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tv   Experts Testify on Online Marketplace Fraud  CSPAN  January 4, 2022 6:27am-8:10am EST

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the hearing will come to order. -- challenge of stolen counterfeit and unsafe products sold to unsuspecting customers online. i'd like to start by showing a brief video that highlight this is issue. >> the rise in e-commerce fueled counterfeiting around the world. some estimate the sail of illicit products could result to 5.4 million net job losses. consumer products and pharmaceuticals make up a big share of counterfeit goods. these are especially dangerous because they pose health and safety risks. >> crime is grewing. >> online marketplaces allow
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criminals to sell items quickly and anonymously. >> this is an organized business and looks to take advantage of consumers. >> we're seeing a ship to immerse. >> confiscated power towels for sale on facebook. >> fix it here and then they pop up somewhere else. >> unfortunately in the online space as we found counterfeit unregulated and threats. >> counterfeits pop unon amazon within 30-60 days of us launching a tv commercial. >> administrative complaints charged some products sold on amazon are defective and pose a risk of serious injury or death. >> original product and this is a counterfeit. side by side. >> third party sellers account for about half of what they are selling themselves. >> lots of things can help. >> a bill is just working its way through congress that can potentially help in that regard. the informed consumers act and it would require third party merchants to be vetted by online
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marketplaces. >> even the simple transparency is something that could make a difference. >> can they assure consumers 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's been co-sponsor of major legislation on the subject. it was then i met with representatives of the homeland who told me about a problem they were facing. there were certain brands of power tools they sold exclusively atproblem they were. there were certain brands of power tools they sold exclusively at home depot but turns out this were being sold new in box on marketplaces like amazon. it wasn't hard to figure what was going on. the tools were being stolen from
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the original manufacture and resold online. and it wasn't just tools it. happened with all kinds of products. cosmetics, electronic, clothe, over the counter drugs. toys. often these products posed serious health and safety risk to customer who is thought they were buying the original product. back in 2008 i introduced my first bill to address the problem of illicit products sold online and the marketplaces told me don't worry, we're taking care of this. you don't need a legislation. well here we are 13 years later and this problem hasn't gone away. its goaten much, much worse. when you buy products from third party sellers online you are really rolling the dice. in 2018 the government accountability office ran a test. they bought a sample of 47
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consumer products from third party sellers on leading e-commerce websites to see how many just might be counterfeit. out of 47? 20. 20 of the 47 were counterfeit. in january the u.s. trade representative reported that the rapid growth of e-commerce platforms helped fuel the growth of counterfeit goods into a half trillion dollar industry. and stolen goods continue to be offered online by sellers who pop up, disappear and then pop up again. retailers lose 45 billion each year in these schemes. my staff asked home depot if their tools are still being offered online as new by third party sellers. they sent me nine posts that popped up just last week. and that was a small sample. here is one of'em. a brand of lithium batteries only available at home depot being offered for sale in the box by a third party seller on amazon for 20% below the retail
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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 deserve better than being deceived into buying sham products. retailers are tired how easy it is for organized groups of thieves to steal their goods and resell them online. manufacturers are sick of seeing knockoffs to their products hocked on sites like amazon. congress needs to do something. first somebody is going to sell large volume of goods online on a marketplace, they should tell the marketplace who they are. doesn't that sound pretty basic? the seller should be verified. second, if a product sold online is fake, stolen or dangerous, consumers should be able to report it and find the seller. and the marketplace must ensure that the seller can't just disappear and pop up later under
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a new account name. third, if a consumer orders a product from one seller online and the order is actually filled by another company t 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 that promotes these principles. called the informed consumers act. i'm honored to advise a co-sponsors, senator grassley, hirono, coons, warnock and rubio. i thaj them all. in house a bill sponsored by the democrat from illinois. she's been a consumer advocate all her life. before she was elected to public office she was a mom raising hell about expiration dates being printed on dairy products.
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she's joined by republican representative from florida. endorse by broad range of consumer groups, retailer and online marketplace likes etsy and ebay. and the day after we announced this hearing adams endorsed it too. we've worked hard and hope to make this bill law soon. there are others out there. the shop safe act which addresses second --. today we'll hear from a distinguished panel of witness who is will talk about the scope of the problem. there is bipartisan support and momentum for addressing it and i hope we get it done. now i turn to my colleague and friend congressman -- senator did i cover ever possible? chuck grassley of iowa. >> thank you for your remarks and thank you for calling this hearing and it is very important that we look into the roles of
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big tech in this area. americans increasingly rely upon the internet to purchase everything from healthcare 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 and other criminals are exploiting online platforms.
