Lawmakers grill Amazon, eBay executives over online counterfeits

Lawmakers grill Amazon, eBay executives over online counterfeits
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Lawmakers grilled some of the country's top e-commerce platforms about their efforts to combat the spread of online counterfeits on Wednesday as the Trump administration and Congress push to clamp down on the hundreds of millions of fake products spreading across dominant and powerful platforms.

Executives with eBay and Amazon, two of the top U.S. e-commerce players, testified before the House Energy and Commerce Subcommittee on Consumer Protection and Commerce about how they're working to sweep up fake and potentially dangerous products before they're sold to their millions of customers. The company representatives emphasized they are willing to work with the government as they step up their various internal efforts.

But a bipartisan group of lawmakers questioned whether the platforms are benefiting from legal loopholes and skirting liability as their customers are duped and injured by fake iPhone chargers, children's products and electronics.  

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"The emergence of these unregulated platforms has given criminal enterprises additional means to sell stolen and counterfeit goods to unsuspecting consumers," said Rep. Jan SchakowskyJanice (Jan) Danoff SchakowskyAhead of a coronavirus vaccine, Mexico's drug pricing to have far-reaching impacts on Americans With Biden, advocates sense momentum for lifting abortion funding ban Hillicon Valley: Facebook removed over 22 million posts for hate speech in second quarter | Republicans introduce bill to defend universities against hackers targeting COVID-19 research | Facebook's Sandberg backs Harris as VP pick MORE (D-Ill.), the subcommittee chair. 

Over the past year, the issue of online counterfeits has jumped into the spotlight as the Trump administration battles with Beijing over the influx of fake products from China. The majority of fake and imitation products seized by U.S. Customs and Border Protection over the past two decades arrived from China and Hong Kong, according to U.S. government data, and the latest trade agreement with China requires Beijing to take stronger action against counterfeit goods.

"The president has made this a priority," said Rep. Cathy McMorris-Rodgers (R-Wash.), the top Republican on the subcommittee, "which is clear in 'Phase 1' of the U.S.-China Trade deal." 

House Energy and Commerce Committee Chairman Frank Pallone Jr. (D-N.J.) quickly took issue with McMorris-Rodgers’s suggestion, saying before his opening remarks, “You said the Trump administration's leading on this issue — I don’t think they are.”  

White House trade adviser Peter Navarro in particular has led the administration’s efforts on the issue. He recently pressed a key group of House Judiciary Committee members to subpoena Amazon CEO Jeff BezosJeffrey (Jeff) Preston BezosTwitter mandates lawmakers, journalists to beef up passwords heading into election Hillicon Valley: DOJ indicts Chinese, Malaysian hackers accused of targeting over 100 organizations | GOP senators raise concerns over Oracle-TikTok deal | QAnon awareness jumps in new poll Amazon planning small delivery hubs in suburbs MORE, claiming that Bezos has refused to sit down with the Trump administration about the issue.

Overall, Democrats and Republicans on the committee voiced concerns that tracked with recent statements from Navarro and acting Homeland Security Secretary Chad WolfChad WolfSchiff to subpoena top DHS official, alleges whistleblower deposition is being stonewalled The Hill's 12:30 Report: Ginsburg lies in repose Amnesty International USA calls for halt on Chad Wolf nomination MORE. Navarro and Wolf say the top platforms need to assume more responsibility over online counterfeits, which have surged as e-commerce becomes more ubiquitous. 

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“The success and benefits of these platforms have given rise to those peddling counterfeit and illicit products for a quick buck,” said Rep. Greg WaldenGregory (Greg) Paul WaldenOVERNIGHT ENERGY:  House passes sweeping clean energy bill | Pebble Mine CEO resigns over secretly recorded comments about government officials  | Corporations roll out climate goals amid growing pressure to deliver House passes sweeping clean energy bill Hillicon Valley: DOJ proposes tech liability shield reform to Congress | Treasury sanctions individuals, groups tied to Russian malign influence activities | House Republican introduces bill to set standards for self-driving cars MORE (R-Ore.), the ranking member of the full committee.

