E-Commerce

A new bill could make e-commerce companies liable for counterfeits sold on their platforms

Key Points
  • A bipartisan bill introduced Monday outlines steps e-commerce platforms must take to prevent the sale of counterfeits third-party sellers sold on their platforms.
  • The bill proposes e-commerce companies that fail to take these steps can be held liable for the sale of counterfeits.
  • The rise of e-commerce has contributed to a boom in shipments of counterfeit goods sold online.
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A bipartisan group of lawmakers unveiled legislation Monday that would hold e-commerce companies like Amazon or eBay liable for counterfeit products sold on their platforms as U.S firms struggle to combat the sale of fake goods online. 

The Shop Safe Act of 2020, co-sponsored by four House members, outlines a series of steps that e-commerce platforms must take to prevent the sale of knockoffs by third-party sellers on their platforms. E-commerce companies that fail to take these steps can be held liable for the sale of counterfeits, a move that would shift burden onto the internet marketplaces, according to a text of the bill obtained by CNBC.

"Consumer lives are at risk because of dangerous counterfeit products that are flooding the online marketplace," Rep. Doug Collins (R-Ga.) said in a statement. "Congress must create accountability to prevent these hazardous items from infiltrating the homes of millions of Americans."

The rise of e-commerce has contributed to a boom in shipments of counterfeit goods sold online. Fake goods accounted for 3.3% of global trade in 2016, according to the OECD. The Department of Homeland Security (DHS) reported seizures of counterfeit products at U.S. borders have increased 10-fold over the past two decades.

In January, the DHS released a report saying e-commerce companies need to do more to fight fake goods on their sites in order to protect American consumers and businesses.

"Counterfeiters have followed consumers, and it is clear more must be done to combat the rising trend in online sales of counterfeit products," said Rep. Jerry Nadler (D-N.Y.) in a statement.

Court decisions have previously found e-commerce companies like Amazon are not liable for counterfeits sold by third-parties on their platforms. In Amazon's case, more than half of gross merchandise sales come from third party-sellers.

Josh Gerben, a trademark lawyer, said this bill would hold e-commerce companies more accountable for the goods sold on their sites.

"Quite frankly it is about time that Congress did something about it because the online marketplaces that exist today have not put consumer safety first," he told CNBC.

In a statement to CNBC, Amazon said it prohibits counterfeits.

"We are actively fighting bad actors and protecting our store and we will continue to work with brands, government officials, and law enforcement," an Amazon spokesperson said.

In a statement to CNBC, eBay said: "Counterfeits are not welcome on eBay. We are reviewing the legislation and will continue to work with the Committee on this important issue."

The House Energy and Commerce Committee is set to hold a hearing Wednesday morning about the sale of counterfeit products online. Witnesses include executives from Amazon, eBay and Apple.