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Cracking Down on Counterfeit Goods with the SHOP SAFE Act

Oct. 25, 2023
If passed into law, a new U.S. bipartisan bill may make it harder for counterfeiters to infiltrate and sell their goods in the $1 trillion-plus e-commerce arena.

Last fiscal year, U.S. Customs and Border Protection (CBP) seized over 24.5 million shipments with intellectual property rights violations worth just shy of $3 billion, had the goods been genuine. And while CBP doesn’t specifically break down the categories of products that it seizes, electronics surely made up a portion of these illegally produced and distributed goods.

Many of the illegal goods likely traded hands online, where it’s easy enough to set up shop and start selling goods under the guise of “authenticity” and “original.” A pair of U.S. senators want to thwart these criminals with a new, bipartisan bill aimed at cracking down on counterfeit e-commerce goods.

Introducing the SHOP SAFE Act

Introduced by Senators Chris Coons and Thom Tillis, the SHOP SAFE Act takes aim at the growing counterfeiting problem right at a time when U.S. e-commerce sales surpassed $1 trillion for the first time. The boom in e-commerce has made both B2C and B2B buyers increasingly vulnerable to the rising number of harmful counterfeit goods sold on e-commerce platforms.

The SHOP SAFE Act would reduce the availability of harmful counterfeit products online by incentivizing platforms to engage in best practices for vetting sellers and goods and stopping repeat counterfeiter sellers.

“As Americans have increasingly turned to e-commerce for convenience, selection and safety, some third-party sellers have begun to exploit consumers’ trust in established online marketplaces to trick them into purchasing dangerous counterfeit goods,” Coons said in a press release. “These counterfeit goods pose health and safety risks, damage the reputations of legitimate brands and line the pockets of organized crime. The bipartisan SHOP SAFE Act is an important step that will protect consumers and encourage greater transparency and accountability.”

Establishing Trademark Infringement Liability

According to the senators who introduced this new bill, the SHOP SAFE Act will:

• Establish trademark infringement liability for e-commerce platforms when a third party sells a counterfeit product that poses a risk to consumer health or safety and that platform has not implemented certain best practices.

• Require brand owners to provide platforms with advanced notice of their mark(s) and a point of contact so that the platforms can implement proactive measures to prevent sales of counterfeit goods.

• Provide a safe harbor from liability for platforms that vet sellers to ensure their legitimacy, remove counterfeit listings and remove sellers who repeatedly sell counterfeits.

The SHOP SAFE Act is endorsed by the American Apparel & Footwear Association, the Alliance for Automotive Innovation, the Toy Association, the National Association of Manufacturers, the Footwear Distributors and Retailers of America and the Council for Innovation Promotion.

In a press release, Hilary Cain, VP of the Alliance for Automotive Innovation, said, “Dangerous counterfeit automotive components endanger public health and safety. The SHOP SAFE Act will help prevent counterfeit auto parts from entering the stream of commerce and reaching the hands of unsuspecting consumers.”

The National Association of Manufacturers says the “explosive growth” in e-commerce has caused a surge in the sale of counterfeits, exposing consumers to health and safety risks.

“Manufacturers commend Senators Coons and Tillis for introducing the SHOP SAFE Act, which lays out reasonable and implementable steps to hold counterfeiters and platforms accountable—keeping dangerous products off platforms and protecting American citizens, workers and businesses from bad actors,” Charles Crain, VP of Domestic Policy, said.

Taking Things Up a Notch

Current law holds direct sellers, like brick-and-mortar retailers, liable for the sale of counterfeit products. However, platforms that allow third-party sellers to sell harmful counterfeit products are often not liable for the sales of those counterfeit products, even when the third-party seller is unavailable to remedy damage to a brand owner, the senators point out in a one-pager on the new act.

“The SHOP SAFE Act aims to combat the sale of unsafe counterfeit goods by incentivizing platforms to engage in best practices for screening and vetting sellers and goods, addressing repeat counterfeiter sellers, and ensuring that consumers have relevant information available to them when they make their online purchases,” they continue. “The Act is tailored to goods that have a health or safety impact, targeting counterfeit goods that have the most serious consequences for consumers.”

Electronic parts and components are a product category that’s often sought after by bad actors looking to make a buck. Those parts and components that don’t meet safety standards may fail prematurely, not perform as expected, contain harmful substances and even cause injuries or fatalities. Here at Chip 1 Exchange, we stand behind any new regulations that help buyers steer clear of these obstacles and only buy from trusted, authorized sources.

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