Amazon’s vice president for customer trust and partner support, Dharmesh Mehta, and eBay associate general counsel Amber Leavitt testified that their companies are building up internal defenses against counterfeits, including powerful artificial intelligence systems that pull down products before they’re even reported. 

Mehta pointed to Amazon’s Project Zero, a recently launched effort that allows sellers on Amazon to take down counterfeit products as they find them. The Amazon executive said the goal is to bring the number of fake products on its platform down to zero.

Meanwhile, Apple testified at the hearing about the company’s struggles with imitation Apple products spreading across e-commerce platforms. Jeff Myers, Apple’s senior director for intellectual property, said Apple has teams specifically dedicated to flagging and reporting fake products, like mock iPhone chargers and batteries, but there’s only so much they can do as bad actors continue to post the counterfeits under new identities. 

“It’s difficult from the outside ... to understand what’s going on,” Myers testified, noting that it’s astonishing “how quickly that seller can repost something.” 

The hearing on Wednesday was only the latest congressional effort to crack down on the platforms disseminating the fake products. 

On Monday, the leaders of the House Judiciary Committee introduced a bill to hold the e-commerce platforms liable for counterfeit products. The Shop Safe Act of 2020, introduced by House Judiciary Committee Chairman Jerrold NadlerJerrold (Jerry) Lewis NadlerDemocrats shoot down talk of expanding Supreme Court Schumer: 'Nothing is off the table' if GOP moves forward with Ginsburg replacement Top Democrats call for DOJ watchdog to probe Barr over possible 2020 election influence MORE (D-N.Y.) and ranking member Doug CollinsDouglas (Doug) Allen CollinsDemocrats ramp up pressure on Lieberman to drop out of Georgia Senate race The Hill's Campaign Report: Biden on Trump: 'He'll leave' l GOP laywers brush off Trump's election remarks l Obama's endorsements GOP, Democrats look to galvanize women with SCOTUS fight MORE (R-Ga.), would require Amazon, eBay, Walmart and other top industry players to establish best practices to vet their sellers to ensure they’re real and expose them to new legal liabilities if they don’t take down counterfeits that put peoples’ lives at risk. 

“Consumer lives are at risk because of dangerous counterfeit products that are flooding the online marketplace,” Collins said in a statement. “Congress must create accountability to prevent these hazardous items from infiltrating the homes of millions of Americans.”

President TrumpDonald John TrumpBiden says voters should choose who nominates Supreme Court justice Trump, Biden will not shake hands at first debate due to COVID-19 Pelosi: Trump Supreme Court pick 'threatens' Affordable Care Act MORE and Peter Navarro have taken great strides to address counterfeit issues, and the Shop Safe Act will help achieve their goals,” Collins said.

In December, the Department of Homeland Security (DHS), alongside Navarro, announced it is cracking down on the mass of counterfeit products sold online, threatening a legal and legislative response to the hundreds of billions of dollars of fakes sold on platforms like Amazon every year. 

The push by DHS, laid out in a 54-page report, strongly suggests “best practices” for the e-commerce companies.

Walden at the hearing on Wednesday asked Amazon’s Mehta whether the company is already adhering to those “best practices” laid out in the DHS report.

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“We agree there’s a number of best practices in that report that we already implement today or plan to,” Mehta said. He said Amazon supports better vetting processes for sellers, “efficient and fast” takedown processes and a higher bar for sellers hoping to sell “risky products.” 

Navarro has continued to criticize the companies for failing to publicly agree to all of the best practices laid out in the report. 

Courts have previously decided that e-commerce companies like Amazon are not liable for counterfeits on their platforms. But lawmakers and the Trump administration are increasingly eyeing legal and regulatory options that would hold the companies more accountable if they don’t make a significant dent — and soon. 

"We need to call on all of these platforms to step up," said David Friedman, vice president of advocacy at Consumer Reports. "They are investing effectively pennies when they should be investing dollars in informing consumers, getting these products off their platforms and putting their consumers instead of their profits first."