Marketplaces Mull How to Combat $464B of Counterfeit Goods

Amazon, eBay and Etsy, which months ago united in opposition to legislation in the U.S. Senate designed to protect online shoppers from counterfeit products, now stand on opposite sides of the issue after a new bill in the House of Representatives toned down some of Etsy’s and eBay’s concerns.

The Organization for Economic Cooperation and Development (OECD) estimates that pirated and counterfeit products make up 2.5% of world trade, or $464 billion per year, with COVID-19 driving significant growth in the online supply of counterfeits.

PYMNTS research has found that 94% of consumers have made a purchase on an online marketplace and 52% have made a retail purchase using an aggregator in the last year, making the safety and security of these platforms a vital issue as eCommerce adoption accelerates. A separate PYMNTS study found that 91% of consumers say they regularly make purchases on Amazon, and 70% say they do so on other major marketplaces.

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The legislation, called the Inform Consumers Act, was introduced earlier this month, with lawmakers on the House Energy and Commerce subcommittee considering the bill last week. If enacted, online marketplaces would have to collect and verify business information from sellers who have made at least 200 sales in a year that together are worth $5,000 or more, and platforms would have to provide customers with a way to contact sellers who have more than $20,000 in annual gross revenue after making a purchase.

Etsy told Axios that the House version of the bill does a better job of protecting the privacy of its sellers by requiring the disclosure of their information. eBay also said that changes to the verification requirements helped gain the eCommerce company’s support, and also increased the threshold for when platforms must provide customers with a way to contact sellers.

“It strikes that right balance between best practices in vetting and thoughtful disclosure without being privacy-invasive,” noted Etsy’s Head of U.S. Government Relations Jeffrey Zubricki.

Amazon’s Approach 

From Amazon’s perspective, the answer appears to mainly rest in the private sector. In a blog post published earlier this week, Dharmesh Mehta, Amazon’s vice president of customer trust and partner support, pointed to the company’s Counterfeit Crimes Unit (CCU), which launched last year, as a model for how the issue could be approached.

“The CCU has made good progress in its first year and has forged beneficial relationships with law enforcement, demonstrating that our anti-counterfeiting efforts are more effective when we work together,” Mehta said.

Related news: Amazon Starts Crime Unit to Crack Down on Counterfeits

Since June 2020, Mehta said the CCU has referred over 250 counterfeiters to authorities in the U.S., U.K., European Union and China, and has filed civil litigation against 64 counterfeiters in U.S. courts in partnership with GoPro, Yeti, Valentino and other brands.

To move the effort forward, Amazon says that retail channels — including direct-to-consumer websites, online marketplaces and offline shops — need to work together more closely and share information about known counterfeiters. A small number of companies, including Amazon, have been piloting a counterfeit information exchange program, and Mehta said that “the early results are encouraging.”

“Among the list of confirmed counterfeiters shared with us by other stores, we found matched accounts that had also tried to sell in our store,” he added.

The eCommerce giant also wants to see increased resources for law enforcement to prosecute counterfeiters, which Mehta said “has not been sufficiently prioritized.”

“The retail industry and government bodies must step up, work together and stop counterfeiters to protect consumers, rights owners and store operators from these criminals,” Mehta said.