Tech companies face another liability threat, this time over counterfeit goods
By now youve probably heard about the fight over Section 230, the law shielding websites from lawsuits over what their users post, which has been under constant attack in Washington. But theres another high-stakes yet lower-profile feud brewing in Congress over platforms liability.
Lawmakers on the House Judiciary Committee on Wednesday advanced legislation that could open up e-commerce giants like Amazon and Walmart to lawsuits over the sale of counterfeit goods on their sites if they don't meet a set of "best practices" to combat them.
Its proponents say passing the proposal - the SHOP SAFE Act - is critical to holding digital platforms accountable for the distribution of fake products on their sites and to give consumers peace of mind when shopping online.
"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," Rep. Jerry Nadler, D-N.Y., the committee chair and lead sponsor on the bill, said during its committee markup Wednesday.
The issue has gained urgency during the coronavirus pandemic amid reports of fake vaccine cards, phony masks and other products proliferating online. Amazon in particular has been dinged by lawmakers and regulators in the past over the prevalence of counterfeits on its sites. (Jeff Bezos, who founded Amazon, owns The Washington Post.)
But some retail groups, tech trade associations and companies, and scholars have voiced concern that the bill would wreak havoc on e-commerce.
Eric Goldman, a law professor at Santa Clara University, wrote in a blistering post this week that the proposal would "drive most or all online marketplaces out of the industry" by imposing "onerous and expensive compliance obligations" that make it "impossible" to avoid liability.
The compliance requirements include verifying a third-party seller's identity and mandating that sellers can verify or vouch for the authenticity of their goods. If companies take those and other steps, they would be immunized from liability over the sale of counterfeit goods by third-party vendors on their platforms under the bill.
Goldman also suggested the requirements are so steep that e-commerce behemoth Amazon may be the only company able to comply with it, thus creating "an insurmountable competitive moat around Amazon's marketplace."
The push has also gotten Silicon Valley's attention. Major players including Facebook, Etsy and Amazon, as well as Walmart and Alibaba, tapped lobbyists to work on the legislation this year, according to disclosure filings reviewed by The Post.
Some of the companies, such as Etsy, Ebay and Walmart, are going on the record about their concerns.
"It's clear from the debate at committee ... that there remains work to be done on SHOP SAFE to best balance protecting both consumers and America's small sellers," Jeffrey Zubricki, head of U.S. government relations for Etsy, told The Post. He added that Etsy plans to work with lawmakers "to find that balance."
Ebay said in a statement that the legislation "would debilitate individuals, entrepreneurs and small businesses trying to compete online." It added, "Now is not the time to place harmful regulatory burdens on small businesses continuing to economically recover from the pandemic."Walmart spokesman Randy Hargrove said the bill "as written could have significant unintended consequences."
If the legislation picks up even more steam in Congress, it would become another major battlefront for tech companies over their legal liability.
Amazon and other retailers have fiercely opposed other similar efforts, including legislation earlier this year that would have required online marketplaces to authenticate the identity of the third-party merchants who sell on their sites. The language was scrapped from a major legislative package in June after a lobbying blitz by the industry.
Amazon spokesman Alex Haurek said the company recognizes the "intent" of the bill and they "look forward to working with Congress to achieve that goal." Facebook and Alibaba did not return requests for comment on the bill.
At the markup, lawmakers stressed that the bill has been shaped by a lengthy drafting process and that they have fielded input from all corners.
Rep. Darrell Issa, R-Calif., one of the bill's lead sponsors, called the legislation a "work in process" but said that there's been "significant progress" on it.
Nadler said lawmakers had "drawn from industry recommendations and the robust input of a variety of stakeholders" in crafting the bill.
Sens. Chris Coons, D-Del., and Thom Tillis, R-N.C., introduced a companion to the legislation in the Senate earlier this year, making the bill bipartisan and bicameral. The next test will be getting the legislation voted by the full House and out of committee in the Senate.
Coons applauded House lawmakers' efforts and said that he looks "forward to advancing the process in the Senate."
