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tv   Experts Testify on Online Marketplace Fraud  CSPAN  January 3, 2022 12:21pm-2:04pm EST

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impartial as possible in your portrayal of both sides of an issue. you have a shot at winning the grand prize of winning $5,000, entries must be received before january 20th, 2022, for competition rules, tutorials or how to get started, visit our web site at >> next, watchdog, and business groups testify about online marketplace fraud, including the rise of organized retail crime to online trade marc counterfeiting, the senate judiciary committee hosts this 90-minute hearing.
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the hearing will come to order. -- challenge of stolen counterfeit and unsafe the hearing will come to order. the senate judiciary committee will consider the challenge of stolen products sold to unsuspecting customers online. i would like to start by showing a brief video that highlights this issue. >> the rise of ecommerce has fueled counterfeiting around the world. some estimate the sale of elicit products could result in 5.4 million net job losses worldwide by 2022. >> u.s. businesses are going out of business because of counterfeit goods. >> consumer products and pharmaceuticals make up a big share of counterfeit goods.
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they pose health and safety risk. >> organized retail crime is growing. >> online marketplaces allow individuals to sell quickly and anonymously. >> an organized business looking to take advantage of consumers. >> a confiscated power tools for sale on facebook. >> it's sort of a game of whac-a-mole, you fix it here, and they pop up somewhere else. >> certainly. >> online space, find counterfeit, unregulated and dangerous toys. >> counterfeits pop up on amazon 30 to 60 days of launching a commercial. >> filing an administrative complaint charging some products sold on amazon are defective and pose a risk of serious injury or death. >> this is the original product and this is the counterfeit side by side. >> third party sellers account for half of what they're selling themselves. >> lots of things can help. >> a bill is working its way through congress that could potentially help in that regard. it's called the informed
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consumers act, and it would require a third party merchants to be vetted by online marketplaces. >> simple transparency is something that could make a difference. >> can they assure consumers that third-party sellers are not posting dangerous or counterfeit products. >> i've been working on this issue since 2008, and enlisted the support of bill cassidy who has been cosponsor of major legislation on this subject, but it was then that i met with representatives of home depot who told me about a problem they were facing. there were certain brands of power tools that they sold exclusively at home depot stores. they weren't supposed to be available anywhere else legally. but it turned out these tools were being offered for sale, new, still in the original box by anonymous sellers on online marketplaces like amazon. it wasn't hard to figure out what was going on.
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these tools were being stolen from the original manufacturer and resold online, and it wasn't just tools. it happened with all kinds of products as we'll hear. cosmetics, electronics, clothes, over the counter drugs, toys, even baby formula. i see some on the table there as an example. third-party sellers were flooding the internet with products stolen and counterfeited. often these products posed serious health and safety risks to customers who thought they were buying the original product. back in 2018, i introduced my first bill to address the problem of elicit products sold online and the marketplaces told me, don't worry, we're taking care of this. you don't need legislation. here we are 13 years later, and this problem hasn't gone away. it's gotten much much worse. when you buy products from third party sellers in online marketplaces, you're really
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rolling the dice. in 2018, the government accountability office ran a test. they bought a sample of 47 consumer products from third-party sellers on leading ecommerce web sites to see how many might be counterfeit. out of 47, 20. 20 of the 47 were counterfeit. in january, the u.s. trade representative reported that quote the rapid growth of ecommerce platforms has helped fuel the growth of counterfeit parted goods into a half trillion dollar industry. half trillion. and stolen goods continue to be offered online by sellers who pop up again. retailers lose 45 billion each year in these schemes. my staff asked home depot if tools are being offered online as new by third-party sellers. they sent me nine postings that popped up just last week, and that was a small sample. here's one of them. a brand of lithium batteries that is only available at home
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depot being offered for sale in a box by a third-party seller on amazon for 20% below the retail price. after the fact, one off investigations aren't stopping the problem. we need to take steps to deter shady sellers from using these marketplaces in the first place. consumers do better, deserve better than being deceived into buying sham products. retailers are tired of how easy it is for organized groups of thieves to steal goods and resell them online. manufacturers are sick of seeing knockoffs of their products hawked on sites like amazon. congress needs to do something. that's what we were elected for, and there are several principles that guide us. if somebody is going to sell a large volume of goods online in a marketplace, they should tell the marketplace who they are. doesn't that sound pretty basic? the sellers should be verified. second, if a product sold online turns out to be a fake or stolen or dangerous, consumers should be able to report it and find
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the seller and the marketplace must ensure that the seller can't just disappear and pop up later under a new account name. third if a consumer orders a product from one seller online, and the order is actually filled by another company, the marketplace should inform the consumer. verification, transparency, accountability, no more bait and switch. these are principles we should follow as we work to clean up online marketplaces. i've introduced a bipartisan bill as i mentioned with senator bill cassidy, republican of louisiana, that promotes these principles. it's called the informed consumers act. i'm honored to have as cosponsored, senator grassley, senator hirono, coops, warner, and i thank them all. jane, a democrat from illinois has been a consumer advocate for her life. before elected to office, she was a mom raising hell about
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expiration dates being printed on dairy products. we take that for grants but she was one of the originals in that fight, joined by republican representative of gus from florida. her bill has been endorsed by consumer groups, retailers, labor, and online marketplaces like etsy and ebay, and the day after we announced this hearing, amazon endorsed it too. we've negotiated and worked hard on this bill to achieve consensus, and i hope we can make it law soon. and the shop safe act introduced by senator coons and tillis, today we'll hear from a distinguished panel of witnesses who will talk about the scope of the problem. there is bipartisan support and momentum for addressing it, and i hope we get it done. i turn to my colleague and friend, congressman, senator, did i cover every possibility. chuck grassley of iowa.
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>> well, i thank you for your remarks and thank you for calling this hearing. it's very important that we look into the roles of big tech in this area. americans increasingly rely upon the internet to purchase everything from health care products and infant formula to iphone chargers and even automobile parts. unfortunately, criminals are using the online platforms to sell counterfeit or stolen items that can be very dangerous to consumers. this hearing will explore the problem. we must stop this activity. thanks to the internet, we can now purchase nearly anything from nearly anywhere. companies of all sizes can reach new customers all over the world. in the same way counterfeiters
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and other criminals are exploiting online platforms. these activities threaten consumer safety and businesses' bottom lines. criminals can easily open online store fronts on ecommerce marketplaces. criminals operate under fake names and stolen identities. they use false credentials. if a marketplace takes them down, these criminals simply resurface under a different store front identity. all the while, their listings look authentic to unsuspecting customers. counterfeit products are usually substandard, and often unsafe. products often don't meet strict
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safety standards or comply with quality controls. for example, drug traffickers are using social media and other ecommerce platforms to market their products. we've also seen a spike in professional shoplifter of highly valued items to resell online. according to a 2020 survey by the national retail federation, organized retail theft has increased nearly 60% since 2015. brand owners, manufacturers, and retailers are doing their very best to fight this epidemic, but even our largest companies who can afford to have dedicated staff monitor online don't seem to be able to keep up.
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small businesses lack the necessary resources to pursue online counterfeiters. law enforcement is also overwhelmed. that's why i introduced s 1159, a bill included in the u.s. innovation and competition act so businesses can get more information to shore up the integrity of their supply chain. customers should have the same confidence buying online that they do if they went to a brick and mortar store. consumers have to rely on the accuracy of online listings. if a product listing consists of misleading images or fake reviews, it's more likely that the consumer will be then tricked into a purchasing a counterfeit or stolen goods.
