In January 2020, the U.S. Department of Homeland Security (DHS) published a report, Combating Trafficking in Counterfeit and Pirated Goods, that offered 11 steps the U.S. government could take to thwart the spread of counterfeit goods and 10 best practices for the private sector. DHS tasked the U.S. Immigration and Customs Enforcement-led National Intellectual Property Rights Coordination Center (IPR Center) with encouraging, monitoring, and reporting on the adoption and effectiveness of these practices. This, in turn, led to the formation of the public-private Anti-Counterfeiting Consortium to Identify Online Nefarious Actors (ACTION), made up of the IPR Center, e-commerce platforms with third-party marketplaces, relevant intermediaries, affected carriers, shippers, payment processors, and search engines. In October 2020, the IPR Center collected self-certified assessments of efforts made by ACTION members to implement the best practices. The following summarizes each of the best practices and highlights some of their responses.
1. Comprehensive “Terms of Service” Agreement
Recommendation: Private sector stakeholders should require third-party sellers to sign a comprehensive Terms of Service agreement that lists explicit prohibitions and repercussions for counterfeit violations and enables the stakeholder to pursue suspicions of counterfeit trafficking.
Response: Most respondents’ Terms of Service agreements featured escalating measures designed to penalize offenders according to the severity of their actions, including account suspension, restricting the number of listings, or destroying remaining inventory already in possession.
Further, some companies listed additional measures included in their “Terms of Service” agreements like seller training and expected legal action. Alibaba highlighted its efforts to inform sellers of legal responsibilities, with a real-time inquiry channel and livestream training. The company employs a three-strike principle for the majority of sellers on its platform and found that offenders were likely to avoid repeat infringement when educated after their offense.
2. Significantly Enhanced Vetting of Third-Party Sellers
Recommendation: Companies should implement a significant vetting regime for third-party sellers on their platforms that includes verifying identification, accounts, and listings, prior bans from other major platforms, business locations, and an acknowledgment of trademarked offerings before allowing sellers to list a product.
Response: Respondents with vetting regimes use a combination of human review and machine learning models to verify their sellers’ information; however, many, like Mercari and Amazon, found that stringent verification hurt their business model and expressed reluctance at the suggestions listed in this best practice.
3. Limitations on High-Risk Products
Recommendation: Private sector stakeholders should consider disallowing or regulating the sale of products that have a higher likelihood of being counterfeited or pose a risk to public health and safety. DHS recommends that e-commerce platforms with third-party marketplaces maintain an easily accessible list of prohibited items.
Response: All e-commerce respondents have such a list on their website with specific examples of prohibited products. Similar to the vetting regime for third-party sellers, many respondents employ both human review and automated processes to identify and remove listings for prohibited products. Facebook subjects listings to automated review before approving a post to its marketplace. Questionable products are then sent to a human team for review before further action, and all products are subject to additional reviews depending on user feedback.
4. Efficient Notice and Takedown Procedures
Recommendation: Private sector stakeholders should enact criteria for efficient notice and takedowns of offending seller profiles and product listings that include minimal registration requirements for interested individuals.
Response: Notice and takedown procedures vary in magnitude across platforms. Some, like Mercari, have no established notice and takedown program dedicated to counterfeits. Instead, the company reviews offending products when it receives a complaint via an online DMCA Policy and Copyright Notification form.
Others, like eBay and Amazon, have more intense procedures to review listings for counterfeit products. Amazon has developed and implemented tools to allow rights owners to efficiently search its platform and employs investigators who are devoted to reviewing claims of rights infringement around the clock. eBay has maintained a partnership with over 40,000 registered rights owners through a Verified Rights Owner program, which enables rights owners to report potentially offending products to the company and receive identification information for the seller of a counterfeit product when allowed by law.
5. Enhanced Post-Discovery Actions
Recommendation: Private sector stakeholders should implement a series of practices upon discovery of an offending product, including notifying and offering to refund any buyer of the product, notifying rights owners, removing any remaining stock in a manner that prevents its re-entry into the market, and engaging with law enforcement for further courses of action.
Response: Implementation of this best practice largely depends on the business model of the stakeholders. For example, EEA members, which consist of DHL, Federal Express, and UPS, created a pilot program for the voluntary abandonment of offending goods that saved Customs and Border Patrol (CBP) millions of dollars over several years. CBP is considering new approaches to seizing and forfeiting goods because of the effectiveness of this program.
E-commerce platform respondents have taken several steps to enact appropriate post-discovery procedures. Amazon maintains its A-to-z Guarantee, which ensures that customers proactively receive a refund following their complaint, even if the seller refuses to provide a refund. Further, the company created a Counterfeits Crimes Unit specifically to work with law enforcement and brands when counterfeit products are detected.
