Isn’t It Time For Online Marketplaces To Take The Hint?

Declan McGonigle, VP at VISUA, has some thoughts on why Online Marketplaces need to take responsibility for copyright infringements on their platforms

For years, online marketplaces have played a ‘Tom & Jerry’ game of cat and mouse with lawyers of individuals, businesses and agencies. They have, until recently, been able to dodge the many traps and thwart the efforts of those who have tried to put them slap-bang in the middle of an issue between the plaintiffs and the producers, or third-party sellers, of a product. They have, until recently, managed to scurry back to their mouse hole and retreat to safety.

It’s easy to do this when you are a ‘mouse’ of a business in a big world, but once you become a massive, world-dominating business, people look at you far less as a tiny mouse and much more as a huge rat. That’s a shift in sentiment that can have major repercussions.

A game-changing rule

For instance, as late as May, 2019 Amazon won a case against them related to a defective headlamp product that burned a house down. Successfully arguing that they were not the ‘seller’ of the product. But just over a year later and a key decision has gone against Amazon relating to another faulty product. This time it’s a laptop battery that caught fire and injured the user causing severe burns. This ruling, a reversal of a previous ruling from 2019, is the first of its kind. 

It means that from now on, according to the law of California, Amazon IS the seller of any goods, whether they are the first-party seller or it happened to be sold by a third-party through Amazon’s platform. The critical part in this decision was the fact that Amazon is dominant in the market. Search for anything online and browse for a short time on social media and you’ll see an Amazon listing or ad. It’s this dominance, both in terms of presence and price, that makes the compelling argument that Amazon has to take responsibility for everything that is sold through their platform.

This sets a precedent which will send a shock-wave through all previous and future cases in states across America, and the rest of the world. This in turn will undoubtedly force a policy change across the marketplace industry. And that’s no bad thing. If you go to a physical store today and buy a defective product, they know they will be held responsible, so they proactively hold their suppliers responsible and only stock products that they know are safe. This change will mean marketplaces will take product safety far more seriously and ensure that sellers can only list products that are proven to meet safety standards and have safety testing certificates where appropriate.

The SHOP-SAFE Act

But it doesn’t just stop there! On January 24th of 2020 something equally momentous happened in the area of anti-counterfeit related to marketplaces. In the same vein as defective products, this new legislation makes the marketplaces responsible for the counterfeits on their platform, whether sold by the marketplace or by a third-party on the marketplace. From this legislation a subsequent bi-partisan bill was submitted to the house of representatives in March 2020, called the ‘SHOP-SAFE Act’, a genius acronym that stands for Stopping Harmful Offers on Platforms by Screening Against Fakes in Ecommerce. Red Points, a leading brand protection platform and service provider wrote an excellent explanatory article on SHOP-SAFE.

The bottom line is that it’s not enacted into law yet, but it’s working its way through. The marketplaces know its coming and they are starting to make preparations, albeit quietly and delicately, so as to draw as little attention to the issue as possible.

The impact of this for the marketplaces is three-fold:

1. They will have to actively try to confirm the legitimacy of products that sellers want to list on their platform to try and stop fakes ever making it on – that’s no easy task, but it’s essentially a question of implementing policies and safeguards wherever possible.
2. They will have to monitor listings to ensure the products being advertised are genuine – another difficult task, but possible using the latest innovations in Visual-AI.
3. Amazon, in particular, will literally need to get its house in order and stop the current practice of ‘co-mingling’, where any product, from any seller, with the same SKU is simply put into the same storage and picking location in their warehouse. That means authentic and fake products potentially mixed together physically and picked at random. This is important because of the growing number of cases of people who thought they were buying a genuine product but actually received a fake!

Marketplaces should be advocates

With all these initiatives and legal cases, the tide is turning and the marketplaces are under ever more pressure to do the right thing. But it doesn’t have to be negative. Taking a positive stance now means that they can be seen as leaders of safety and advocates of brands. They could become the:

1. Defenders of consumer safety
   There are many examples of fake products harming and even killing consumers. From fake toothpaste containing chemicals commonly used in solvents and anti-freeze, to fake car parts, and fake pharmaceuticals that are estimated to kill 250,000 children per year (and that’s just with drugs intended to treat malaria and pneumonia alone – more are killed by fake antibiotics!).
2. Blockers of illegal and terrorist funding sources
   Even where consumers are buying low-risk items, such as clothing, shoes and handbags, there is still a societal risk. It has been shown that criminal drug gangs and terrorist organisations use the counterfeit trade to make and launder money for their activities. The fallout from these illicit activities harms us all.
3. Creators of jobs
   It has been estimated that globally 2.5 million jobs throughout the supply chain are lost because of counterfeiters. From manufacturing to warehousing and logistics to retail, companies that would otherwise expand operations are restricted by the sale of fake versions of their products.
4. Advocates of innovation
   A startup that launches a new and innovative product can find a fake version of that product on a marketplace, alongside their genuine product, in a matter of weeks. The combination of poor anti-counterfeiting initiatives, plus weak intellectual property laws, and high legal costs means that innovators are less likely to innovate and that’s bad for humanity.
5. Protectors of the vulnerable, especially children
   The counterfeit industry is reported to use forced child labour in the manufacture of fake luxury and other goods. First-hand reports detail children being chained, mutilated and underfed while working them long hours.

I urge this e-commerce and marketplace industry to do the right thing and make a move now to act against dangerous and counterfeit products in a proactive and meaningful way and stop the lip-service and commercial & legal filibustering that has occurred in recent history. You are big enough and wealthy enough to act responsibly.