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it's clear that voluntary efforts by big tech companies while a very good first step, are not enough. online companies profit off of every sale on their platform, even if it's counterfeit or stolen. consumers need more accountability and transparency including who's operating online and selling these products. we should promote better screening, more transparent seller information, and increase collaboration and data sharing. it's very essential that businesses and platforms work with law enforcement to identify criminals selling counterfeits and stolen goods online. congress should consider legislation to protect consumers from criminal enterprises operating online.
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none of the proposed solutions is a silver bullet. there needs to be a multifaceted approach to addressing the problem. online shoppers deserve to have confidence that they're getting exactly what they're paying for, and that their purchases are safe and authentic, thank you. thanks, senator grassley, we have four witnesses this morning. i'm going to introduce three and senator whitehouse will introduce the fourth. the first witness is aaron muderick, he invented thinking putty which is made here in america by his small business and 100 employees. his company is known for developing unique production methods to employ individuals with special needs. that's good. mr. muderick is on the board of the toy association, a volunteer firefighter. he received his bs from
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university of rochester, glad you're here. kari kammel is the assistant director for education and outreach and senior academic speblist at michigan state university, and takes today's prize for the longest title. she also serves as an adjunct professor of law at michigan state university college of law, teach intellectual property and trademark law. previously worked for depaul university college of law including in the iraq office of their international human rights law institute. received her b.a. from university of chicago, her m.a. from american university in cairo and j.d. from depaul. dane snowden, the association represents global internet companies on matters of public policy and the members include amazon, ebay, etsy, facebook, and google. prior to joining the association
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mr. snowden was the chief operating officer at the internet and investigation association advice president of ctia, the wireless association. he has served in the federal communications commission as chief of the consumer and government affairs bureau b.a. from william and mary. senator whitehouse. >> thank you very much, chairman. it's my great pleasure to introduce ben dugan, director of organized crime for rhode island's cvs health, a great growing and successful rhode island company that has shown leadership and many issues including refusing to sell tobacco products as part of its commitment to its customers' health. online marketplaces, have been a part of life during the covid shut down, they present convenient avenues, orchestrated
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criminal schemes and online marketplaces flourish. mr. dugan is at the vanguard of investigating and combatting crimes. for three decades, he's fought retail theft, a national leader in retail prevention, where it relates to ecommerce, and featured in the foremost efforts in dismantling organized crime, a veteran of the united states military army police, serves as president of the national coalition of law enforcement and retail, and i'm delighted to have him here. i will say as u.s. attorney in rhode island, and u.s. attorney general, it was my privilege to work with skilled rhode island investigators, both in law enforcement and from the private sector, and mr. dugan continues our tradition of investigative excellence in rhode island. >> we're going to follow the customary hearing process after they're sworn in, witnesses will have five minutes for opening statements, then senators five minutes of questions, so would the witnesses please stand to be
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sworn in? please raise your right hand, do you affirm the testimony you're about to give before the committee will be the truth, the whole truth and nothing but the truth so help you god. let the record indicate all answered in the affirmative. mr. muderick, your turn. >> good morning, my name is aaron muderick, i'm the founder and president of crazy aaron, a toy manufacturer, thank you for the opportunity to testify today, i applaud your commitment to protecting consumers from unsafe, unreliable and unregulated products sold through channels. curbing the flow of counterfeit and unsafe goods in ecommerce is critically important to me as a toy manufacturer and a small business owner. i founded crazy aarons with a mission to create toys that inspired a sense of wonder and creativity. i quickly realized that to make my product right i was going to have to build my own factory, so that's what i did. our headquarters is part of the
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revitalization of norristown where thinking putty is made in the united states. we employ over 100 people and 18 years with the support of our customers we have provided meaningful daily work to hundreds of additional individuals with disabilities in the philadelphia area. my business has seen successes since the days of experimenting in my parents' basement, it's come with unanticipated challenges. as our thinking putty became more popular, i discovered a tidal wave of infringing products. we have spent significant time and resources policing these one by one. i have submitted to this committee a list of hundreds of third-party sellers, many based outside the united states across numerous marketplaces who we identify as infringing on our marks. today i appreciate the opportunity to share three serious concerns, first, the enormous resources required from a small business to endlessly police these marketplaces for bad actors. second, that due to many of these bad actors being outside
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the jurisdiction of the united states, our recourse to protect our intellectual property and reclaim damages is severely limited and in many cases, nonexistent. third and most importantly, these bad actors often sell unsafe goods which do not meet the stringent federal safety standards required of legitimate producers. these violations range from labeling requirements, illegal levels of regulated chemicals, and mechanical hazards which cause acute physical harm. consumers visit online marketplaces assuming that the products they see meet safety standards. so i created the world's first magnetic putty. it climbs over to a magnetic as if it was a lie. it was a fre success and differentiated us from competitors. we invested significant r and d into making it a reality and into making it a safe product. as counterfeiters, infringers and knock offs flooded the
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marketplace, magnetic putty sales began to decline. i scrambled to dedicating resources to beating back infringers but became concerned that every one of the kmeeting products did not comply with mandatory federal safety standards. i have brought with me products i purchased last week from two of the largest online marketplaces in the u.s. i also have brought independent third-party laboratory results showing their noncompliance with mandatory federal standards. our company has done this testing at our own expense and communicated this noncompliance to online marketplaces again and again, following up with them repeatedly. we have done this for years. nonetheless, these products remain available for sale. they are purchased in the hundreds of thousands by unsuspecting consumers. they contain loose as received high strength hazardous magnets which are not legal in children's products. you will note that the product packaging and online listings for these products include language like safe for children
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ages 3 plus, or safety tested. they include photos of children as young as toddlers playing with them. accidental ingestion of these hazardous magnets can cause serious internal injuries, debilitating lifelong disability in some, and unfortunately, numerous fatalities have been documented. their magnetic strength is so high, they destroy themselves when drawn to each other. you can see in the video and photo i have provided that when these magnets collide, they not only shatter into razor sharp shards, but due to the nature of the materials, they will spark and have the capacity to start a fire. if my words, demonstration or laboratory results aren't enough, you need only look at the consumer reviews of these products which are publicly available in the marketplaces themselves. an example quote, the magnet broke apart while i was showing this off to a friend. he was pulling them apart, sliced open his finger, i do not recommend this to anyone. thank you for the opportunity to
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share the story of one product amongst a sea of millions available in online marketplaces. i appreciate your efforts to secure consumers from counterfeit and unsafe goods and i look forward to answering your questions. >> and we appreciate your testimony, and the fact that your business philosophy is embracing people with disabilities. >> thank you. . >> thank you for doing that. professor, dr. kammel, you're next. >> thank you for inviting me to speak today. my remarks draw on my research on online trademark count you are -- counterfeiting. i focus on research, education and outreach around trademark counterfeiting and brand protection with my colleagues. we work with online marketplaces, social media platforms, and other industry experts across the field, giving the unique ability to exam the problem from a neutral academic
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perspective. i'll give you an overview in the current state of the law and make two recommendations. one, i support the informed consumers and shop safe bills, and two i u recommend continued and expanded data sharing and research on the trade and counterfeit goods and anticounterfeiting responses. i would like to start by painting a picture that is occurring with trademark counterfeiting in the current state of the law. the sale of counterfeit goods online impacts national economies, companies of all sizes, including small and medium sized enterprises, and consumers and has exploded in the past decade, and more so since covid-19. the financial impact is staggering, estimated $460 billion worth of global sales in 2019. counterfeiters find success by using another company or brand owner's trade marc on a product or package without authorization to sell a fake or sub standard or damaged good. they take opportunities to reach unsuspecting consumers who can
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not examine the goods before purchase. consumers struggle to report suspected counterfeit or cannot find a third party seller for service of project if injured or killed. varying levels of proactive and active levels. in order for a counterfeit to be sold to a consumer, there must be a meeting in time and space of the consumer, the counterfeiter's posting and the ecommerce platform, the most effective way to disrupt this is to remove one of the factors from the situation proactively before they ever reach that meeting and time and space in the platform. in the brick and mortar space, the current state of the law requires service providers to take steps to disrupt the sale of counterfeits, and consumers, however, in the ecommerce space we don't find the same parallel in the law. the current state of the law rests on tiffany versus ebay, which notes an ecommerce platform only needs to act if they have specific knowledge from a brand. there is no proactive
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requirement if the prevention of counterfeit postings or monitoring of their own platforms for counterfeit even though they have the most control over the platforms they have created thus an imbalance has evolved where brand owners attempt to take down counterfeit postings but cannot get at the root of the issue. tied into this is a lack of transsrnt si about third party sellers, take down repeat sellers or education awareness or reporting mechanisms for consumers. while informed consumers in shop safe reflect the growing urgency on this topic and take different approaches, they seek to require ecommerce platforms to take measures to prevent from selling counterfeits, and multiple avenues for tackling this complex issue. in my opinion both pieces of legislation are essential to balance in the space due to the shift from brick and mortar environments to the current online space that the law did not foresee, and importantly to provide consumers with more education, protection, and avenues in which to report suspected counterfeit goods.
