Newly proposed U.S. federal legislation is aimed at resolving what the courts so far have been mixed on deciding: Whether Amazon, eBay and other online marketplaces are liable for counterfeits sold by third parties on their platforms.

The Shop Safe Act of 2020, co-sponsored by two Republican and two Democratic members of the U.S. House of Representatives, outlines a series of steps that e-commerce platforms must take to prevent the sale of counterfeits by third-party sellers. Companies that fail to take these steps can be held liable for those sales, a move that would expand liability that currently applies only to the seller.

The introduction of the bill comes a few weeks after the Trump administration, as part of its “Phase One” trade deals with China, opened up enforcement against the platforms.

Court Decisions
The legislation would counter earlier lower court decisions. Amazon, eBay, Alibaba and other ecommerce companies have long maintained that since they’re not the actual sellers, they can’t be held liable under state laws that allow consumers to sue retailers. They also have argued that they’re protected by the Communications Decency Act of 1996 which shields internet companies from liability for what is posted there.

But a crack in the court decisions occurred last July when a federal Appeals Court ruled that Amazon could be considered a seller because there is no vetting process to ensure that third-party companies are available for consumers to sue. And the U.S. Department of Homeland Security announced a new crackdown on counterfeits in January, primarily from China.

Trade in counterfeit goods of all sorts grew 154% between 2005 and 2016 to $500 billion, accounting for 3.3% of global trade, according to the Organization for Economic Cooperation and Development (OECD). And U.S. Customs and Border Protection seizures of counterfeits increased 10-fold between 2000 and 2018 to $1.3 billion.

Platforms Step Up Their Efforts
The ecommerce companies have responded with anti-counterfeiting programs of their own such as Amazon’s Transparency. Amazon says it spent $400 million on fighting counterfeiting and fraud in 2018 and is prepared to spend billions moving forward. And Alibaba, which operates Tmall and other marketplaces, said in January that “ever-improving technologies and close partnerships with brands and other external stakeholders” have helped identify and remove counterfeit goods from its platforms.

To be sure, counterfeits are a perpetual issue, and the advent of ecommerce has turned the pursuit of unauthorized goods into a global series of moves and countermoves among brand owners, law enforcement, government agencies, manufacturers, payment processors and resellers.

Consider this proposed legislation to be the latest, but certainly not the last, move in that ongoing battle.