By: Joslyeen Mitri
The COVID-19 pandemic has dramatically shifted society towards a digital world, a dramatic shock to healthcare professionals, governments, and businesses around the world. In order to maintain social distancing and prevent the spread of the virus, countries and businesses were forced to take a strategic approach in order to keep their heads above water. While the e-commerce industry found enormous opportunity during the pandemic, it nonetheless presented potential issues pertaining to the upsurge of counterfeits sold online.
E-commerce as a whole has increased an unprecedented 44% in 2020, with consumers spending $861.12 billion online with U.S. merchants. Amazon claimed a new title as the “pandemic giant”, after reporting blowout third-quarter results in 2020 due to the pandemic sales boost helping the company triple its profits amid a 37% increase in earnings. The company’s revenues of $96.15 billion were better than analysts expected, and its net income increased to $6.3 billion in the third quarter, compared with net income of $2.1 billion in the third quarter of 2019.
Amazon has become increasingly popular due to their incredible benefits including free same-day shipping, grocery delivery services, streaming platforms, and generous customer service. Although these benefits seem incredible on their face, the impact of a growingly impatient society caused by instant delivery and instantaneous streaming has led buyers to prioritize swiftness over safety.
Historically, many counterfeit products were compiled at flea markets where counterfeiters enticed naïve consumers with trunks filled with fake Gucci purses and Rolex watches. In today’s day in age, counterfeit goods are being sold globally on websites, driving down their costs of production while giving an impression of legitimacy on authentic platforms, such as Amazon. The counterfeit market has spread beyond Gucci purses, to include more dangerous dealings in pharmaceuticals. For example, illicit prescription opioid medications, such as Oxycontin, are commonly produced by counterfeiters by diluting an authentic pill with deadly narcotics, such as fentanyl.
Counterfeit medications often contain carcinogenic and allergenic ingredients, counterfeit lithium-ion batteries pose significant risk of exploding, and counterfeit airbags can cause severe malfunctions such as non-deployment. Aside from the substantial risks to the health and safety of consumers, counterfeit goods threaten the profits, reputation, and intellectual property rights of legitimate businesses. One of the main areas of e-commerce growth was over-the-counter medicine, which saw an increase of 44% in customers shopping online in 2020. While accessibility and ease are crucial factors to shopping, health and safety are often overlooked. The downside of online shopping, especially on platforms like Amazon, is that consumers never know who is behind a listing or whether the product may be a counterfeit that poses a health hazard.
Currently, brand owners can take civil actions against counterfeiters through three theories of trademark infringement: direct infringement, vicarious infringement, and contributory infringement. Applied to operators of third-party online marketplaces, in order to be held liable for contributory trademark infringement, the third-party online marketplace must have “intentionally induced [a marketplace seller] to infringe a trademark, or . . . continued to [allow a marketplace seller to use its online third-party marketplace services when] it knows or has reason to know [the marketplace seller] is engaging in trademark infringement.” This liability standard has been difficult for plaintiff brand owners to establish, forcing brand owners to self-police online third-party marketplaces for counterfeit goods, leading to no resolution.
The Shop Safe Act is a bipartisan bill that was introduced to the House of Representatives on March 2, 2020. The bill would serve two main purposes: (1) establish incentives for ecommerce platforms to vet third-party sellers better, and (2) hold e-commerce platforms liable for allowing counterfeits that pose a health hazard to be sold. E-commerce platforms would not be held liable if the third-party seller in question is available to be served a lawsuit in the U.S., or if the platform meets ten other safety requirements before the counterfeit was sold, some of which have already been enacted by Amazon.
The goal of the Shop Safe Act is to only hold e-commerce platforms liable if the goods they sell pose significant health risks. The bill defines these goods as those leading to “illness, disease, injury, serious adverse event, allergic reaction, or death if produced without compliance with all applicable Federal, State, and local health and safety regulations and industry-designated testing, safety, quality, certification, manufacturing, packaging, and labeling standards.” Goods that could potentially implicate health and safety include the categories of baby products, cosmetics, and pharmaceuticals, none of which are being regulated when sold online by third parties.
For online retail giants such as Amazon, vetting every item sold by third parties would be extremely time-consuming, meticulous, and expensive. However, these multi-billion-dollar corporations have a responsibility to ensure the safety and dependability of products sold on their platforms to millions of consumers each and every day. Although the financial burdens of vetting items may place grim strongholds on smaller retailers, they are typically not dealing with the magnitude of third-party distribution as Amazon does.
The Shop Safe Act would not only provide protection for consumers but would also preserve the profits and intellectual property rights of legitimate American businesses that have devoted countless hours and resources into developing their products. Lawmakers have an obligation to enact the Shop Safe Act and protect consumers from harmful counterfeit goods that compromise the health and safety of our digital society.
Student Bio: Joslyeen Mitri is a second-year law student at Suffolk University Law School and a Staff Member of the Journal of High Technology Law. Prior to law school, Joslyeen received a Bachelor of Science Degree in Corporate Finance and Accounting from Bentley University.
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