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i also recommend continued and expanded data sharing and research on the trade and counter fit goods and anticounter fitting responses. thank you for the opportunity to participate in this hearing on this important issue and i look forward to answering your questions. >> thank you, dr. kammel. mr. snowden is next. >> chairman dur min, ranking member grassley, and the committee. thank you for the opportunity to appear before the committee today to discuss the ways that online platforms are partners in the fight against illegal and counterfeit goods, retail theft, and protecting consumers from bad actors online. ia represents over 40 of the world's leading internet companies on public policy. our mission is to foster innovation promotion economic growth and empower people through the free and open internet. online marketplaces and platforms are the virtual main streets that enable us to purchase the things we want and need. not all marketplaces are the same. different items, different sellers, different audiences,
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and households across america, we use online marketplaces and platforms to get our groceries for the week, sell our children's old clothes that they grow out of too fast, and find handmade goods and as we continue to live through the covid-19 global pandemic, online marketplaces and platforms have helped by delivers goods and products to maintain daily lives and keep our economy going. the vast majority of online sellers and goods sold online are legitimate. the internet industry recognizes that online systems have created new challenges for brand owners, rights holders, retailers and consumers. however, counterfeiting, retail theft and organized crime are not new problems. nor were they created by online platforms and marketplaces. it would take all of us, law enforcement, big box retail,
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brands and rights holders, state ags and online marketplaces to work together to combat the illegal activity by organized crime. online marketplaces have made this a priority and work every day to stop organized crime and counterfeiters. we recognize the responsibility and the important role we play in the ecosystem in stopping this activity. we continue to innovate and cooperate to ensure our marketplaces are trusted by consumers and sellers. we are on the right path to addressing the issues. it's important to stress, internet companies do not permit illegal or counterfeit goods on their platforms. they have invested hundreds of millions of dollars in toolless to implement clear policy. when they find something that violate theirs terms of service, they take it down. in other cases, never allow it up.
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they use advanced tools as well as reports from brand owners. the partnership with brand owners and rights holders are critical. they are in the best position to identify counterfeit goods. the investments the internet industry made in tools, teams and partnerships is finding success. amazon enrolled more than 500,000 brands in its free reporting tool. those brands reported a 99% reduction in suspected infringement. less than .01% received a counterfeit complaint. ebay works with 40,000 individual right holders to identify intellectual property infringement. it has led to a 58% increase in
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takedowns. we support the chairman and committee's goal of minimizing availability of counterfeit and other illegal goods online. internet association encourages the committee to consider two aspects that impact sellers, consumers and online marketplaces and platforms. first, a national framework that clearly pre-empts a patch work of states or local laws and ensure americans receive a consistent internet experience nationwide. states have an important role to play in protecting consumers and stopping retail theft. federal law should be the sole source for companies that operate across state lines. any information collection should be careful not to impose barriers on online sellers. establish reasonable thresholds and time lines in protecting
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their privacy. we recognize the changes made in the senate version of informed consumers act. we are encouraged by the version introduced in the house. it sets national expectations about the type of information online platforms or marketplaces should collect about high volume sellers and disclose to consumers. we recognize burdens -- while recognizing burdens and risks to small businesses. the internet industry, our partners in the fight to protect consumers from the threats posed by fake goods and bad actors. we hope today's hearing will further discussions that can enable online platforms and marketplaces to continue providing safe opportunities to connect sellers and consumers. thank you. i look forward to your questions. >> thank you very much. >> good morning. chairman durbin. i'm the director of organized retail crime and corporate
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investigation for cvs health. i'm the president of clear, the calition of law enforce money and retail dedicated to reducing retail theft nationwide. thank you for the opportunity to testify today on the massive growth of organized retail crime and the impact it has on our consumers, our please and the communities that we service. i want to share what i have experienced. it represents a massive and growing threat to the tune of $45 billion a year. the internet is riddled with illegitimate sellers that hide behind anonymity and lack of transparency. the criminal organizations employ crews of thieves that steal products by any means necessary and sell them through online marketplaces. unfortunately, these include daytime retail theft, threats, intimidation, violence, horrifying stories that play out in our stores every day which a
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lot of us see playing out in media every day. there's one thing i want to leave with you today, senators. we're not talking about shoplifting. we're not talking about individuals that go into a store to steal something for personal use. these crimes are connected to organized crime. carefully plan and controlled by large-scale criminal enterprises. with serious economic and human implications. these professional crews can victimize the same store over and over in the same day or they can go to dozens of stores in the same day and travel over multiple states. this is all part of the national retail theft epidemic that we are in. it's being all controlled by organized crime. it's fuelled by an increase in demand. perhaps the most disturbing is the direct physical harm the retail crime organizations cause retail employees every day.
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very recently, a cvs manager was assaulted and remains in serious condition. these incidents are not uncommon. reported violent events at cvs have doubled in the last year. to give it some scale, senators, there's an organized retail crime event reported from cvs every three minutes. two-thirds of those involve threat of violence, actual violence or a weapon. there are far less obvious dangers to this crime, including infant formula. this is a favorite target of the organizations. in the investigations that i have worked, the criminals disregard all of the safety protocols for these products. they ignore or manipulate the expiration dates. they are not storing it at proper temperatures. it compromises the product integrity and endangering the health of an infant. last week, i received some
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disturbing photographs of a surveillance my team conducted where it showed criminals retrieving stolen baby formula from the basement of an abandoned home, cleaning it up and then sending it off -- repacking it to appear as new for an online seller to sell. these products go from the hands of criminals to the hands of families. our investigations involve illicit wholesale operations to recruit professional thieves who steal. criminal organizations closely coordinate movement of the crews. they purposely direct them to stores in urban and suburban neighborhoods in virtually every state. the stolen products are repackaged, distributed and distributed to the largest online marketplace sellers. then eventually on to unsuspecting customers.