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these activities threaten consumer safety and businesses' bottom line. criminals can easily open online store fronts on ecommerce marketplaces. criminals operate under fake names. and stolen identity. 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 safety standards or comply with quality controls.
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for example, drug traffickers are using social media and other e-commerce platforms to market their products. we've also seen a spike in professional shoplifters 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. put even our largest companies who can afford to have dedicated staff monitor online don't seem to be able to keep up. small businesses lack the necessary resources to pursue online counterfeiters.
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law enforcement is also overwhelmed. that is why i introduced s-1159, a bill that was 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 mortar and brick store. consumers have to rely on the accuracy of online listings. so if a product listing consists of misleading images or fake reviews, it is more likely that the consumer will be then tricked into purchasing a counterfeit or stolen goods. it is clear that voluntary efforts by big tech companies, while a very good first step,
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are not enough. online companies profit off of every sale on their platform, even if it is counterfeit or stolen. consumers need more accountability and transparency including whose operating online and selling these products. we should promote better screening, more transparent seller information and increase collaboration and data sharing. it is very essential that businesses and platforms work with law enforcement to identify criminals selling counterfeits and stolen goods online. congress should consider legislation for consumers from criminal enterprises operating online. none of the proposed solutions is a silver bullet. there needs to be a multi faceted approach to addressing
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the problem. online shoppers deserve to have confidence that they are getting exactly what they are paying for. and that their purchases are safe and authentic. thank you. >> thank you senator grassley the first witness is aaron muteric. he invented thinking putty. his company is known for developing unique production methods to employ individuals with special needs. he's a volunteer firefighter. received his b.s. from university of rochester. gary camel is the is assistant
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direct for education outreach and senior academic specialist at michigan university center for anti-counterfeiting and product protection. she also serves as an adjunct professor after law at michigan state college of law. intellectual property and trademark law. previously worked for de paul college of law. received her b.a. from university of chicago, her m.a. from american university in cairo. and j.d. from de paul. james snowden. association represents global internet on matters of public policy. mr. snowden was chief operating officer at ntca, internet and
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television --. also served in federal communications commission as chief of consumer and government affairs bureau from william mary. senator whitehouse. >> thank you very much. dvs health is a great growing and successful rhode island company shown leadership in many issues including refusing to sell tobacco products as part of its commitment to public health. online marketplaces have been an important part of every day life in the covid shut down but they present convenient avenues for organized theft and crime. mr. dougan is at the vanguard of investigating and combatting
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these crimes. for decades fought. he's a natural leader in retail loss prevention particularly e-commerce and even featured in the news media as one of the foremost experts in dismantling organized retail crime. he's a veteran of the united states army military police, serves as president of the national coalition of law enforcement and retail. and i'm delighted to have him here. i will say that as u.s. attorney and rhode island attorney general it was my privilege to work with many skilled rhode island investigators both in law enforcement and from the private sector. and mr. dougan continues our tradition of investigative excellence in rhode island. >> thank you senator whitehouse. with the witnesses please stand to be sworn in. please raise your right hand. do you affirm the testimony you
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are about give before the committee will be the truth, the whole truth and nothing but the truth so help you god? all answer in the affirmative. mr. muteric. >> aaron muteric. founder and president of crazy aarons a toy manufacturer in norristown, pennsylvania. thank you for the opportunity to testify today. chairman durbin, ranking member grassley. i applaud your commitment to protecting consumers. curbing the flow of counterfeit and unsafe goods is e-commerce is critically important to me as a toy manufacturer and a small business owner. i founded crazy aarons in 1998 with a mission to create toys that inspired a sense of wonder and creativity. i quickly realized i was going to have to build my own factory, so that is what i did. and today our headquarters is part of the revitalization of norristown. we employ over 100 people and
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for over 18 years we have provided meaningful daily work to hundreds of additional individuals with disabilities in the philadelphia area. while my business has seen successes since the days of experimenting in my parents basement, it has come with unanticipated challenges. i discovered a tidal wave of infringing products being sold online through third party sellers. we've spent significant time and resources policing these one by one. i've submitted a list to the committee. 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 the jurisdiction of the united states, our recourse to protect our intellectual property and reclaim damages is severely
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limited. and in many cases non existent. 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 requirement, illegal levels of regulated chemicals and mechanical hazards which cause acute physical harm. consumers visit online marketplaces assuming the products they see meet safety standards. so i created the world's first magnetic putty. it is a putty toy that crawls over to a magnet as if it was a live. and it was a tremendous commercial success and differentiated us from competitors. we invested significant r&d into making it a reality and into making it a safe product. as counterfeiters and knockoffs flooded the marketplace, magnetty putty sales began to decline. i scrambled but became
