Etsy Warns The SHOP SAFE Act Could Harm Small Businesses

Etsy has announced publicly via their blog their opposition to the Stopping Harmful Offers on Platforms by Screening Against Fakes in E-commerce (SHOP SAFE) Act that was passed through the House of Representatives earlier this month. The SHOP SAFE Act sounds like something that would be beneficial to all online sellers as it specifically tries to address a number of issues around counterfeit goods being sold online. Etsy, however, is standing up for its artisan sellers saying there are too many cracks genuine sellers would fall through.

What Is The SHOP SAFE Act Trying To Acheive?

At its core, the act is attempting to take action against the number of counterfeit products that are sold online to the unknowing American public. As eCommerce continues to grow every year, so do the number of counterfeits available to the unknowing public. To help highlight the scale of the problem, you should check out thecounterfeitreport.com which states on their website that “Counterfeiters will produce an estimated $4.5 trillion in fake products globally this year…”

“For too long, millions of Americans have been duped into purchasing counterfeit goods on online marketplaces…Under current law, platforms that allow third-party sellers to peddle counterfeit products are seldom held responsible for this frequent fraud and damage to consumer confidence. This legislation ensures that online platforms hosting third-party sellers are incentivized to engage in best practices for screening and vetting sellers and products, addressing repeat counterfeiter sellers, and ensuring that consumers have access to valid information when they make their purchases online.”

Darrel Issa (R-CA), Subcommittee on Courts, Intellectual Property, and the Internet Ranking Member

In the simplest terms the SHOP SAFE Act will:

• Establish trademark liability for online marketplace platforms when a third-party sells a counterfeit product that poses a risk to consumer health or safety and that platform does not follow certain best practices;
  
• Incentivize online platforms to establish best practices such as vetting sellers to ensure their legitimacy, removing counterfeit listings, and removing sellers who repeatedly sell counterfeits; and
  
• Call for online marketplaces to take steps necessary to prevent the continued sale of counterfeits by the third-party seller or face contributory liability for their actions.

You can see the full SHOP SAFE Act bill text here.

Why Does Etsy Oppose The SHOP SAFE Act?

As you can read from the above brief outline, the proposed SHOP SAFE act adds a lot more liability and responsibility to online marketplace platforms like Etsy. Adding these in could mean that Etsy and other marketplaces would have to put a number of checks in place before a seller was able to list a single item. This alone would greatly affect how all marketplaces ran.

“Unfortunately, SHOP SAFE takes a one-size-fits-all approach that would have a devastating impact on small businesses, especially artists, creative entrepreneurs, and recommerce sellers. The bill would provide consumers with fewer options for shopping online and, ultimately, the biggest beneficiaries would be the largest and richest global retailers.”

Jeffrey Zubricki, Head of Americas Advocacy & Public Policy, Etsy

Etsy went on to list their 3 main objections to the SHOP SAFE Act which were as follows:

1. It treats local artisans the same as global manufacturers – The intention behind the bill is to deter the online sale of counterfeit goods that could pose health and safety threats to consumers, such as a knock-off bicycle helmet or baby formula. The problem is that the bill’s language is so broad and overreaching that it would impact almost any item sold online.
   
   That means that hand-knitted sweaters and vintage ceramics could be subject to the same lengthy product review processes and standards as mass-produced batteries or phone chargers. This wouldn’t stop counterfeiters.  And it wouldn’t protect consumers from dangerous items. But it would create an immense barrier to entry for artisans and entrepreneurs. 
   
2. It creates pre-screening requirements that don’t work for handmade and custom items – SHOP SAFE Act includes broad, vague pre-screening requirements for marketplaces that never physically possess or handle any merchandise. Imagine the challenges in doing this for the millions of items on Etsy that are handmade and custom made to order.
   
   How could we possibly pre-screen items that don’t exist until a seller custom creates them for a buyer? This would limit how and where handmade goods are sold online, and would be crushing to the creative spirit in America. And, considering Etsy sellers alone contributed $13 billion to the U.S. economy in 2020, there would be real world economic consequences.
   
3. It creates a divided front against bad actors – Finally, SHOP SAFE propose a framework to quickly shut down counterfeit operations. But instead of encouraging brands and marketplaces to stop bad actors together, it creates a system where anyone can make false or baseless claims. Marketplaces would spend valuable time investigating these claims, leaving them fewer resources to protect consumers from real threats. Businesses could even accuse other businesses simply to eliminate competition. It would be the wild, wild west of the digital age.

Good Intentions…But Application Needs Work

It doesn’t need saying that the issue of counterfeit goods is one that definitely needs addressing, and whilst marketplaces like eBay, Amazon, and Etsy have all been doing their best to combat counterfeits, it has felt like some government assistance would be required.

However, it seems like Etsy is right when it comes to the SHOP SAFE Act. It offers no provisions for unique, handmade, or customized items which would affect millions of sellers nationwide. Whilst the act undoubtedly has good intentions and is on the right track, in its current iteration it still has too many holes that would negatively impact so many honest sellers selling genuine products.

Yesterday a collective of organizations including Etsy, eBay, Poshmark, Shopify, and more sent a letter to House-Senate leaders expressing their concern with the SHOP SAFE Act.

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