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Bipartisan Bill Would Make Amazon, Digital Retailers Responsible for Counterfeits

By Daniel B. Kline - Mar 5, 2020 at 10:02AM

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The law would shift responsibility from the seller to the platform.

Amazon.com (AMZN 1.12%), like a number of other retailers, offers goods from third-party sellers on its website. The retailer handles the payment for the sale and, in some cases, even ships the item, but it's not responsible for whether consumers are actually getting what they paid for.

A new bipartisan bill being introduced in Congress, the Shop Safe Act of 2020, could change that. The proposed law would make Amazon and other digital retailers responsible for vetting goods sold through its site as a way to eliminate counterfeits.

Yellow police tape that says counterfeit products.

The new rules would make retailers responsible for vetting third-party sellers. Image source: Getty Images.

What would the law do?

Under Shop Safe, digital retailers would have to step up vetting the goods sold on their platforms by third parties. The act would also require e-commerce sites to:

  • Establish best practices to ensure that sellers are legitimate
  • Remove counterfeit listings
  • Remove sellers who repeatedly sell counterfeits
  • Take steps necessary to prevent the continued sale of counterfeits by the "third-party seller or face contributory liability for their actions."

The published information on Shop Safe does not lay out penalties for companies that do not take the required actions.

Good for consumers?

"Counterfeit products directly impact brands and consumers while also posing serious dangers to public health and safety," said Martha Roby (R-Ala.) in a public release.

Amazon and other digital marketplaces have little reason to crack down on counterfeit items, aside from customer satisfaction. That should, in theory, be enough, but so far counterfeits still exist. The Government Accountability Office found that "20 of 47 items purchased from third-party sellers on popular consumer websites were counterfeit."

These potential rules would almost certainly cut down on that by making retailers responsible for what's sold through their marketplaces.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Amazon. The Motley Fool has a disclosure policy.

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