from that-does-no-one-safe department
Last fall, we had a whole series of blog posts explaining how dangerous Rep. Jerry Nadler’s SHOP SAFE bill would be. It’s one of those bills that, if you just hear what it’s all about – stopping the sale of counterfeit products online – sounds good. But only if you don’t understand how everything actually works in the real world, including liability and infringement laws. SHOP SAFE would upend concepts related to intermediary liability and essentially lock Amazon in as one of the only companies that could possibly handle the massive compliance costs associated with SHOP SAFE.
And, of course, Rep. Nancy Pelosi was happy to include SHOP SAFE in the otherwise helpful COMPETES omnibus bill. COMPETE’s senatorial companion, known as USICA, did not include SHOP SAFE, and both houses of Congress attempted to settle the differences.
Recently, two letters were sent to congressional leaders explaining how incredibly dangerous it would be for the internet if SHOP SAFE becomes law. The first letter came from more than two dozen academic trademark/infringement law experts, explaining the bill’s serious flaws:
Rather than protecting consumers, the SHOP SAFE Act would reduce many existing online marketplace offerings that currently provide consumers with greater choice and stimulate price competition, which would reduce consumer costs. In a time of pandemic with rising inflation, taking away the ability for consumers to shop at home and raising consumer prices is the opposite of what voters want Congress to do. The bill also puts many small online entrepreneurs and the jobs they provide for Americans at risk.
The SHOP SAFE Act would do this by fundamentally changing trademark law. For more than a decade, trademark law has made it clear that online marketplaces must honor takedown notices that trademark owners submit about specific listings. This well-established rule balances the interests of brand owners, online marketplace operators, online marketplace sellers and consumers. The SHOP SAFE Act would overturn the existing rule in two key ways. First, it would allow brand owners to send general takedown notices that are not specific to a listing, placing online marketplaces in an untenable position of trying to determine the legitimacy of individual listings without the benefit of expertise. unique to the brand owner. Second, it would create a whole new cause of legal action against online marketplaces that would hold them liable even in circumstances where trademark owners have not sent takedown notices.
As we have seen repeatedly over the past two decades, both in the context of trademarks and copyright, rightholders routinely send illegitimate takedown notices and assert their rights. But current law allows services and other recipients of such requests to push back. SHOP SAFE removes the balancing approach from the existing law. The SHOP SAFE Act will expedite misconduct, using the law’s imprecise definitions for key terms such as “counterfeit”, “e-commerce platform” and “goods that involve health and safety”. Trademark holders will abuse their extraordinary new powers to broadly restrict legitimate competitive offerings in online marketplaces, such as imitators and resellers of non-infringing second-hand goods. Moreover, in the face of essentially unmanageable legal liability, online marketplaces would proactively restrict many legitimate marketplace activities. This will have a particular impact on online merchants and the jobs they create.
Ironically, changes to online marketplaces in response to the SHOP SAFE Act are likely to hurt brand owners. First, the compliance and risk management costs imposed by law will eliminate the industry’s existing online marketplaces, consolidating e-commerce into fewer marketplaces/retailers and improving their ability to dictate prices and other terms. to brand owners. Second, reduced activity in online marketplaces will eliminate distribution opportunities for brand owners, reducing their sales volume.
The SHOP SAFE Act represents a negative-sum policy, where it likely harms all stakeholders and benefits none of them. Given that risk, it’s not the kind of bill that should bypass the normal congressional review procedures. The SHOP SAFE Act deserves careful consideration by Congress so that the pitfalls can be fully understood and policy solutions that better balance the needs of all constituencies can emerge. Bundling the SHOP SAFE Act into an omnibus bill like USICA or America COMPETES prevents these dialogues from happening, to the detriment of all of us.
Then another letter was sent by a diverse group of civil society organizations, think tanks and internet companies.
SHOP SAFE represents a sea change in the law and policy regarding contributory trademark infringement. Yet it has not received sufficient attention and verification. Among other things, SHOP SAFE would effectively require digital services to monitor their users’ posts for trademark infringement, creating barriers to entry for smaller services, making it harder for small U.S. businesses to reach their customers and limiting creative expression by encouraging the most -removal of non-infringing messages. Due to the overbreadth of the bill, consumers could be negatively impacted, as small services and sellers may cautiously overreach legitimate listings or even shut down due to compliance charges. This runs counter to the bill’s stated goals of improving American competitiveness by severely limiting opportunities for small American businesses to offer their goods and services to consumers.
The Senate hasn’t had a chance to properly review this bill and discuss how best to balance major policy changes to protect consumers while avoiding harm to legitimate American small businesses. Further, the House Judiciary Committee did not fully consider stakeholder concerns raised with the Committee. While tagging the bill, many members of the House Judiciary expressed bipartisan concerns about the bill’s broad reach and its negative impacts on consumers and small businesses. Unfortunately, while the Committee’s leadership has publicly agreed to continue work to address the concerns of various stakeholders affected by this legislation, instead, as Rep. Lofgren notes, “we now find that SHOP SAFE has been inserted without improvements[.]”
Congress should not embed this kind of sweeping policy change in the final compromise between USICA and America COMPETES or other “binding legislation.” This type of proposal should be carefully considered in the Senate as part of a transparent legislative process that takes into account the full participation of stakeholders. Given that the bill’s lingering flaws remain, these aren’t the kinds of issues that can be resolved in conference and SHOP SAFE should be left out of the final package altogether. Allowing SHOP SAFE to proceed, as is and added to unrelated legislation, would set a dangerous precedent for the development of policies that are fundamentally tied to our economy, innovation, competition and free speech. .
Let’s hope Congress recognizes the significant and serious issues and dangers associated with SHOP SAFE, and removes it from consideration of any type of larger omnibus bill regarding American innovation.
Filed under: competition law, competition, infringements, innovation, liability of intermediary, marketplaces, brand, usica