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increasingly concerned that almost every one of the competing products did not comply with safety standards. today 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 non compliance with mandatory federal standards. our company has done this testing at our own expense and communicated this non compliance 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 high strength hazardous magnets which are not legal in children's products. you will note the online packaging and listings including language like safe for children 3 plus. or safety tested. they include photos of children
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as young as toddlers playing with them. accidental ingestion of these hazardous magnets can cause serious injury 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, that the not only shatter into sharp shards but due to the nature of their material, they will spark and have the capacity to start a fire. if my words, demonstration or laboratory results ant enough you need only look at consumer reviews of the 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. i thank you for the opportunity to share the story of one product monk a sea of millions
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available online. i appreciate your efforts to secure consumers from counterfeit and unsafe goods. >> and we appreciate your testimony and the fact that your business philosophy is embracing people with disabilities. >> thank you. >> professor, dr. camel, you are next. >> chair durbin, ranking member grassley and members of the committee, thank you for inviting me today. my remarks draw on my research online trademark counterfeiting and work with industry professionals. i focus on research, education and outreach around counterfeiting and brand protection. we work with both intellectual property rights coners and governments as well as online marketplace, social media platforms and other industry experts across the field giving us the unique ability to examine the problem wholistically. today i'll give an over view and the current stay of the law.
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one i --. and two i recommend continued and expanded data sharing and research on the trade in counterfeit goods and counterfeit responses. i'd like to start by painting a picture what is occurring online marketplaces in the current state of the law. the sale of counterfeit goods online impacts national companies, companies of all size, small and medium sized enterprises and consumers is has exploded in the past decade and even more since covid-19. the financial impact of the sale is staggering. roughly over 460 billion dollars wort of global sales in 2019. counterfeiters find success by using another company or brand own ears trademark on a product or package without authorization to. they also take advantage of the opportunity online marketplaces to provide to reach often unsuspecting consumer who is cannot examine the goods before purchase. consumers struggle to be able to report suspected counterfeit or cannot find a third party
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seller. only marketplaces have varying levels of proactive efforts. must be a meeting in time and space of the consumer, counterfeiter posting and commerce platform. the most effective way to disrupt this is removing a factor from the situation proactively before they ever reach that meeting in time and space on the platform. in the brick and mortar space, the current state of law requires providers to take steps to disrupt the sale of counterfeits and consumers. however we don't find the same parallels in the law. the current state of law rests on the 2010 second circuit case of tiffany versus ebay. which recommends only need to act if they have specific knowledge of a posting from a --. -- monitoring other platforms for counterfeit even though they have the most control over the
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platforms they have created. thus where brand owners attempt to take down counterfeits but cannot get at the root of issue. a lack of transparency about third party sellers, details on vetting, taken, repeat sellers or any education awareness or reporting mechanisms for consumers. while informed -- growing urgency on this topic and take different approaches they both seek to require e-commerce platforms to proactively take measures. and provide multiple avenues for tackling this complex issue. in my opinion both pieces of legislation are essential to balance the space due to the shift from brick and mortar to the current online e-commerce space. and importantly to provide consumers with more education, protection and avenues which to report suspected counterfeit goods. i also recommend continued and expanded data sharing and research on the trade in counterfeit goods and
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anti-counterfeiting responses. thank you again for the opportunity to participate in this hearing on this very important issue. and i look forward to answering your questions. >> thank you. >> chairman durbin. ranking member grassley, members of the committee. thank you for the opportunity to appear 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. represent -- our mission is foster innovation, promote 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 things we want and need. not all marketplaces are the same. different item, sellers, audiences. and households across america, we use online marketplaces to
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get our grows for the week and goods and crafts all with the click or swipe on a screen. as we continue to live through the covid-19 pandemic online marketplaces and platforms have helped americans by delivering the essential goods and products consumers need to maintain their daily lives and keep our economy going. while 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, 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, state box retail. brands and right holders and online marketplaces to work
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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. and we continue to innovate and cooperate to ensure our marketplaces are safe and trusted by the consumers and sellers who use our stores. we are on the right path to addressing these issues. it is important to stress, internet companies do not permit illegal or counterfeit goods on their platforms. they have invested hundreds of millions of dollars in tools and deployed thousands of people members to implement clear policy. when they find something that violates their terms of service, they take it down. or in other cases never low it up. online platforms and marketplaces bet sellers up front through the direct skpin correct means. they use advanced tools like image detection and machine learning as well as reports from brand owners.