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we are talking about dozens of professional thieves traveling to multiple states, hitting 20 to 30 retail stores per day and stealing tens of thousands of dollars per store. cvs health resolved over $75 million in organized retail cases so far this year. the current law doesn't provide us or law enforcement with the tools we need to hold these people accountable. these criminal organizations are going more sophisticated, more entrenched. they do the -- the harm they do to consumers and businesses is only becoming more severe. we work closely with law enforcement to address this. in addition to try to educate our consumers. we are running out of tools to keep up. we need urgent action from this congress. the informed consumers act, championed by the leadership of
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this committee, will make a difference for us. this bill will help protect consumers. it will aid law enforcement and prevent crime. making it harder for criminals to easily dispose of stolen goods to online marketplaces is the most significant step that we can take to curtail retail theft and reduce the real harm organized retail crime represents to our employees and customers. chairman, ranking member, i appreciate your leadership on this issue. the entire committee's commitment to combating organized retail crime. thank you for this opportunity today. i welcome your questions. >> thank. you had a cnn interview a couple years ago. you said one of your employees war spending 15 to 20 hours a week submitting forms asking amazon and other ecommerce sites to remove products with your company's trademarks. is that still going on?
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>> the producers realized that difficult. it doesn't change the fact that they don't comply with safety standards and flood the marketplace at discounted prices. the problem remains. we no longer have standing to go to the marketplace through these brand owner protection mechanisms and say, please take this down. >> they aren't using your trademarks or identification? >> it's dropped off significantly because we were so aggressive. but they do use key words and other things that we can't enforce with our trademark to drive consumers towards purchasing these types of items rather than the legitimate product. >> what i heard you say, i think, was that the controlling law case on this subject requires that the marketplace have knowledge of deception or counterfeit status. is that true? >> that is correct. they need to be notified often
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by the brand owner, which is the notice and takedown proceeder, that there's a counterfeit posting before they are required by the law to take it down. many marketplaces, of course, still take down counterfeits beyond this. in order for them to be held accountable for trademark counterfeiting -- that's the standard for it. they have to respond to specific knowledge of a counterfeit posting. >> i guess the thing that has mystified me is that these internet marketplaces which have grown there size -- all of us use them. if they are going to maintain their reputation and integrity, they should be on our side in this battle. it took eight years to bring them around to that point. why? >> i would say we are on your side. we are on the side of the consumer. look at satisfaction reports. consumers enjoyed the convenience but good products. what i think is right in the
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sense that, yes, when we have knowledge, we have to take it down. we don't just wait for that. in 2020, amazon took down over 10 billion bad listings. this process is going on. online stores -- we don't want this information on our marketplaces. it's not our goal. it hurts our reputation as online stores to have this type of activity on our stores. we want to get it off as fast as we can. it takes us working with retailers, rights owners and law enforcement. >> i would say my observation, amazon is late to the party, but we welcome them as a guest. they have said recently, quote, we look forward to working with lawmakers to further strengthen the bill. the proposals they made over the years do not strength the bill. they strengthen amazon's hand in avoiding the bill. i am not going to stand by and
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watch this watered down any further. we need to move on this. we are going to test your statement that they are on our side. i asked a competitor of yours in illinois, why do you have plastic flaps with keys necessary for deodorant? what is going on here? >> senator, actually, that's a direct result of organized retail crime. unfortunately, it varies sometimes in product by demographic or by city or suburban neighborhood. we have to lock up those types of products to prevent organized retail crime groups from stealing them. >> let me pursue this for a second since we have a minute left. they swoop in with some container and drag everything off the shelf. where do they end up selling these products that they have stolen? >> online marketplaces are the number one place for these professional crew to dispose of
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products. they don't come in and steal one or two. they steal all of the deodorant in the store. most of that product winds up on an online marketplace. >> flea markets? >> kind of a thing of the past. they exist. the online marketplaces -- most flea market sellers also have an online presence. they are not mutually exclusive. they do both. flea markets don't play the role they used to because the internet provides a larger customer base. >> i will close by saying, in 2019, the u.s. customs and border protection reported 83% of the seizures came from one country, $1.4 billion. we have retail theft at home being translated into the fencing of stolen goods and these internet marketplaces.
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we have foreign suppliers of counterfeit goods that is another venue. there may be more, but those are the two that have been identified so far. senator grassley? >> to each of you, if you support legislation, what tools would you like to see in those legislation -- what tools do you need? >> thank you. a more formal process to identify product we know is unsale or does not meet safety standards. communicate that to the marketplace versus only having intellectual protection as the channel to communicate to that marketplace. that would be a tool that would be very useful. >> from my perspective, transparency is very important. we have a lot of statistics about takedowns and sellers but not necessarily how many of those had sold counterfeit prior
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to the takedown procedure or what is happening on the back end beyond those initial statistics. at least from my perspective, the ability to use some of that data for research to study the problem further. >> i would say information sharing is very important among all parties. something critical for this particular issue to understand who is doing what. also reporting requirements for small sellers. right now in your bill, it's two days. i think it's important if we have longer. the house bill has ten days. i would encourage you to consider that as well. >> i would say transparency, ranking member. transparency equals accountability. we can hold people accountable. we have to figure out who they are. we need that transparency first before any other remedy. >> what collaborations or voluntary initiatives or within stake holder groups have you
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participated in, have these been successful efforts, and are some marketplaces more cooperative than others? >> as a member of the toy association, we work with our members, many are manufacturers. some retailers and online marketplaces are also members and have come to the table to have conversations. i have seen progress over probably the eight-year period i have been involved in that conversation, specifically around intellectual property protection. have not seen progress at the table regarding these unsafe products or products that don't meet safety standards. >> what we see right now with our attorneys general across the country, we have utah, illinois, arizona, california, ags are setting up organizeed crime task force cl brings in the retailers, us, rights holders. that's important.
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this is organized crime. they are organized. we have to make sure we get organized on our side. that takes all of us. >> yes, sir. unfortunately, there hasn't been a lot of progress in that regard. there are some online marketplaces that do cooperate. ebay is a great example of a great partner on the investigative side. i will tell you that none of the online marketplace currently have the transparency to the level we are looking for to prevent crime. the attorneys general task forces that are being set up, that talk about increased penalties, tougher penalties, they talk about resources they want to add. they all say the same thing. the thing we need to make this work is transparency from the online marketplaces. which now we don't have. >> what do each of you believe has been the most successful strategy to counter illegal activity? >> i think persistence.
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our internal efforts nonstop to communicate this even when we feel like we're hitting a brick wall. i'm hopeful we will break through. >> proactive approaches to dealing with this. reactive approaches are very necessary, but when we see either marketplaces or brands really trying to take a proactive approach before it ever gets posted, we find those the most effective. >> i would agree with a proactive nature. i would also add that it's important that what's been successful is being able to have the partnership with brands and rights holders. they know what's counterfeit. they know what is illegal. working that angle and having us work together has been the most success. >> what i have learned in my years investigating these crimes is that we're not going to arrest our way out of this problem.
