How US lawmakers can keep supply chains secure from counterfeits

Consumers have increasingly come to rely on e-commerce platforms for all of their shopping needs amid the COVID-19 pandemic, and criminal networks are doubling down on efforts to take advantage of this trend to peddle unsafe and defective merchandise to unwary buyers. It’s a growing threat to consumer safety, negatively impacts brands and businesses across the globe and it deserves the attention of lawmakers, law enforcement officials, and retailers. 

As those within the brand security industry are well aware, no single business is untouched by the prevalence of knockoff goods. US Customs and Border Protection recently announced they had seized nearly 13m counterfeit face masks through September — a serious threat to doctors and nurses on the frontlines of a deadly pandemic. Ahead of Super Bowl LV, the Department of Homeland Security announced that they seized 169,000 counterfeit sports memorabilia, totaling $44m. Whether it’s medical supplies or sports merchandise, the theme is one and the same: counterfeits are a mounting issue.

This growing threat to supply chains nationwide can be seen most clearly on leading third-party marketplaces like Amazon and eBay. A May 2020 study, which surveyed 150 e-commerce “leaders,” found that 39 per cent of respondents reported an uptick in counterfeiting. The Department of Homeland Security echoed these same concerns in a recent report, stating that “e-commerce platforms, third-party marketplaces, and their supporting intermediaries have also served as powerful stimulants for the trafficking of counterfeit and pirated goods.”

The issue isn’t just limited to counterfeit merchandise, as stolen goods are also flooding e-commerce platforms. Organized retail crime operations are stealing large amounts of merchandise from retailers and selling these items to unsuspecting customers online. In California, investigators uncovered $50m in stolen health and beauty products from an organized retail crime ring that targeted numerous businesses across the San Francisco Bay Area.

Many of the criminals hiding behind anonymous seller accounts are also tied to other illicit activities. Alongside the more than 660,000 counterfeit items that were recently seized in a Los Angeles warehouse were three illegal assault weapons, one of which was described as a "ghost gun'' and lacked a serial number. In addition, many sophisticated narcotics rings can also be tied back to counterfeit operations.

The threat to the supply chain lies with the glaring lack of verification mechanisms on third-party marketplaces. Due to gaping loopholes, criminals are easily able to hide behind anonymous profiles and deceive customers. Buyers have no way to spot the defective merchandise that runs rampant on these platforms. In order to keep consumers safe, action is desperately needed.

Fortunately, legislation has been introduced in the US that would help secure supply chains and keep counterfeit merchandise off of third-party marketplaces.

The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM) Act is a common-sense, bipartisan solution to a rising threat. If passed, sellers on e-commerce platforms would be required to disclose basic information, including their government ID, tax ID, bank account information, and contact details. Third-party marketplaces would also need to supply a hotline to allow customers to report any suspicious activity.

In order to bring down the criminal operations that are putting consumers in harm’s way and threatening businesses, we must first guarantee transparency and accountability on e-commerce platforms. This is the best way to reverse the alarming flow of counterfeit merchandise flooding the US marketplace.

Michael Hanson is the spokesperson for Buy Safe America Coalition, which represents retailers, consumer groups, manufacturers, intellectual property advocates and law enforcement officials who support efforts to protect consumers and communities from the sale of counterfeit and stolen goods.

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