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President Trump has signed a memorandum that requires the Departments of Homeland Security, Justice, and Commerce to deliver a report later this year that decides how much of a problem the sale of online counterfeit goods is, determines how effective current efforts are at stopping the practice, and suggests additional actions if necessary, according to CNBC.
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While the move was described as “a shot across the bow” to online marketplaces by President Trump’s trade advisor Peter Navarro, it remains to be seen if this initiative will be problematic for marketplaces like Amazon and eBay, or if it will ultimately benefit them.
Here’s what it means: The report and resulting actions could help online marketplaces since they’re also against counterfeiting, but if they gain liability for what’s sold on their marketplaces it could hurt their business.
- Marketplaces may welcome more government interest in counterfeits because it could boost consumer trust in their offerings. Having a reputation for selling counterfeit products can lead consumers to avoid shopping with a marketplace because they’ll be concerned about what they buy. This is why top industry players like Amazon and Alibaba have tried to combat fake reviews and products on their platforms, and help from the US government could further these efforts.
- On the other hand, the White House appears interested in shifting liability to marketplaces, which would complicate their operations.Navarro said that “Our goal is to rightly shift the burden of trafficking to the supply chain and third-party online marketplaces and intermediaries,” according to CNBC, suggesting that there’s a real chance marketplaces have to take more responsibility for what they sell. If that comes to pass, the platforms will have to more carefully monitor their sellers, potentially making it hard to add new merchants and build a wide product selection to attract consumers.
The bigger picture: New liability for counterfeiters would add to the growing number of hindrances online marketplaces are facing lately.
This would be another example of regulations making it harder for online marketplaces to operate.Now that US states are able to collect taxes on e-commerce sales even if the merchant has no physical presence in the state, marketplaces risk losing small sellers that can’t effectively collect those taxes, or they have to help the sellers with the collection process.
Meanwhile, Amazon has faced scrutiny in the US for selling on the same marketplace it controls, and marketplaces in India with foreign investment — such as Walmart-owned Flipkart — can’t sell products they own a portion of, all of which hurts marketplaces’ flexibility and revenue opportunities.
Combined with the potential to be held liable for selling counterfeit goods through their platforms, marketplaces are suddenly facing serious operational issues that may cause some to drastically change their processes, which would change a core part of online shopping for consumers.
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