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we do need proactive solutions to stem the tide of this growth of organized retail crime. proactive measures. preventative measures have been the most effective. i think wil effective going forward. >> i'm going to jump in. i don't believe you have identified the percentage of retail theft impact on a business, drugstore. can you give a percentage of sales? >> unfortunately, mr. chairman, i'm unable to talk about specific retail shrink numbers, loss numbers to cvs. i will tell you this. it's pretty consistent across all retail, all types of retail. we're all seeing the crime affect us at a similar level. it's higher than any level in history. there are ceos that have made public statements about how that is affecting their overall
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profitability. i think those are available to you. we could possibly get back to you. >> please do. senator klobuchar? >> very good. thank you very much for your leadership on this issue and all of you for your work. i want to focus on some bipartisan legislation that senator grassley and durbin and others introduced with me. that would prevent dominant digital platforms from engaging in behavior that unfairly harms competition, like relevant here, knocking off products sold on their platform. recent reports in places like "the wall street journal" have documented how amazon has created knockoff products based on the data that they get from innocent companies that are selling on their platform. of course, it's the big platform in town. then engages in self-preferences of their own brands above other
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brands. do you support legislation in making it illegal to use special access to online seller data to create copycat versions of popular products? >> there is an issue that i have members on both sides. i have -- we have not taken a stance on competition issues. i don't plan to make news today. >> we have a lot of people on a lot of sides. at some point, this congress has to take a side. do you want to add anything, mr. dugan? >> no. this is the first i have heard of that. >> you were nodding your head. >> i was learning something. you were teaching me something. i find it amazing. thank you. >> it's true. >> thank you.
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a few months ago, i was sent a link to a new product on amazon. a version of our product. i was concerned. i saw not only was it a knockoff of our product but it violated a number of our trademarks. someone did not do their homework. we were able to get it taken down through the registry, which speaks to some of the progress they have made. it speaks also to an underlying problem that you have brought up here. >> very, very good. i appreciate that. i think we are seeing so much more of it. you just happen to be on this panel. we have had people who have experienced this as we know from the reporting. i think there's just a lot of it. my view is that we have to update our laws, which is part of the work that senator durbin and senator grassley have been doing. i'm concerned about safety when consumers buy products online. just last week in the commerce committee, i questioned snap
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about the stories of young people in minnesota who died after taking drugs that were purchased on snap in one case, they didn't know it was laced with fentanyl. mr. dugan, what are some of the harm consumers can experience when they unknowingly purchase unsafe goods online? >> thank you for that question, senator. there's a lot of harms. i will say that there's virtually no product integrity online. i would caution buying sensitive products online, unless you know that they are safe. we spoke about infant formula. there's another case i have worked involving organized crews that steal diabetic test strips and sell them and store them at different temperatures and wind up counterfeiting the strips and sell them to unsuspecting patients with diabetes across the country. there's a lot of harm across there. the effectiveness of over-the-counter drugs, they expire, get less effective.
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it's a domino affect on the safety hazards out there when there's no product integrity. >> of course, the fentanyl example is an example of drugs that shouldn't be sold at all on a platform. snap has pledged to take these down and do what they can to get in the witness's words, drug dealers off the platform. when you have new marketplaces with people making tons of money that they have to start being responsible for taking this stuff down. in your experience when consumers are making purchases online, do they have enough information to decide for themselves whether a product might be unsafe? >> no, they don't. often they are looking just at an image. sometimes it's a copy of another brand's copyrighted image. what information the seller decides to put on the site.
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one cannot tell what they are buying until they receive the product. even if it appears genuine at first glance. >> whether it's counterfeit ppe on amazon or advertisements for fake covid-19 vaccines on facebook, do you think that online platforms are doing enough to stop this conduct? what else should they be doing? >> there were a lot of initiatives around fake ppe and counterfeit covid-related products, for sure. i do applaud the marketplaces for looking at that. across the board, we see counterfeit in almost every industry that we work with, almost every product line that's successful. i believe more should be done proactively. >> very good. i appreciate it. thank you very much. mr. chairman, thank you for your work on this and for being a co-sponsor of our bill which i think is timely given what we are talking about here today. thank you. >> thanks. senator lee. >> thanks, mr. chairman.
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thanks for offering your insights today. we have all seen that ecommerce has revolutionized the marketplace, the way we live and operate and do business. it has given a lot of people opportunities they wouldn't otherwise have. there are some challenges that have, of course, accompanied this technological revolution and the corresponding social and economic revolution that occurred with t. as we seek to make the world a better place and the online experience better, we have to be careful. any time we enact laws, those laws can have consequences. we want to make sure that any laws we enact and codify don't make things worse or don't create one problem while purporting to solve another. the legislation we are talking about today is something that we should scrutinize to make sure
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we have it right. i have some concerns with it. the inform act has a laudable goal, one all of us would share. cracking down on counterfeit and stolen merchandise, sales on the internet. nobody wants that. everybody wants to crack down on that, at least everyone in this room. i wonder how difficult some of the requirements might be for some companies, especially smaller online marketplaces. by smaller online marketplaces, i mean to a degree, anything other than the largest among them. anything smaller than the largest among them could suffer. for example, the bill requires verification of high volume third party sellers and requires that within three business days. then it also requires annual --
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continuous annual certification of all sellers. the threshold definition of a high volume seller is set fairly low. it's triggered once you pass the required sales of between 5 and $7,000 annually. it's pretty low. it would take in a lot of people. do you have any idea -- i'm imagining that the combined sellers of your member companies can certainly be numbered in the many thousands if not millions. am i on track? >> in the millions, yes. >> we are talking about millions and millions of sellers. amazon might -- just might be able to do this verification with technology. it might be able to do it just fine. i'm not sure. but i doubt all of your members would.
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i definitely worry about smaller platforms that might not be able to do this. could the bill -- assuming that i'm right, that some really large online marketplaces, amazon, for example, might be able to do this, but smaller companies couldn't, could it help amazon while making it more difficult for smaller businesses to operate and do so in compliance with the law? >> senator, i think your characterization of sellers who use our online marketplaces is accurate. it can be someone -- a mom who is working on handmade goods or something she makes in her basement. she would fall to the verification process of having to do it every three days. in the house bill, which is ten days, gives more time and flexibility. we don't want barriers that will limit sellers from being able to get online and sell their goods.
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the beautiful thing about online marketplaces is that it opens up the door for more sellers, but also opens up the door for more buyers to see your products. i would say the ten-day threshold would be important. also, raising the limit to $20,000. right now it's $5,000 or $7,000. if you think about someone selling something, if it's $5,000 or 200 sales, that's about $13 a week selling your product. that's not a lot of money. >> which gets to another concern i have got. i do worry about language in the inform act and in the shop safe act that would mandate the public disclosure of the platform's seller's names and contact information. this worries me for three reasons. there are a lot of individuals, moms and dads out there, who work from home or at least partially from home who operate
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outof their homes. if they have to provide their name and address, that could present some privacy and safety and security issues for them. some of them might be deterred from engaging in that line of work at all. number two, it could end up stifling competition by giving larger companies the ability to poach sellers. the sellers who have been affiliated with their smaller competitors. number three, the sheer regulatory burden associated with this could create a natural barrier on entry, a natural restriction on entry, making it harder generally for smaller competitors to compete. am i right to be concerned about those three things? >> i think you are. one concern or one -- i would applaud the chairman and members of the committee who have worked with us and others particularly in the house side as well as the senate side to increase to allow
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consumers or sellers to report their business information versus their personal information. that is definitely a barrier. if i'm a single mom working creating products out of my basement, i don't want everyone to know my home address. we need to keep going down that path. >> thank you very much. >> senator coons. >> thank you for holding this important hearing. the ranking member and i have been co-chairs of the trademark caucus for a long time. have held a number of caucus meetings and hearings over the last decade about the risk that counterfeits goods pose to american consumers. this testimony today is riveting and challenging. it reminds us that as the marketplace for the purchase of goods online has grown and grown and particularly strongly during pandemic, that the number of stolen and counterfeit goods that are now being stolen and fenced or produced and sold to american consumers has taken off dramatically. we have heard about unsafe
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goods, whether cellphone batteries or bike helmets or spoiled baby formula or counterfeit drugs that have harmed americans. they also ruin the trust built between brand owners and consumers. pretty wise and capable aaron has demonstrated to us today. we need to take stronger steps to address the online sale of these goods before they reach consumers' hands. there's some studies that suggest as much as a quarter of all americans who have purchased goods have unknowingly purchased a counterfeit good. that's why i'm proud along with my colleague to have introduced the shop safe act. i was pleased to see a strong bipartisan vote over in the house judiciary committee to send it to the floor. it will encourage electronic commerce providers to adopt anti
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that will increase transparency, keep counterfeit goods with the health and safety impact out of consumer hands and i think promote the health and safety of our country and continue to accelerate the growth of these innovative sales platforms. there's a need to provide transparency to consumers. that's why i'm proud to support the informed consumers act. there's a great need for greater transparency. i think shop safe and informed complement each other to increase transparency and accountability. i urge my colleagues to support both of these important bills. let me turn to some quick questions, if i could. my daughter is a satisfied customer. loves putty and slime and so forth. had commented on how inventive your products are. i'm struck by your descriptions about how hard it has been to enforce your trademark and how much time you have had to dedicate to it. could you briefly give us a little more detail.
