Facebook’s Privacy Crisis Exposes Amazon, eBay Also Play by A Different Set of Rules
March 28, 2018, Los Angeles, CA - The Facebook Cambridge Analytica incident has exposed a dirty little Silicon Valley secret -- internet companies do not have to live by the same standards as traditional media companies.
The same holds true for e-commerce giants. When lawmakers passed the Digital Millennium Copyright Act in 1998 to address counterfeits and piracy on the fledgling internet, they had no way of knowing they had laid the foundation for the inundation of counterfeit goods on e-commerce websites.
They did this by carving out immunity, or “safe harbor,” for the e-commerce platforms that enable, facilitate and deliver an inexhaustible supply of counterfeit merchandise, mostly from China, to unsuspecting consumers. Amazon, eBay and other e-commerce sites are able to sell counterfeit goods by proclaiming, as with Facebook, “we’re are not the publishers, we're just the pipe.”
Counterfeits, trademarks, and copyrights became the right holder's problem, and when there was an outcry over the infringements, e-commerce sites simply claimed they were a venue and immune from prosecution and liability.1
That means they would never have to live by the same standards that would face fraudulent sellers and counterfeiters -- if they could ever be identified.
All the while, transaction fees kept rolling in and profits soared.
The U.S. Government Accountability Office ("GAO") launched an undercover investigation2 of counterfeit consumer goods on eBay, Amazon, Sears, Walmart and Newegg finding that about 50% of the items it purchased were counterfeit.
Aiding distribution of counterfeits are substantial postal rate “terminal dues agreements" (loopholes) that allow Chinese counterfeiters and fraudulent sellers to mail counterfeit, dangerous or potentially deadly products to the USA at a fraction of what legitimate retailers can mail an authentic item across the street. The Post Office loses hundreds-of-millions of dollars.
The consequence; one-third of online shoppers received an unexpected surprise last year - they unwillingly received a counterfeit product.3
This isn't just e-commerce websites inconveniencing or putting consumers at risk, they are undermining the entire global marketplace4. Counterfeiting, now the world largest global criminal enterprise, is forecast to grow to $2.8 trillion, and cost 5.4 million net job losses by 2022.5
While it is increasingly challenging to find e-commerce websites that have an ethical core, they become industry titans -- 'we're not the counterfeiters, we're just the venue' and ‘we can’t be blamed for the bad actors.”
Congress can act to protect consumers, e-commerce can curb the practice, and consumers can shop elsewhere - will they?
Footnotes:
(1) In a devastating blow to manufacturers and consumer protection, the U.S. Court of Appeals upheld a U.S. District Court decision by Judge Ricardo S. Martinez excusing Amazon (NASDAQ: AMZN) from liability in the sale of counterfeit items on its website. (Milo & Gabby, LLC. v. Amazon.com, Inc.)
(2) Report to the Chairman, Committee on Finance, U.S. Senate
Full Report: Agencies Can Improve Efforts to Address Risks Posed by Changing Counterfeits Market
GAO-18-216: Published: Jan 30, 2018. Publicly Released: Feb. 27, 2018.
Summary: https://www.gao.gov/products/GAO-18-216
(3) Global Online Shopping Survey 2017 – Consumer Goods
Prepared by: Clarivate Analytics for MarkMonitor® Inc. November 2017
(4) Wade Shepard, "As Amazon And eBay Flood With Illegal Goods From China, Beijing Cracks Down On Foreign E-Commerce"
Forbes (Nov. 22, 2017), available at: https://www.forbes.com/sites/wadeshepard/2017/11/22/as-amazon-and-ebay-flood-with-illegal-goods-from-china-beijing-cracks-down-on-foreign-e-commerce/#7223f1604dfd
(5) THE ECONOMIC COSTS OF COUNTERFEITING AND PIRACY
The report was prepared for The International Chamber of Commerce Business Action to Stop Counterfeiting and Piracy unit (ICC BASCAP) and The International Trademark Association (INTA)
January 2017
Frontier Economics, Ltd.
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