Chairman Nadler Statement for the Markup of H.R. 5374, the SHOP SAFE Act
Washington, September 29, 2021
Washington, D.C. - Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening statement, as prepared, during the markup of H.R. 5374, the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-Commerce (SHOP SAFE) Act:
"H.R. 5374, the 'SHOP SAFE Act' is bipartisan legislation that will have a significant impact on the safety of consumers when they purchase products online. It would place greater responsibility on online platforms to help police counterfeit products sold by third parties on their platforms, by incentivizing them to implement certain best practices designed to keep counterfeit products off these marketplaces if the health and safety of consumers is implicated.
"I am pleased to lead this bipartisan bill together with my colleagues, IP Subcommittee Chairman, Hank Johnson, IP Subcommittee Ranking Member, Darrell Issa, and Representative Ben Cline, a former colleague on this Committee.
"The SHOP SAFE Act takes a measured and balanced approach to address this serious and growing consumer safety concern. In developing this legislation, we have drawn from industry recommendations and the robust input of a variety of stakeholders over the course of more than two years. I am pleased that this effort has earned the bill broad, bipartisan support.
"On that point, I want to thank Mr. Johnson and Mr. Issa for their leadership on this issue in the IP Subcommittee. They have engaged stakeholders throughout this process, including holding a hearing on the bill in May followed by a series of roundtables over the summer in which stakeholders had additional opportunities to offer feedback on the bill. I know that this bill is a priority for them, as it is for me, and I am pleased to have worked with them on it in a bipartisan and collaborative way. I also look forward to continuing to work with them and other interested Members to refine the bill as it continues through the legislative process.
"From toys to contact lenses to cosmetics, no industry is immune from counterfeiting. While attempting to appear legitimate to unsuspecting consumers, counterfeit products avoid the health and safety standards with which authentic products must comply.
"What results? Counterfeit air bags that deploy fractions of a second too late; counterfeit bike helmets that break in half upon impact; counterfeit batteries that explode from poor construction; and counterfeit toys that break into small pieces that can be swallowed by young children.
"The Internet and e-commerce have revolutionized the way products are marketed and sold. A decade ago, just over 20 percent of Americans reported making purchases online. Today, nearly 80 percent of Americans have made purchases online.
"Americans spent more than 790 billion dollars in e-commerce in 2020. Driven in part by the global Covid-19 pandemic, online sales to U.S. consumers were up more than 30 percent in 2020 over 2019.
"At the same time, the products Americans were purchasing online were exactly the type for which compliance with health and safety standards are most critical: masks, gloves, and cleaning supplies, for example. Unfortunately, counterfeiters were quick to move in too. Reports of counterfeit personal protective equipment and other Covid-19 essentials sprung up almost immediately.
"Whether a purchase is made online, or in a brick-and-mortar store, consumers must be able to be confident that what they see is what they will get. In a brick-and-mortar store, a consumer can see first-hand what they are purchasing. And the liability structure for brick-and-mortar retailers incentivizes those companies to thoroughly vet their supply chains to ensure that the products they sell are authentic.
"In the online world, however, without the benefit of the look-and-feel opportunity before purchase, consumers are at the mercy of the accuracy of the online listing information and the scruples of the seller.
"Consumers may never become aware when they have purchased a counterfeit product, particularly if a sales listing included misleading images of the authentic product or fake reviews that made the listing appear more legitimate—unaware, that is, but still susceptible to the worst-case scenario in which a product they believe to be legitimate actually poses a threat to their health or safety.
"One of the principal problems in the current legal regime—relying on a notice and take down regime—is that it is unduly reactive. It is not until a listing is up, perhaps for some time, that a brand owner can notify the platform of the concern.
"During the recent hearing on this bill, one witness who litigates in the area of counterfeit goods explained that it is not uncommon to encounter sellers using false names and contact information when operating their third-party storefronts. She explained that many overseas counterfeit sellers on e-commerce marketplaces operate as if they are untouchable.
"The reliance on the current notice and takedown system for policing counterfeits opens the door for an unsuspecting consumer to buy a fake product instead of the genuine one she thought she was purchasing. To address this problem, we need both the brands and the platforms to work together to limit and prevent the sale of dangerous counterfeit goods.
"As a result, the SHOP SAFE Act takes a balanced approach to the problem. Recognizing that online marketplaces operate differently than brick-and-mortar retailers and offer distinct advantages, particularly to smaller sellers, the bill does not impose the kind of direct liability applicable to brick-and-mortar stores.
"But it does require more of online marketplaces than they must do now. It requires them to undertake a series of common-sense steps to ensure that they know the sellers they allow on their marketplaces and to confirm that those sellers provide legitimate contact information. For foreign sellers, there is a requirement to accept personal jurisdiction in the U.S. and to provide a means to accept service of process. This way, brand owners have a way to seek recourse against a third-party seller who sells counterfeit goods.
"The bill also encourages platforms to monitor and screen for known indicia of counterfeiting and to keep repeat infringers from reappearing on their platforms. These measures assess a platform’s actions from a reasonableness standard, taking into account that different-sized platforms will have different resources and capabilities to devote to these efforts.
"Finally, and significantly, the bill includes a provision that addresses the concern that the notice-and-takedown procedure for reporting counterfeit listings is sometimes abused. The bill creates a new cause of action that allows third-party sellers who have had their listings taken down based on a material, false misrepresentation in a take-down notice to recover in a civil action against the person who made the misrepresentation. This important new addition to the bill will further the goal of balancing the equities in the fight against online counterfeits."It is past time to address the concern of unsafe counterfeit products available for purchase online. I urge my colleagues support this important, bipartisan legislation."