6. Indemnification Requirements for Foreign Sellers
Recommendation: Private sector stakeholders should require foreign sellers to provide financial security when foreign products are sold to U.S. consumers. Because foreign sellers do not fall under the jurisdiction of U.S. courts, consumers cannot easily bring legal action against them for counterfeit or unsafe products.
Response: Respondents’ enactment of this best practice largely depends on their business model. Facebook and Mercari both operate primarily with local or U.S.-based sellers and thus maintain looser seller indemnification rules. Similarly, Alibaba requires sellers to pay a membership fee but does not require any form of security.
Of the respondents, Amazon has taken the most significant steps for indemnification for foreign sellers. The company requires all sellers to provide full indemnification regardless of their location and disburses payments to sellers on a delayed schedule in case of counterfeit detection. Further, Amazon mandates that all high-volume sellers carry insurance in case of damage caused by their products.
7. Clear Transactions Through Banks that Comply with U.S. Enforcement Requests
Recommendation: E-commerce platforms should recommend that sellers clear transactions through banks or payment processors that comply with U.S. counterfeit laws and law enforcement investigations.
Response: Respondents either expressed reluctance to the premise of this recommendation or had already implemented it before DHS’s report. Further, Amazon already disburses 99 percent of payments to bank accounts in the United States and believes that the recommendation will not reduce the number of counterfeit products.
8. Pre-Sale Identification of Third-Party Sellers
Recommendation: E-commerce platforms should take steps to inform consumers before they purchase a product that the product will be fulfilled by a third-party seller, including informing consumers about the seller’s status as a brand owner, authorized reseller, or unauthorized reseller and any allegations of past counterfeit products.
Response: On Amazon and Walmart, consumers can see the seller’s name and language that indicates third-party fulfillment on product listings. However, Amazon disagrees with the last two recommendations of the best practice as they do not believe it is a best practice and fear that it will hurt legitimate sellers. eBay relies on its product review system to inform consumers about sellers’ status. Consumers can leave comments on a sellers’ page that will inform their future counterparts about any counterfeit or unsafe products.
9. Establish Marketplace Seller IDs
Recommendation: Platforms should require sellers to make publicly available identification information on their underlying business or any related profiles.
Response: Walmart accomplishes this best practice by requiring potential sellers to disclose their legal name, business name, and any existing accounts as a part of their seller verification process, and further vets sellers by comparing submitted information with data held on file by third-party payment processors. Any discrepancies between submitted information and third-party data are taken into consideration during the verification process.
Further, Amazon assigns every seller a unique ID that is displayed in their profile along with contact information and product reviews. The company prevents sellers from operating multiple profiles under the same account and continuously monitors sellers for signs of duplicity, including misidentification or efforts to return to the platform after being blocked.
eBay takes a less stringent approach by displaying sellers’ names, feedback ratings, and other listed products, as well as facilitating direct communication between sellers and consumers. The company collects contact information from sellers during the registration process but does not publicly display this information. Instead, eBay relies on interactions between sellers and consumers to convey seller identification information and additional product listings.
10. Clearly Identifiable Country-of-Origin Disclosures
Recommendation: E-commerce platforms should require sellers to provide the country of origin of their products. DHS suggests that platforms then post this information in product listings.
Response: Most respondents voiced disagreement with this best practice. Facebook, eBay, and Mercari operate under a business model that would make obtaining this information difficult if not impossible. Likewise, Amazon and Walmart claim that such requirements would prove too challenging to reasonably enact.
Alibaba was the only company to respond affirmatively. The platform has required merchants to disclose the country of origin of their products since August 2020.
Additional Efforts Towards Combating Counterfeit Tracking
The IPR Center and private sector stakeholders involved with its working groups have taken further steps to combat the escalation of counterfeit trafficking outside of implementing DHS’s best practices. First, the parties agreed to establish a data-sharing platform to allow exchanges of information between the companies and law enforcement agencies. Second, Amazon and Walmart have started sharing data on individuals and companies who were removed from their platforms for selling counterfeit goods to ICE and CBP. Finally, ICE launched Operation Stolen Promise in early 2020 to identify individuals and companies involved in the sale of counterfeit goods related to COVID-19 prevention and care. These are all useful steps to improve cooperation among private sector stakeholders and the government.
Moving forward, continued cooperation and coordination on developing and reviewing best practices for both government and the private sector will likely be one of the most effective measures for improving anti-counterfeiting efforts. In particular, these voluntary efforts will allow stakeholders to respond and adapt quickly to new strategies used by those importing and selling counterfeit goods and thus help prevent subsequent harm to U.S. consumers and brand owners.
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