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-- monitoring for any issues. the partnership with brand owners and rights holders are critical because they are in the best position to identify counterfeit goods. last year amazon enrolled more than 500,000 brands in its free reporting tool. those brands reported 99% reduction in suspected infringement. and less than 0.01% of products sold on amazon received a counterfeit complaint from a customer. ebay works with 40,000 individual rights holders to identify property infringement and -- teams have led to 58% increase in intellectual property related take down. beyond these proactive efforts we support the chairman and committees goals of further minimizing the availability of
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counterfeit and other illegal goods online. international association encourages to consider two aspects that impact sellers, consumers and online marketplaces and platforms. first a national framework that clearly preempts a patch work of states or local laws that ensuren americans continue to receive a consistent internet experience nationwide, while states have an important law enforcement role in protecting consumers and stopping retail threat. federal law should be the sole source of companies that operate across state lines. second -- careful not to impose unnecessary burdens on small businesses. many online operations are small --. protecting privacy. recommend changes made in the -- informed consumers act and
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encouraged by the version recently introduced in the house. -- expectation about the type of information online platforms or marketplaces should collect about high volume sellers and consumers while recognizing burdens and risks to small businesses. the internet industry are partners in the fight to protect consumers and rights holders from the threats opposed by fake goods and bad actors. we hope today's haerlg are further discussion about clear, reasonable requirements within the national from, that can enable online marketplaces to continue providing convenient and safe opportunities to connect sellers and consumers. thank you, i i look forward to your questions. >> thank you very much mr. dougan. >> good morning, chairman durbin, ranking member grassley and members of the committee. my name is ben dougan and i'm director of organized retail crime and -- cvs health.
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reducing retail theft nationwide. opportunity to testify on the massive growth of retail crime and impact on consumers, and communities we service. i want to share first hand what i experienced over 30 years working on the problem. organized retail crime represents a massive and growing threat to the tune of 45 billion dollars a year. the internet is riddled with illegitimate sellers. these criminal organizations employ teams or crews of professional thieves that steal products by any means necessary and sell them through online marketplaces. unfortunately these means often include daytime retail theft, threat u intimidation, violence, horrifying stories that play out in our stores every day and which a lot of us see playing out in the media every day. there is one thing i want to
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leave you with today senators is that 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 and carefully planned 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 this national retail theft epidemic that we're in. and it is being all controlled by organized crime. it is fueled by increase in demand and facilitated by an unregulated online marketplaces. but perhaps the most disturbing is the direct physical harm these crime organizations cause retail employees every day. very recently, a cvs manager was assaulted and remains in serious
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condition. these incidents are not uncommon. reported violent events at cvs have doubled in the last year. to give it some scale, senators. there is an organized retail crime reported to -- from cvs store every three minutes. and two-thirds of those involve threat of violence, actual violence or a weapon. but there are far less obvious dangers to this crime, including infant formula. a favorite target of these criminal organizations. and the investigations that i've worked, these criminals disregard all of the safety protocols for products. they ignore or manipulate expiration dates and are not storing at proper temperatures. compromising the product integrity and endangering the health of an infant. just last week i received disturbing photographs of a surveillance my team had conducted with criminals
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retrieving stolen baby formula from the basement of an abandoned home, cleaning it up and repackaging it to appear as new for an online seller to sell to an unsuspecting consumer. these products go from the hands of criminals to the hands of families. our investigations involve illicit wholesale operations that include hundreds of professional thieves who steal up to a million dollars of product a month. just at cvs. -- specific instructions on what items and quantities the target and purposely direct them to stores in urban and suburban neighborhoods in virtually every state. these stolen products are repackaged, distributed and distributed to the largest online marketplace sellers. and then eventually on to unsuspecting customers. we're talking about dozens of professional thieves traveling to multiple states.
