US-China competitiveness bill sparks battle over e-commerce
Industry groups and powerful corporations are battling over a bipartisan bill that aims to crack down on the sale of counterfeit products online.
Etsy, eBay and other e-commerce firms are lobbying lawmakers to strip the Shop Safe Act out of the bill to bolster U.S. competitiveness with China, warning that it would force most online marketplaces to shut down, leaving only a few industry giants like Amazon to dominate.
The measure — which was included in Democrats’ House-passed China competitiveness bill but not in the Senate’s bipartisan package — would open up online marketplaces to lawsuits over the sale of counterfeit goods if they don’t comply with new regulations requiring them to identify and remove knockoff products from their site.
Major brands and their trade groups pushed House lawmakers to pass the bill, arguing it is an effective way to stop the steady rise of counterfeit goods online amid the pandemic that undermine U.S. companies and pose safety risks to consumers.
Both sides are gearing up for a conference committee, where House and Senate lawmakers will craft the final China competitiveness bill before it goes to President Biden’s desk.
Jeffrey Zubricki, the head of Etsy’s U.S. lobbying team, said that the Shop Safe Act threatens the livelihood of small online vendors selling legitimate products.
“In fact, it would embolden commerce giants, hurt small businesses and lead to less choice for consumers,” he said. “Etsy hopes that Congress will do as it promised and work with all stakeholders on a better, balanced approach to protect both consumers and America’s small sellers — who are frequently one and the same.”
The bill would shift the burden of identifying counterfeit goods online from copyright holders to the online marketplaces themselves. In order to avoid liability, e-commerce sites would have to verify the identity of each seller and the authenticity of their goods and require sellers to post a picture of their product and reveal its country of origin, among other measures.
Opponents argue that the vast majority of digital marketplaces don’t have the resources to comply with the new requirements, and some sellers would struggle to provide the required information, particularly for used products. They say that as a result, most e-commerce sites would simply go out of business.
“There are a massive number of regulatory hurdles that a platform would have to clear to make themselves not liable for the products on their platform and not suffer massive lawsuits,” said Chris MacKenzie, a spokesperson for the Chamber of Progress, which lobbies on behalf of tech giants.
“It’s not even a handful of online marketplaces that we think could survive this bill,” he added. “It’s maybe Amazon and maybe eBay.”
Platforms that don’t comply with the bill’s rules would be liable every time they allow the sale of a counterfeit product that poses a risk to consumer health and safety. The bill exempts platforms with less than $500,000 in annual sales.
E-commerce firms and internet privacy groups argue that the bill’s provisions are far too broad and would apply to most goods sold over the internet. They’ve warned that under the current text, the new rules could apply to products sold through NextDoor, Twitter or even email, potentially opening up a wide variety of websites and apps to legal action.
“The bill goes well beyond the purported goal of consumer safety to pit even the smallest online sellers up against big brands, shifting the playing field in favor of some of the largest companies in the world,” said an eBay spokesperson. “Legislation that aims to improve American economic competitiveness should not limit economic opportunity for millions of people who sell online.”
The bill’s sponsors, Reps. Jerry Nadler (D-N.Y.), Darrell Issa (R-Calif.), Hank Johnson (D-Ga.) and Ben Cline (R-Va.), say the bill will ensure that Americans aren’t purchasing dangerous counterfeit products such as knock-off car seats that fail safety standards or cellphone adapters that have the potential to electrocute the user.
Jennifer Gibbons, senior vice president of government affairs at the Toy Association, said that the huge growth in e-commerce during the pandemic has led to a stunning increase in illicit trade.
“We used to see counterfeits and knockoffs around just the hottest toy of the year, something that was already sold out,” she said. “Now, every product is getting counterfeited or infringed upon. It really is a problem that has grown to the point where it has to be addressed.”
E-commerce sales in the U.S. ballooned to $790 billion in 2020, up 32 percent from 2019, according to U.S. Census Bureau data. The National Association of Manufacturers estimates that counterfeits from China and other nations have stolen roughly $131 billion from the U.S. economy, costing the nation billions in tax revenue and hundreds of thousands of jobs.
“It is important to remember that counterfeit products are not just cheap knockoffs — they are products that steal American intellectual property, put American consumers in harm’s way, and that finance illegal activities,” said Jennifer Hanks, director of brand protection at the American Apparel and Footwear Association, which represents brands like Under Armour and Ralph Lauren.
Home appliance manufacturers, health products companies and cosmetics firms are also pushing for the bill’s passage.
It’s unclear whether the Shop Safe Act will be included in the final China competitiveness package, but the bill’s opponents noted that it was not included in the Senate package and senators have indicated that they favor measures that were passed by both chambers. Any legislative package will need to win the support of 60 senators.
California Democrats have already indicated that the measure needs to be tweaked or outright eliminated before going to Biden’s desk. Rep. Zoe Lofgren (D-Calif.), one of Democrats’ go-to tech experts who represents a large part of Silicon Valley, said last week that she hopes “improvements will be made” to the anti-counterfeit bill as it goes to conference committee.
Lawmakers are more likely to support the Inform Consumers Act, another anti-counterfeit measure that requires online marketplaces to collect information from high-volume third-party sellers but doesn’t open them up to additional liability. House lawmakers included the provision in their China competitiveness bill.
Both copyright holders and e-commerce firms like Amazon and eBay, which lobbied lawmakers to make the bill more industry-friendly, support the Inform Consumers Act.