SHOP SAFE Act Could More Effectively Address Counterfeiting Online
The new Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act, introduced in late September by U.S. Senators Chris Coons (D-Del.) and Thom Tillis (R-N.C.), will help crack down on harmful counterfeit products online. The ultimate goal of reducing counterfeit goods online is crucial, but the current language of the bill creates ambiguity and confusion for platforms. There are a few changes that could make the bill more effective. Congress should reduce ambiguity around the “three-strike rule” and incorporate industry innovations and current standards into the proposed safe harbor.
SHOP SAFE aims to reduce counterfeits on e-commerce platforms and third-party marketplaces. The bill would make platforms liable for trademark infringement when a third party sells a counterfeit product. It would also require brand owners to provide advanced notice of new trademarks to the platform, along with contact information for the brand, so the platform could proactively search for violations. This year is the third time Congress is considering this bill, but unlike previous versions of the legislation, the newly introduced SHOP SAFE provides a safe harbor for platforms that engage in specific actions to prevent counterfeiting, including vetting sellers, removing counterfeit product listings, and banning bad actors who repeatedly sell counterfeit products. The bill would require platforms to have a “three strikes rule,” and remove sellers if they had three violations in a single year.
The inclusion of a safe harbor against liability is a positive change that acknowledges the considerable effort that e-commerce platforms have taken to address counterfeiting on their marketplaces. Major e-commerce platforms have invested in practices that would meet the safe harbor requirement, such as preventing bad actors from joining the platform and removing counterfeit listings. For example, Etsy removed 1.9 million listings in 2022 for platform policy violations, including for listing counterfeit products. Of those, 95 percent were caught by Etsy’s internal automated monitoring. Meanwhile, Amazon’s robust seller verification prevented 800,000 known bad actors from selling on the platform.
However, questions remain about how the safe harbor applies because the listed qualifications are ambiguous. For example, platforms must remove or disable listings “expeditiously” once a platform detects a counterfeit mark, according to SHOP SAFE. However, it is not clear who determines the length of time to disable the potentially counterfeit content, or if platforms must remove the listing before investigating if the flagged content is a counterfeit good.
Congress should work alongside e-commerce platforms to develop clear best practices that accurately reflect industry innovations. These best practices should include removing verified counterfeit listings, providing a reasonable mechanism for brand owners to report potential violations, and vetting sellers using the standards outlined in the INFORM Act, which requires platforms to verify and disclose certain information about third-party sellers. In addition, Congress should clarify how the SHOP SAFE’s safe harbor will impact resellers and resale platforms. Given the popularity of reselling and the rise of designated secondhand and used fashion marketplaces like Poshmark and Depop, Congress should consider how platforms authenticate second-hand products and provide a mechanism for second-hand platforms to engage the safe harbor if platforms are unable to authenticate or verify a seller’s secondhand goods.
Finally, policymakers should clarify the proposed “three-strike rule” and include specific information about how the rule will be adjudicated. Currently, it is unclear if a “strike” applies to reported listings, removed listings, or just confirmed trademark violations. Without clarity on how platforms should apply strikes to sellers, sellers could engage in fraudulent reporting to have competing listings and sellers removed from the platform. Policymakers should also clarify if a seller removed by the three strikes rule would be able to appeal and return to the platform, or if bans would be permanent.
For SHOP SAFE to reach its full potential, it is imperative that Congress collaborates with e-commerce platforms to establish clear best practices reflecting industry innovations and define the specifics of the “three strike rule.” By refining and elaborating on these aspects, Congress can create a SHOP SAFE Act that provides robust protection for platforms, consumers, and brands.