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20 or 30 retail stores per day. and stealing tens of thousands of dollars per store. -- over 75 million dollars in cases so far this year but the current law doesn't provide us or law enforcement with the tools we need to hold these people accountable. these criminal organizations are growing more sophisticated, more entrenched and the harm they do to consumers and businesses is only becoming more severe. we work closely with law enforcement to address this and educate consumers but we are running out of tools like senator grassley said his opening statement to keep up. we need urgent action from congress. the informed consumers act championed by the leadership of this committee and several of its members will make a meaningful difference for us. this bill will help protect consumers and aid law enforcement and it will prevent
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crime. making it harder for criminals to easily dispose of zolen goods to online marketplaces is the most significant step we can take to curtail retail theft and reduce the harm organized retail crime represents to our employees and customers. chairman durbin, ranking member grassley, i appreciate your leadership on the issue and commit to combatting organized retail crime. thank you for the opportunity and i welcome your questions. >> thank you mr. dougan. mr. muteric you had a cnn interview couple years ago and you said that one of your employees was spending 15-20 hours a week submitting forms asking amazon and other e-commerce sites to remove products with your company's trademarks. is that still going on? >> what's happened is the producers of these goods have realized that infringing our marks is more difficult for them. so they have changed to not
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infringe our marks but it doesn't change the fact that they do not comply with safety standards and flood the marketplace at severely discounted prices. the problem remains. we just no longer have standing to go to the marketplace through the brand owner protection mechanisms and say please take this down. >> so they aren't using your trademarks or identification. >> it is dropped off significantly because we were so aggressive. and they -- but they do use key words and other things we can't enforce to drive consumers to purchasing these types of items rather than the legitimate product. >> dr. camming when i heard you say i think the controlling law case on this subject requires that the marketplace have knowledge of deception or counterfeit status. is that true? >> that is correct. so they need to be notified often by the brand owner that, which is the notice and take down procedure there is a
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counterfeit posting before they are required by the law to take it down. many marketplaces of course still take down counterfeits. beyond this. but in order for them to be held liable, secondarily liable for trademark counterfeiting, that is the standard for it. so they only have to respond to specific knowledge of a counterfeit posting. >> mr. snowden, i guess the thing that's always mystified me is that these internet marketplaces which have grown in size and all of us use and i think it is pretty safe to say, if they were going 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. the side of consumer and customer satisfaction reports you will see consumers actually enjoy the online sponsor, for many the convenience but also they get good products. it is right in the sense that
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yes when we have knowledge of something we have to take it down. but we don't just wait for that. in to 2020 amazon took down over 10 billion bad listings. so this process is going on. online stores, we don't want this information on our marketplaces. it is not our goal. it hurts our reputation as online stores to have this type of activity on our stores. so we want to get it off as fast as we can and it takes us working with retailers, rights owners and law enforcement. >> well, i would say my observation, amazon is late to the party but we welcome them as guest. they have said recently we look forward to working with lawmakers to further strengthen the bill. the proposals they made over the years do not strengthen the bill. they strengthened amazon's hand in avoiding the bill. i for one am not going to stand by and watch this watered down any further. we need to move on this. we're going to test your
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statement that they are on our side. mr. dougan, i asked a competitors of yours in the state of illinois. so why do you have these plastic flaps with the keys necessary for underarm deodorant for goodness sakes? what is going on here. >> that is a direct result of organized retail crime and unfortunately it varies by product by demographic or city or suburban neighborhoods. so we have to lock up those type of products to prevent organized crime groups o from stealing them. >> since we have a minute left. so they swoop in with some container and drag everything off the shelf. where do they sell the products. >> online marketplaces is the number one place to dispose of products. they don't come in and steal one or two of these. they steal all the deodorant in
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the store to maximize profit. and unfortunately most of that product winds up in online marketplace. >> -- markets. >> flee markets are kind of a thing of the past mr. chairman, quite frankly. they still exist but most free market sellers also van online presence so they are not mutually exclusive. they do both. but flee markets don't play the role they used to because quite frankly the internet provides much larger customer base that they can sell products too. >> i'll just close by saying in 2019 u.s. customs and border protection reported 83% of ip based seizures and goods came from one country. and you can guess what it is. the equivalent of $1.4 billion. so we have retail theft at home being translated into the fencing of stolen goods and internet marketplaces and then we have the foreign suppliers of counterfeit goods such as mr. muteric has referred to that is
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another venue. there may be more but those are the two that have been identified so far. senator grassley? >> yeah. 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 unsafe or does not meet safety standards and communicate that to the marketplaces versus only having intellectual property protection as the channel to that marketplace. that would be a tool would be useful. >> transparency is very important. we have statistics about take downs and sellers but not necessarily how any of the sellers have counterfeit prior to the taken procedure or what is happening on the back end beyond those initial statistics.
