It used to be that counterfeit goods in the United States originated in well-known places like New York City’s Canal Street, or perhaps other niches in a city near you. Back then, getting a Rolex sold out of someone’s jacket or a Chanel handbag from a street vendor’s coat hanger made it easy for buyers and law enforcement alike to tell what is counterfeit.

But today’s counterfeit-spotting is much harder, and that’s largely because of the internet.

With the anonymity given to online retailers by e-commerce platforms, there has been a consistent influx of artificial merchandise onto platforms like Amazon, Facebook, and other retailers that many consumers would find trustworthy. Their selling of fake products has not only led to angry consumers who have spent hard-earned money on bad goods, but it has done serious financial damage to retailers, costing $54.1 billion in lost revenue and nearly 283,400 jobs in the retail sector, according to one study.

There have even been some cases in which the problem has actually been dangerous. A 2019 investigation by the Wall Street Journal found that Amazon had thousands of counterfeit items listed that were deemed unsafe or mislabeled by a third-party seller. Another report cited problems in cosmetic counterfeits, which often use dangerous, unsafe, and illegal chemicals or components in their blends.

With a counterfeit market that is ever-expanding, the question becomes: what can be done? To date, not much. 

Liability of e-commerce

The first – and perhaps most logical – thought that comes to mind might be to ask why online retailers haven’t snuffed out counterfeiting. In large part, it’s because they don’t have to.

In the United States there are very limited laws in place that hold e-commerce sites liable for filtering illicit products from their platforms, something that has been reaffirmed by several high-profile judicial decisions, including Tiffany vs. eBay, Coach vs. Gata, and others that fail to hold online platforms liable.

The result is that e-commerce giants are largely self-regulating when it comes to counterfeit products, making it difficult to know accurately how effective companies really are. For instance, last year, Amazon touted itself when it said that it had blocked 10 billion counterfeit listings in the prior year, a staggering number, but one that can be questioned given the lack of regulatory standards and the company’s past lobbying against third-party consumer protections.

How law enforcement and agencies are responding

The government has taken notice of the rise in counterfeit products entering the U.S. supply chain, and agencies are wagering ongoing campaigns aimed at cracking down on the goods’ import, shipping, and distribution. One major initiative of note was the launch of Operation Stolen Promise by the Department of Homeland Security and Immigration and Customs Enforcement.

Begun in the midst of the COVID-19 pandemic when online retail skyrocketed, the agencies tried to stop the counterfeit at the source, opening investigations, making arrests, shutting down websites, and seizing fraudulent products and the proceeds from them, totaling more than $57 million to date.

Private companies like Amazon and others have also joined forces with the government to support their crackdown. Working with the National Intellectual Property Rights Coordination Center (IPR), a division of DHS, companies including Alibaba, eBay, and Amazon shared data to help target fraud.

Separately, Walmart and Amazon send IPR lists of individuals who commit fraud on their platforms so the agency can enhance their targeting efforts.

What lawmakers are doing

Marred by the issue and hearing about problems from constituents and local businesses alike, Congress has recently taken up legislation aimed at combating the flood of counterfeit materials on the online market today. Lawmakers have put forward two bills to curb the criminal activity, and while each of them carries bipartisan and bicameral support, their path to passage remains unclear.

The SHOP SAFE Act, one of the bills in the effort, would hold e-commerce platforms partially liable for third parties that sell counterfeit goods, and offer companies incentives for following best practices related to counterfeiters. The legislation, however, came up against pushback from major retailers like Amazon, Etsy, and eBay, all of which argue that the legislation would go too far in holding them liable.

The INFORM Consumers Act was the industry’s response, which would only regulate that they verify third-party vendor information and disclose the information to consumers. Companies are more in favor of the bill than its counterpart, though it remains unclear where each is headed or whether they will be passed at all.

Given that, aside from DHS’s work confiscating counterfeits, private industry and lawmakers have equally shirked responsibility in the matter, the burden of avoiding counterfeits largely remains on the consumer, at least for now. People shopping online should always verify the product is being distributed by a trustworthy seller. And as always, for those items that hold substantial value, putting on a pair of shoes and walking into the store is never a bad idea.  

The experienced intellectual property lawyers at Dunlap Bennett & Ludwig can help clients navigate the associated legal matters involving counterfeit goods. The firm’s attorneys leverage a combination of advanced technical backgrounds, vast knowledge, and practical experience to provide unparalleled insight to clients regarding the laws pertaining to counterfeit goods. We stay on top of developments in this area of law in order to provide our clients with the latest up-to-date information.