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how many other competitors -- how many other small businessowners like you have had to dedicate enormous amount of resources to the game of notice and takedown, notice and takedown, with online? >> we go to trade shows. we sit around and talk. the toy industry in particular is -- started my life with something else, invented something, landed here. imitation is the finest form of flattery. i think many of us are very, very flattered. if we have a successful product, you are going to see these outright knockoffs, counterfeiters coming into the marketplace. >> you described how magnetic putty that has much lower safety standards poses a real threat to children and infants in particular. what would it mean to you and other small businessowners if platforms took more proactive steps to combat counterfeit good sales? >> it would reduce the resources
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we need to spend pounding against a wall trying to get someone to listen. it will also would help our brand integrity. it would help consumer confidence. we would probably receive more of the legitimate sales of the product than the sales which are going to illicit product. >> thank you. mr. dugan, how will the information that inform would collect assist in combating the sale of stolen goods? >> thank you for the question, senator. i think it will do more to prevent these accounts from being opened in the first place. it will protect the consumers from these sellers. it will aid law enforcement. to identify the bad actors quicker. it will prevent the further expansion of the crime. what we need -- what is vital is that we are in the middle of an epidemic. we take action to slow this down. >> thank you. some platforms have said they would like to see affirmative
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requirements for donors. why isn't the current duty brand owners have to police their own trademarks enough to encourage them to assist platforms in policing counterfeit goods? >> i think one of the things you are doing in the bill is changing the liability. it's going to put the burden on us and not on them. they have no responsibility in this. it's important that they stay at the table as well. we cannot do this alone. it takes all of us. we have been proactive for many years working on this particular issue. when i look at the retail side, ebay has a program over ten years working with retailers to help identify suspicious products. we need retailers, we need rights holders to make sure they are at the table and they have a responsibility to help us police their products as well. >> if i might have one final question. professor, help us understand how this balance works. if you would, describe the
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problem experienced by brand owners. i have heard some say it's a handout to big tech. is that accurate? is it true that online platforms are not frequently broadly responsible for trademark infringement? >> to the first part of the question about the approach, this is when -- it has been described today, a counterfeit posting super, a brand owner tries to react and they spend hours searching for the counterfeit postings across multiple platforms and a subindustry has actually sprung up to basically monitor these platforms to the best of their ability, verify with the brand owners and submit for notice and takedown. once you take down one, another 10 or 20 come in its place. the second part of the question, could you repeat? >> contributory liability and whether this is just a handout
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to big tech, shop safe, that immunizes them from liability they have in exchange for nothing meaningful, that's been one criticism. >> sure. i don't believe that. i think it addresses what i have written about, which is law disruptive technology. this technology has been wonderful for all of us. everybody in this room uses ecommerce. there has to be a balance to it. we are reaching that tipping point where we have seen all of these strict product liability cases being brought because people who are being injured cannot find the seller of the goods. to flip that back to the secondary liability, it creates the space where ecommerce platforms have to prevent the postings from coming up. brand owners need to identify what their trademarks are. we find a more balanced meaning. >> thank you. i look forward to working with all you have to reform this further. thank you very much. >> thanks. on the floor we have started the first of three roll calls.
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i'm going to make the first one and senator blumental will reside. >> thank you, mr. chairman. i want to come to you if i may. section 230. i know some online sellers have used section 230 as a shield to prevent them from liability. i come from tennessee. of course, we have after market auto parts that copyrights have been infringed. we have guitars infringed and books that have been published, music. when you talk about the auto parts, the engines for boats and motorsports, things of that nature, what sometimes we have seen in these cases where online sellers really try to hide behind section 230.
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do you see that specific part of the law as something that is a potential obstacle to consumers who are trying to get recourse for having bought something that's a fraudulent product? >> i'm very aware of section 230. it's not an area that i have spent a significant amount of researching. i do know that the sellers of counterfeit goods will try to hide behind almost anything they possibly can. >> why don't you take a look at that. then weigh back in with us. country of origin labeling. i have heard from so many people that sell online that they think this is a good thing. also, from people who buy online, because specifically, they don't want to buy from china, because many times they feel like they are infringed or knockoff. in tennessee with some of our
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toy inventors, we have had problems. i'm certain you have met with some of these guys. talk to me about why that type disclosure and how it can be done so that people get the protection and the knowledge but their privacy is protected. >> sure. when i was starting a business, i was making putty and selling it out of my home. when the time came that i felt like i needed some protection of my privacy of my home, i got a p.o. box. there's a way to trace it back. then eventually there was an office. in terms of country of origin labeling, it's required by law. it's important for consumers. when i look at products, sometimes they have it. sometimes they don't. sometimes it will be in the online listing. sometimes it won't.
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often, it's in conflict with whatever the online listing says. it's absolute chaos. >> mr. snowden, i want to go back. senator klobuchar was asking you about protections. i think you might want to explain. it sounded in your response that you do not support intellectual property protections for u.s. innovators. that's a protection to them under law. when you said you have members that are for disclosure, members that are against disclosure, intellectual property protections are very important to this committee. >> i agree with you. it's important to us as well. what i was referring to with senator klobuchar is she was mentioning the self-preferencing part of her bill. that's the part that i said we were -- i was not going to make a comment on today. >> okay. i think that's -- let's go to the country of origin labeling.
