In a landmark regulation on anti-counterfeiting, US president Donald Trump has shifted the liability for counterfeits from third parties to platforms like Amazon. Jeff Bezos, the chief of Amazon, has been able to sidestep any liability for counterfeit goods, but the Trump Administration's crackdown on counterfeit goods have backed the retail giant into a corner,
says a report from CCN.
It says, "The new customs and border protection framework shifts the burden of responsibility to Amazon. Now warehouses and fulfilment centres, most notably Amazon, will be legally and financially liable. Jeff Bezos’ company will have to bear more of the costs of policing for counterfeits on its platform."
"The Trump administration will now require e-commerce platforms like Amazon to turn over vast amounts of third-party vendor data for additional scrutiny. The government says the new rules not only protect US intellectual property but also ensure public safety. But national security interests are also important," the news report says.
Mr Bezos is facing a massive counterfeit goods problem on his platform and Amazon has defended itself from a number of lawsuits by brands who have found counterfeits for sale on the platform. But so far, Amazon has prevailed in court.
Mr Bezos has been able to sidestep any liability for counterfeit goods. His lawyers have successfully argued in court that Amazon is a platform, not a seller. But the Trump Administration’s crackdown on counterfeit goods have backed the retail giant into a corner, the report from CCN says.
The US department of homeland security (DHS)’s office of strategy, policy, and plans had prepared and submitted to Mr Trump, a report titled 'Combating Trafficking in Counterfeit and Pirated Goods'. The report is based on a memorandum from President Trump signed on April last year.
The DHS report says, "The rapid growth of e-commerce has revolutionised the way goods are bought and sold, allowing for counterfeit and pirated goods to flood our borders and penetrate our communities and homes. Illicit goods trafficked to American consumers by ecommerce platforms and online third-party marketplaces threaten public health and safety, as well as national security. This illicit activity impacts American innovation and erodes the competitiveness of US manufacturers and workers."
Counterfeiting is no longer confined to street-corners and flea markets. The problem has intensified to staggering levels, as shown by a recent Organisation for Economic Cooperation and Development (OECD) report, which details a 154% increase in counterfeits traded internationally — to $509 billion in 2016 from $200 billion in 2005.
Responding to a query from the President, OECD reported that e-commerce platforms represent ideal storefronts for counterfeits and provide powerful platform for counterfeiters and pirates to engage large numbers of potential consumers.
The sale of counterfeits away from so-called underground or secondary markets like street corners and flea markets to e-commerce platforms is reshaping consumer attitudes and perceptions.
Where in the past, consumers could identify products by relying on 'red flag' indicators—such as a suspicious location of the seller, poor quality packaging, or discount pricing—consumers are now regularly exposed to counterfeit products in settings and under conditions where the articles appear genuine.
A summary of the annual intellectual property right (IPR) seizure statistics collected by US customs and border protection (CBP) in FY2018; including items from all modes of transportation. Apparel and other types of accessories, along with footwear, top the list at 18% and 14% of seizures, respectively. Commonly counterfeited items in these categories include brand name shoes such as Nike and Adidas, as well as NFL jerseys.
Watches and jewellery follow at 13% of total seizures. During the Mega Flex operation on 21 August 2019, for example, CBP officers seized counterfeit Rolex watches valued at over $1.4 million. Handbags and wallets represented nearly 11% of all seizures, including counterfeits of luxury brands such as Louis Vuitton, Michael Kors, and Gucci. Consumer electronics represented 10% of seizures, including products such as iPhones, hover boards, earbuds, microchips, and others.
Pharmaceuticals and personal care items account for only 7% of total seizures. However, DHS says, many of the products in these categories pose significant dangers to the consumer. Fake prescription drugs can lack active ingredients, contain incorrect dosages, or include dangerous additives. Fake personal care items such as cosmetics have been found to contain everything from harmful bacteria to human waste. Between 2017 and 2018, CBP and ICE Homeland Security Investigations (HSI) seized over $31 million in fake perfumes from China, it added.
DHS says, while e-commerce has supported the launch of thousands of legitimate businesses, e-commerce platforms, third-party marketplaces, and their supporting intermediaries have also served as powerful stimulants for the trafficking of counterfeit and pirated goods. This is because, selling counterfeit and pirated goods through ecommerce platforms and related online third-party marketplaces is a highly profitable venture.
"For counterfeiters, production costs are low, millions of potential customers are available online, transactions are convenient, and listing goods on well-known platforms provides an air of legitimacy. When sellers of illicit goods are in another country, they are also exposed to relatively little risk of criminal prosecution or civil liability under current law enforcement and regulatory practices. It is critical that immediate action be taken to protect American consumers and other stakeholders against the harm and losses inflicted by counterfeiters," the report says.
This report submitted to President Trump identified a set of strong government actions that DHS and other federal agencies can begin executing immediately to address a crisis that is undermining America’s trust in e-commerce even as it is exposing the American public to undue and unacceptable risks.
"Additionally, this report has proposed a set of best practices for private sector stakeholders thatDHS believes should be adopted swiftly. As the longstanding experiences of brick-and-mortar stores demonstrate, the private sector is capable of operating businesses that sell legitimate, not illicit, goods to American consumers. We should expect the same level of care from online third party marketplaces that we expect from the stores physically located in our communities," the report concludes.
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I am also awaiting Mr. Goyal's intelligent comments like the $ one billion investment by Amazon.