings the previous year, a staggering number, but one that can be called into question given the lack of regulatory standards and the company’s prior lobbying against third-party consumer protection.
How do law enforcement agencies and agencies respond
The government has noticed the rise of counterfeit products entering the US supply chain, and agencies are betting on ongoing campaigns aimed at cracking down on the import, shipment and distribution of goods. One of the major initiatives noteworthy was the launch of Operation Stolen Promise by the Department of Homeland Security and Immigration and Customs Enforcement.
Started in the midst of the COVID-19 pandemic when online retail sales surged, agencies attempted to stop counterfeiting at the source, opening investigations, making arrests, shutting down websites, and confiscating fraudulent products and proceeds from them, totaling more than $57. million so far.
Private companies such as Amazon and others have also joined forces with the government to support its crackdown. Working with the National Intellectual Property Rights Coordination Center (IPR), a division of the Department of Homeland Security, and companies including Alibaba, eBay and Amazon sharing data to help target fraud.
Separately, Walmart and Amazon send out lists of intellectual property rights of individuals who commit fraud on their platforms so the agency can boost targeting efforts.
What do legislators do?
Because of this problem and hearing about problems from voters and local businesses alike, Congress recently adopted legislation aimed at combating the flow of counterfeit material in today’s online marketplace. Lawmakers have introduced two bills to curb criminal activity, and while both have bipartisan and bicameral support, their path to passage remains unclear.
The SHOP SAFE Act, one of the bills in this effort, would hold e-commerce platforms partially responsible for third parties selling counterfeit goods, and provide incentives for companies to follow best practices regarding counterfeiters. However, the legislation has faced opposition from major retailers such as Amazon, Etsy and eBay, all of whom argue that the legislation would go too far in holding them accountable.
The INFORM Consumer Act was the industry’s response, which would only regulate verification of third-party supplier information and disclosure of information to consumers. Companies prefer the bill more than its counterpart, although it remains unclear where each is headed or if it will ever pass.
Given that, apart from the Department of Homeland Security’s work to seize counterfeit products, private industry and lawmakers shirking equally responsibility in the matter, the burden of avoiding counterfeiting remains largely on the consumer’s shoulders, at least for the time being. People who shop online should always check that the product is being distributed by a trustworthy seller. And as always, for items that are so valuable, putting on a pair of shoes and walking into the store is never a bad idea.
Experienced intellectual property attorneys at Dunlap Bennett & Ludwig can assist clients with legal issues associated with counterfeit goods. The firm’s attorneys draw on a combination of advanced technical backgrounds, extensive knowledge, and practical experience to provide clients unparalleled insight into the laws relating to counterfeit goods. We keep abreast of developments in this area of law in order to provide our clients with the most up-to-date information.