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so 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 is something critical for this particular issue to understand who is doing what. and also reporting the crime, particularly small sellers, right now in your bill i think is two days. and i think it is important -- encouraging to consider that wales. . >> i would say transparency ranking member. transparency equals accountability. we got to first figure out who they are. we need that first before any other remedy. >> what collaborations or voluntary initiatives are crossed or within stakeholder groups have you participated in? have these been successful efforts? and are some marketplaces more
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cooperative than others? >> as a member of the toy association, we work with our members, many of whom are manufacturers. some retailers and online marketplaces are also members and have come to the table to have conversations. i have seen progress over the probably eight-year period that i've been involved in that conversation, specifically around intellectual property protection. but have not seen progress at the table regarding these unsafe products or products that don't meet safety standards is. >> mr. snowden. >> we have utah, illinois, arizona, california, ags are setting up organized crime task forces which brings in all the parties. retailers, us, rights holders. that is important because they are look at a holistic point of view which is the way we need to tackle this issue. this is organized crime. key thing about them, they are organized. so we have to get organized on
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our side as well. and that takes all of us. >> unfortunately there hasn't been a lot of progress in that regard. there are some online marketplaces that do cooperate. e guay is a good example on the investigative side. i will say none of online marketplaces currently have the transparency to the level we're looking for to prevent crime. and the attorney general task forces that are being stood up working very closely with that talk about increased penalties, tougher penalty, they talk about resources they want to add. they all say the same thing. thing we need to make this work is transparency from the online marketplaces, which right now we don't have. >> what do each of you believe has been the most successful strategy to counterillegal activity. >> i think efforts to
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communicate this even when we feel we're hitting a brick wall. i hope we'll breakthrough. >> notice and taken procedures 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 proactive nature of it. i would also add that it is important that what's been successful is being able to have the partnership with brands and rights holders. they know what's counterfeit. and they know what is illegal. so working that angle and having us work together i think has been the most success. >> what i've learned in my years investigating this crime that we can't -- we're not going to be able to arrest our way out of this problem. we do need proactive solutions to really stem the tide of this growth of organized retail
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crime. so proactive measures, but preventative measures have been the most effective and i think will be the most effective going forward. and i believe this bill does that. >> i'm just going to jump in because i don't believe you have identified the percentage the 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, mr. chairman, that it is pretty consistent across all retail, all types of retail. we're all seeing the crime effect us as a simpler level and it is higher than any other level it has been in history. i note there are some ceos that have made public statements about how that -- affecting their overall profitability. i think those are available to you. but we could possibly get back
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to you mr. chairman. >> senator klobuchar? >> thank you very much, senator, for your long time leadership on this issue, and all of you for your work. i want to focus on bipartisan legislation that senator grassley and durbin and others introduced with me. and that would prevent dominant digital platforms from engaging in behavior that unfairly harms competition. like, relevant here, knocking off products sold on their platform. our recent reports in places like the "wall street journal" have documented how amazon has created knockoff products based on the data they get from innocent companies that are selling on their platform. and it is it is the pig platform in town. and then engages in self references of their own brands above others. do you support legislation in making it illegal to use special
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access to online seller data to create copy cat versions of popular products? >> senator, this is an issue that i have members on both sides. so i am actually -- i have traditionally not taken a stance on the competition issues. and i will not. i don't plan to today. >> okay. lot of people and lot of sides here. but just to be clear. i get this. but at some point this kompb has to take a add anything, mr. dugan? >> no. i'm sorry, senator, but this is the first i heard of that. >> you were nodding your head so i thought you agreed with me. >> i was learning something, senator. you were teaching me something. thank you. >> well, it's true. mr. mordorach.
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>> thank you. a few months ago i was sent an amazon-based view of our product. i realized not only was it a knockoff but identical. somebody didn't homework. i think it speaks to an underlying problem we have here. >> you happen to be on this panel. we have people who have experienced this, as we know, from the reporting, and my view is we have to update our loss, which is part of the work that senator durbin and senator grassley have been doing. i'm also concerned about safety when consumers buy products online. just last week in the commerce committee, i questioned snap about the heart-wrenching stories of people in minnesota
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who died after taking drugs that were purchased on snap. in one case they didn't know it was linked to fentanyl. mr. dugan, what are some of the harm consumers can experience when they unknowingly purchase goods on line? >> there are a lot of harms. i would say there is virtually no product integrity online, so i would caution buying sensitive products online unless you know that they're safe. there is a formula, there are other cases that i've worked, unfortunately, millions of dollars in diabetic test strips and then sell them to people online. they expire, they get less effective. it's really a domino effect on the type of safety hazards that
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are out there when there is still product integrity. >> of course, the fentanyl example is an example of drugs that shouldn't be sold at all, duh, on a platform. snap has pledged to take these down and do what they can to get in the witness' words at the last hearing, drug dealers off their platform. but the truth is i continue to believe that when you have these new marketplaces, those people making tons of money, they have to be responsible at taking stuff down. when people are purchasing things online, do they have enough information to know if a product might be unsafe? >> no, they don't. often they're just looking at an image. oftentimes it's a brand of an image, whatever the seller decides to put on the site. one cannot tell what they're actually buying until they receive the product, even if it
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appears genuine at first glance. >> and whether it's counterfeit ppe or covid-19 vaccines on facebook, do you think they are doing enough to stop this conduct? what else could they be doing? >> there were a lot of initiatives around fake ppe and counterfeit covid-related products for sure, and i do applaud the marketplaces for looking at that. but across the board, we see counterfeits in almost every industry that we work with, almost every product line that's successful, so i believe more should be done proactively. >> very good. i really appreciate it. thank you, mr. chairman, for doing a lot of work on this and being a co-chair on this bill given what we're talking about today. thank you. >> thank you, senator klobuchar. senator lee.