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where are your members on that? >> the country of origin is a challenge for us. sometimes we may not even know -- we don't touch the product in some cases. in other cases, some of our -- let me back up. it's important to recognize that online marketplaces aren't just one company. i think someone said a moment ago this is big tech. there are small tech online stores as well. when we try to track country of origin, a lot is tied up with trade agreements, enforced by border patrol. >> do you think that everyone in the online marketplace has a responsibility to know what they are selling and what they are bringing to the marketplace? >> what they are selling, yes. what they are selling, yes. the country of origin is very different. >> mr. dugan, you want to weigh in on that? >> this is a 50 state problem, senator. we have a lot of -- plenty of
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home grown organizations to deal with. transnational organized retail crime is part of this but not a major factor as far as we can see right now. >> my time has expired. i'm going to come back to you for a written answer on your comments on law disruptive technology. i think that would be helpful as we look at how we're going to move forward on this issue and protect u.s. innovators and protect a healthy, productive kwon line place that consumers can feel and be certain that they know they are not getting fraudulent, counterfeit products. thank you. >> thanks. i will preside while senator durbin is voting and recognize myself. to all the witnesses, thank you
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for being here today. as the chair of the commerce subcommittee on consumer protection, i have been focussed on the role of the consume product safety commission and our consumer product safety laws, particularly in the struggle to get online marketplaces to take seriously their responsibility to recall dangerous items. we have a procedure now to protect people. recall dangerous products. all too often the online marketplaces feel they have no responsibility to inform consumers or to in any way participate in recalls. just as one example, in april of 2019, i wrote to facebook marketplace and craigslist about the fact that they were not effectively preventing the sale of recalled products, including rock and play sleepers linked to
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32 infant deaths. they have been laggard, slow, inconsistent in taking on responsibilities that other sellers and retailers observe. i am now considering reforms that should be made that would strengthen the cpsc. one of them is that we need to make sure online marketplaces are covered by the product safety and recall laws. let me ask the witnesses, all of you, what role you think that this cpsc can have along with the ftc in enforcing these laws. i should emphasize, we have a lot of good laws. often, they are unenforced. we have spent a lot of time making new laws that are then
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unenforced. frustrating? yes. dangerous? yes. we need to focus on enforcement and give the ftc and cpsc the tools they need to assure that the law is more than just dead letter. let me go down the panel. >> thank you. i have had conversations with cpsc and shared my information about the products that we have and the infringers we see. i think that cpsc does an effective job at look agent the ports and bulk shipments coming into the united states. i think they are very challenged, as is the postal service at the single parcels that come through third party sellers into the united states. it's a torrent of small envery much -- envelopes. it's hard to prevent them from reaching consumers' hands.
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that's where i see a pay juror problem. >> we focus on trademarking and consumer product safety. i think it's important for platforms or anyone who is in the business of providing a space for consumers to purchase product that whatever laws are in place they uphold whether they are brick and mortar or whether they are online. >> senator, i think this is something i would like to come and talk to you about more. i will share that when we are notified of recalls or made aware, we try to -- we pull the product down, in most cases, where we can. also, we try to inform the consumer. in some cases when you try to inform the consumer, the product may have been bought two or three years ago and the email we may not have or they may not be able to be contacted.
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that's something that we are working on. we take it very seriously. >> i apologize, senator. that's beyond my role at cvs health. i'm not familiar with some of the laws that you mentioned earlier. i would assume that we would be in support of any action that helps protect consumers. >> thank you. let me ask one more question. one of the obstacles to effective accountability currently is section 230. which in effect creates broad immunity for the platforms. let me ask you whether you are familiar with the impediments of section 230 to effective accountability to consumers on the part of the platforms. i'm an advocate of reforming section 230. we managed in certain discreet
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areas to do it. we are proposing additional measures. senator graham and i have a proposal which we introduced in past congresses. it passed from the judiciary committee. one example of what we can do to impose greater accountability if we reform section 230. >> thank you for the question. i'm aware of section 230. i'm happy to provide you with follow-up afterwards. >> that would be great. anyone else who wants to add any views on section 230, i welcome them. thank you. senator hawley? >> thank you, mr. chairman. thanks to the witnesses for being here. mr. dugan, i noticed something in your testimony that i thought was interesting. you said much of the problem with counterfeit goods online is due to organized crime in brick and mortar stores and that organized criminals shoplift and sell the goods online.
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have i got that right? >> i don't think i commented on counterfeit goods. stolen goods. >> i'm sorry. stolen. the goods online that are stolen and they steal them from brick and mortar stores and sell them online? >> yes, sir. >> "the new york times" earlier this year had a story in which you were quoted, i think, as saying our security officers are assaulted on a regular basis in san francisco and that san francisco is one of thes of ret. >> yes, sir. >> i think it's -- this is something that is -- has not been widely reported, not widely understood. part of the problem we see in counterfeit or in this case stolen goods online -- we have a deluge. it's linked to the crime wave we are seeing across the country. >> yes. thank you for that question. i will start by saying that this is not a big city crime.
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this occurs in all 50 states, thefts of organized retail crime occur just as much in local crime suburban neighborhoods as they do in america's largest cities. that's probably news to a lot of folks. it's not covered on the media as in some of our major cities. what i meant to say is, we were talking about san francisco specifically. there's a lot of stolen product there that gets filtered to other states, texas, north carolina and new jersey. they get a lot of that stolen product from san francisco. i was trying to make a point. even though product is stole. >> announcer: -- stolen in one area, it's statewide. >> it can be stolen from one place, san francisco, new york, st. louis, whatever, and but then it finds its way online. it's competing with legitimate goods, with goods that are entirely legal online.
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you have competition that's making its way to the online marketplaces that's due to organized crime at the brick and mortar level. >> that's fair to say. it's unfair competition. they are getting the products for cheaper. that's what our team does. we track the investigations state to state all across the country. ultimately, it leads us to the same place, which is an online marketplace. >> what do you think is the best way for this body to address that phenomenon? >> the swift passage of the informed act is vital and first step. >> very good. thank you for that. i want to turn to the amazon self-preferencing question. i think you testified to senator klobuchar that your product in particular that amazon for a while had a knockoff of your product. >> that's correct. >> it's been taken down. >> it was taken down only
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because i will say it accidentally infringed on some of our trademarks. >> i see. i want to highlight this problem. last year "the wall street journal" reported that amazon collects detailed information and they can create copycat products. amazon denied that. they said they had procedures in place banning the practice. has that been your experience? >> i do not have any insight into how amazon makes their decisions. i was aware that the four pack they created or six pack was similar to and item we had on amazon. >> it doesn't seem you are the only one. employees said that the procedures that amazon referenced weren't enforced. amazon encouraged employees to break those. the markup is evidence that
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amazon is rigging its search engine to return results for its copycat products over producers like you. i want to drive home the point that we can talk all day about the problems of counterfeit goods and those are significant, but that's not going to make a dent unless we do something about the self-preferencing on the platforms. i introduced legislation that would prohibit it. i just want to underline i think that it's vital that we tackle this issue. last thing, in my few remaining seconds, senator blackburn was asking about some of the country of origin issues. i want to just highlight this. your product -- tell us about the problem of counterfeiters using high strength magnets in some of the knockoffs of your products. these were not made in the united states? >> the samples i have here, which i ordered last week, were
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not made in the united states. some of them do have producer markings. this says made in china. this one says nothing at all. they do contain these high strength magnets which cause significant hazard to children when they are playing with this product. >> absolutely. i want to underline that we are talking about supply chain and manufacturing issues, which is important given our supply chain crisis. i think what we are seeing is that when giant companies like amazon help hock foreign counterfeits, they are made abroad, parents don't have any way of knowing this, it's very difficult to find out, they are not only endangering children, they are taking jobs away from people like you and your company that are made here in this country and putting american kids at risk as well as our own economy. we need to find ways to push back against this simultaneous problem of misrepresentation of goods and counterfeiting and offshoring. thank you, mr. chairman.
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>> thanks. >> thank you. i thank the panelists. you mentioned that you think that the informed act should be passed. my understanding is the house version of this act changed the date when the consumer receives information about the product to after the point of sale. do you support that change? >> um, i support both the house legislation and the companion here in the senate. i'm not an expert of legislators. i'm going to kind of leave that to the legislators if i could. >> doesn't it make more sense to get the information to the customer before the consumer purchases the item? >> yes. i prefer -- i support that, yes. >> so, since mr. dugan supports the passage of the inform act, do the other panelists support the passage of this act? >> senator, we have not weighed in with official support.
