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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 SchakowskyPublic option fades with little outcry from progressives Online school raises new concerns about cyberbullying Progressives nearly tank House Democrats' Capitol security bill 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 BezosThe tax code's Achilles' heel is surprisingly popular — and that's a problem for taxing the rich Overnight Energy: Lake Mead's decline points to scary water future in West | White House leads opposition to raising gas tax | Biden taps ex-New Mexico lawmaker for USDA post On The Money: Centrists gain leverage over progressives in Senate infrastructure battle | White House rules out gas tax hike 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 WolfLawmakers slam DHS watchdog following report calling for 'multi-year transformation' Intel heads to resume worldwide threats hearing scrapped under Trump Sunday shows preview: Democrats eye passage of infrastructure bill; health experts warn of fourth coronavirus wave 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 WaldenLobbying world Give Republicans the climate credit they deserve Fox hires former GOP lawmaker Greg Walden as political consultant 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 NadlerSenate on collision course over Trump DOJ subpoenas Black Democrats press leaders for reparations vote this month House Judiciary to probe DOJ's seizure of data from lawmakers, journalists MORE (D-N.Y.) and ranking member Doug CollinsDouglas (Doug) Allen CollinsLoeffler meets with McConnell amid speculation of another Senate run Georgia agriculture commissioner launches Senate campaign against Warnock Poll shows tight GOP primary for Georgia governor 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 TrumpHead of firms that pushed 'Italygate' theory falsely claimed VA mansion was her home: report Centrists gain foothold in infrastructure talks; cyber attacks at center of Biden-Putin meeting VA moving to cover gender affirmation surgery through department health care 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.

“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."