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>> we've all seen that e-commerce revolutionized the way we live and the way we do business and give people opportunities they wouldn't otherwise have. there are some challenges, of course, that have attended this revolution in the socio and economic revolution that's occurred with it. as we seek to make the world a better place and the online experience to be better, we've got to be careful because any time we enact laws, those laws can have consequences. we want to make sure that any laws we enact and caudify don't make things worse, or don't create one problem while purporting to solve another. the legislation we're talking about today is something we've scrutinized fully. i do have some concerns with it.
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mr. -- i'd like to start with you. everyone wants to crack down on sales online, everyone in this room. i wonder how difficult some of the requirements might be for some companies, especially smaller online marketplaces. and 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 -- continuous annual certification of all sellers. the threshold definition of a
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high-volume seller is set fairly low. it's triggered once you pass the required sales of$5,000 annually. i imagine the combined sellers of your member companies can certainly be numbered in the many thousands, if not millions. am i on track there, roughly? >> in the millions. >> so we're talking about millions and millions of soaps. now, 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. and i definitely worry about smaller platforms that might not be able to do this.
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could the bill, assuming that i'm right, that some really large online marketplaces, for example, might be able to do this, but other companies wouldn't. would the bill end up helping a company like 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 using our online marketplaces is accurate. it can be someone, a mom who is working on handmade goods or something that she makes in her basement. then she would follow the verification process of doing it every three days. i think the house bill gives us a little more time. we don't want to have barriers that limit sellers from being able to get online and sell their goods. the good thing about online
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marketplaces is it opens the door for more sellers but also opens the door for more buyers to see your product. the 10-day threshold, i think, would be important and also raising the limit to 20,000. right now i think you said $5,000 or $7,000. if it's $5,000 over 200 failed, that's about $13 a week. that's not a lot of money. >> which goes to a concern i've got. i do worry about language that would mandate the public disclosure of the platforms' sellers names and contact information. this worries me for three independent reasons. number one, there are a lot of individuals, moms and dads out there who work from home, or at least partially from home who operate out of their homes. if they have to provide their name and address, that could
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provide some safety and security issues for them. some 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. and number three, the sheer regulatory burden associated with this could itself 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. the one i would applaud the chairman and members of the committee who have worked with us and others in the house side as well as the senate side to increase to allow consumers and sellers to be able to report their business information versus their personal information, because that is definitely a barrier.