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right now we still want to work with the committee to fine-tune some things in the bill, particularly the verification timelines and thresholds which are very important. >> but it sounds as though you support the concept of disclosure information? >> correct. and inform. >> yes. >> yes, i do. >> yes, i do. >> thank you. so, mr. muderick, you have brought to the attention of these online sellers about maybe amazon, that they have online unsafe products and they don't take it down. you've been asked a number of questions relating to section 230. and i'm wondering whether where the online platform receives money for advertising the product, whether they should be exposed to liability.
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what do you think, any of you? >> i'm not sure if i fully understand your question, senator. >> right now section 230 pretty much protects the online marketplace of google and amazon. let's just use amazon. that whatever is the content, they have no responsibility for monitoring or doing anything, disclosing anything. so, there is -- i am co-sponsor of, what is it, the safe act, which requires that in certain instances, these platforms will not have the benefit of liability protection. one of the instances would be if they actually receive money for that item to be advertised on their platforms. >> well, section 230 allows us to actually take down the content. that's why it's so vital that we have that liability protection.
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so, anything that would harm or dilute that protection would be a concern of ours. >> well, except that if the platform does not take down this product, as was the case with mr. muderick, then shouldn't there be some liability attaching? because right now there's nothing that really requires these platforms to take those kinds of precautions. if they want to, they can. if they don't, they still -- >> actually, ma'am, there is law now that says if we are notified of something, we have to take it down. so that is required, and we do that. now, mr. muderick, i don't know all of his examples and i'm not familiar with everything, it's the first time i'm hearing about it so i can't comment on exactly what he's saying, but i can tell you that there is existing law that says if we are notified about something, we must take it down. >> that is surprising because we have -- this committee has had other hearings where certain video, for example, very harmful, very -- the platform is
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asked to take down a video, for example, a father whose daughter was shot and killed online. the video, so he kept asking the platform to take down the video, and they never took it down. so i don't understand your comment that -- you have to take something down. >> an example mr. muderick said was there were products that were infringing on his trade marks. and in those cases that information, once we're notified that, there's law there that says we have to take it down, that's noticing comment. >> if i may -- >> yes. >> on a monthly basis we would send in lists of product which did not infringe our marks but were obviously in violation of federal safety standards. and on a monthly basis we would follow up with the same list of not only the same products but even many cases the same exact listing that had not been taken down. >> so, i am among the members of
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this committee who are looking at the section 230 immunity provisions to make some changes. i realize that every time we do that, there might be unintended consequences. so, the bill that i mentioned seeks to really define those instances when that immunity is not available. so, i'm going to continue to pursue it. i would ask the panelists to take a look at the safe tech act. thank you, mr. chairman. >> thank you, senator hirono. senator cruz? >> thank you, mr. chairman. mr. dugan. >> over the last several years, we've seen repeated efforts in democrat-controlled cities and states to effectively decriminalize theft. california, for example, said that any theft under $950 is no longer a felony. and we won't arrest you if you're under that dollar figure. a recent nbc news article stated
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that both cbs and walgreens say shoplifting in san francisco outpaces thefts at their stores across the country. pretty common sense. if you remove or greatly reduce the penalty for stealing things, theft gets worse. what exactly are the figures for nonemployee theft in cvs stores around the country? and in particular, how do the rates of theft differ in jurisdictions with so-called progressive prosecutors who decline to prosecute shoplifting versus jurisdictions where law enforcement is enforcing laws against theft? >> thank you for that question, senator. unfortunately, i'm not going to be able to disclose cvs financial information about losses. but if you'll allow me to comment, this is not a big city problem. decriminalization is contributing to the problem. you're right, sir. >> is there more theft in san
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francisco than elsewhere? >> no, sir. >> there's not? >> relative to the amount of stores and marketshare that we have, it's higher. >> so nbc news was wrong when they said that? >> i can only speak to what i see every day on the ground, senator. and i follow these criminals day to day from state to state and city to city. >> so cvs would support other jurisdictions legalizing shoplifting up to $950? >> cvs does not support shoplifting. >> why not? >> we're not going to endorse criminal activity. >> but you're saying it has no effect. >> i never said it had no effect. >> you said there's not worse shoplifting in san francisco. i find that highly dubious. does it have an effect or not? >> yes, of course it does. >> what's the effect? >> the effect is shoplifting is completely different than organized retail crime. if you're talking about shoplifting, that's a whole different dynamic than organized retail crime. >> answer my question is what's the effect? you guys have the data. >> i'm not sure i understand
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your question, senator. do we take losses to shoplifting? yes, like every other retailer. >> and are they greater in jurisdictions that effectively legalize it? >> no, they're not. >> so, then why would you oppose every jurisdiction legalizing shoplifting? >> we don't -- >> your answer's not making any sense, sir. >> well, i respectfully disagree. i think it makes perfect sense. what i'm saying, senator, is this crime goes to all 50 states. it's not a big city problem, absolutely not. >> so why would you oppose every jurisdiction legalizing shoplifting? sir? why would you oppose every jurisdiction legalizing shoplifting? >> we're not going to -- why are we not going to oppose shoplifting? >> yes. >> no, we're not going to do that, senator. we're not going to endorse criminal activity. but shoplifting is a different dynamic than organized retail crime. what i'm here to testify about today -- including the major cities in texas. >> that's really quite remarkable. let me ask a different question,
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which is you go into great detail about organized criminal organizations. but i want to point to you to something in ms. camel's testimony where she cites the work of j.p. kennedy, who has written a lot on the subject of theft. and one scholarly article that mr. kennedy wrote, "the functional redundancy and response to employee theft within small businesses," has an interesting paragraph on the second page, which is relevant to this discussion. it says, it has been estimated that employee theft within the united states is ten times more costly than all forms of traditional street crime and that it cost victimized businesses in the u.s. economy as much as $400 billion a year. furthermore, employee theft is estimated to cost victimized businesses significantly more than nonemployee theft within the same businesses. in your experience, what is the
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relative magnitude of employee theft versus nonemployee theft for retailers? >> my scope at cvs, senator, is to investigate the external part of the theft. i don't have the internal figures necessarily at cvs. i will say overall as a president of the coalition of law enforcement and retail that internal theft is down. i can certainly provide you a report with those figures attached to it, senator, if you'd like me to. >> do you have any judgment as to which is bigger, employee theft or nonemployee theft? >> well, i might be biased because i'm in the street every day working on organized retail crime. i see the harm that it does every day, why we need this federal legislation. >> sir, with all respect, i'd like you to answer my question. do you have any judgment as to which is bigger, employee theft or nonemployee theft? and in particular, mr. kennedy says employee theft is ten times larger. >> no, i would disagree with that assessment. >> do you have any judgment as to which is bigger, employee theft or nonemployee theft? >> most recently over the spread
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of this epidemic, i would say nonemployee theft. >> thank you. >> you're welcome. >> i want to thank the witnesses for coming in today and testifying. it was an interesting panel and drew a large part of our membership here in the senate judiciary committee. we have committee jurisdiction issues which suggest that the senate commerce committee has jurisdiction over this issue. we have jurisdiction over senator coons' aspects of it. that's ours to worry about. but the problem is real. and we now have all the major players on board, apparently, toward doing something about it. and i'm going to do my best -- i won't go through this committee to encourage the commerce committee to join with us in this effort. so i thank you for lending your voices to it. it's been 13 years for me since i first saw those home depot drills and realized what was going on out there. that's a long time to wait for an answer, maybe not by senate
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standards but by normal human standards. so thank you for joining us today. and with that the senate judiciary committee stands adjourned. c-span offers a variety of podcasts that have something for every listener. weekdays "washington today" gives you the latest from the nation's capitol. and every week "booknotes plus" has in-depth interviews with
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