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if i'm a single mom working creating products out of my basement, i don't want everyone to know what my home address is. i definitely would say we need to keep going down that path. >> thank you very much. thank you, mr. chairman. >> senator koons? >> thank you, senator durbin, senator grassley, for holding these hearings. we've been a meeting of the trade caucus for a long time and have held caucus meetings for over a decade about the risk counterfeit products impose to american consumers. this testimony today is riveting and challenging. it reminds us as the marketplace for goods online has grown and grown, and particularly strong during the 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've heard about unsafe goods whether they're cell phone batteries, bike helmets or spoiled baby formula or
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counterfeit drugs that have harmed americans. they also ruin the trust built between brand owners and consumers. pretty wise and capable aaron has demonstrated that to us today. i think we need to take stronger steps to address the online sale of these goods before they reach consumers' hands. there are some studies that suggest as much as a quarter of goods all americans have purchased online have unknowingly purchased a counterfeit good. that's why i'm with my co-leader on a safe harbor for contributing liability for infringement. it will keep counterfeit goods with a health and safety impact
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out of consumers' hands, and i think promote the health and safety of our country and continue to accelerate the growth of these innovative sales platforms. there is also an urgent need to provide transparency to consumers. that's why i'm also proud to support the informed consumers act. as mr. dugan pointed out, there is a great need for transparency. i think they increase transparency and accountability. i urge my colleagues to point to these important bills. let me ask some questions, if i could. mr. muderick, my daughter is a satisfied customer. really loves putty and slime and so forth and had commented on how inventive your products are, but i'm worried about how much time you've dedicated to it. how many other small business owners like you have had to dedicate enormous amount of
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resources to the whack-a-mole of take-down notice and take-down notice and take-down with online platforms? >> so pre-pandemic, owners sit and talk. i started my life doing something else and landed here. imitation is the finest form of flattery, and i think many of us are flattered. if we have a successful product you'll see these knockoffs, counterfeiters coming into the marketplace. >> and you described a 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 business owners if platforms took more proactive steps to counteract counterfeit sales? >> on the one hand the resources we need to spend getting someone
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to listen. it also would help our brand integrity. it would help consumer confidence, and we would probably receive more of the legitimate sales of the product than the sales that are not an a-listed product. >> mr. dugan, how would an informed content combat the sale of online counterfeit goods? >> it will omit the counterfeit in the first place. it will help identify the bad actors much quicker and will prevent further expansion. what's vital right now is that we're in the middle of an epidemic and that we take immediate action to slow this down. >> thank you, mr. dugan. mr. snowden, some platforms said they would like to see
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affirmative duty brand owners. why isn't that enough to assist them from releasing counterfeit goods, and what platforms would brand owners like to see in the bill? >> one of the things you're doing in the bill is changing the contributory liability. the liability is going to put the burden on us, not 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 of over ten years working directly with retailers to help identify suspicious products. this is something we want to do, but we need retailers, we need right voters to help us police their products as well. >> mr. chairman, i have one final question. professor kammel, tell us about the whack-a-mole of brand
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owners. i've heard it limits them from liability, that they already have an exchange from something meaningful. is that true, or is it true that online platforms are not broadly liable for trademark infringement. >> the first part of your question about the whack-a-mole approach, this is what's been described today. a counterfeit posting goes up, a brand owner tries to react to it, and they spend hours searching for these counterfeit postings across multiple platforms. an entire sub-industry has actually sprung up to monitor these platforms to the best of their ability, verify for the brand owners and submit for a take-down. hence the term whack-a-mole. once you take down one, another 10 or 20 come back in its place. the second part of your question, could you repeat? >> whether this is just a handout to big tech that immunizes them from liability?
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that's been one criticism from the house market. >> i don't believe that. i think it addresses what i've written about, which is law-disruptive technology. this technology has been wonderful for all of us. i'm sure everyone in this room uses e-commerce but there still has to be a balance to it. we're still reaching that tipping point where cases are being brought because people who are being injured cannot find the seller of the goods. so to flip that back to the second liability, it creates the space where e-commerce platforms do have to proactively do something to prevent the postings from ever coming up. brand owners still need to be involved to help identify what their trademarks are, but we find a more balanced medium with them. >> thank you, senator koons. on the floor, we started the first of three roll calls.
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>> thank you, mr. chairman. mr. muderick, i'm coming to you. i know sellers have used section 230 as a shield to protect them from liability. of course, we have copyrights that be infringed, we have things like gibson guitars that have been infringed, including books, music. when you talk about auto parts, the engines for boats and motorsports, things of that nature, what -- sometimes we've seen in these cases where online sellers really tried to hide behind section 230. do you see that specific part of the law as something that is a
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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've spent a significant amount of time researching, but 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 and then weigh back with us. mr. muderick, let me come to you. country of origin labeling. i've heard from so many people that sell online that they think this is a good thing. and also from people who bought online because specifically they don't want to be buying products from china. because many times they feel like they're an infringed or a knockoff, and certainly in tennessee with some of our toy inventors, we have had problems. i'm certain you've met with some of these guides.
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so 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, why it's a good thing. >> sure. when i was starting a business, i was making putty and selling it out of my home. and when the time came like i felt i needed some protection of privacy of my home, i got a p.o. box. but at least there is a way to trace it back, right? then eventually i got an office. there are ways to communicate to the customer a place to go, especially if there is a legal recourse, while maintaining personal privacy. in terms of country of origin labeling, it's required by law. it's important for consumers. when i look at these products, sometimes they have it, sometimes they don't. sometimes it will be in the online listing, sometimes it won't, and often it is in conflict with whatever the online listing says. it's absolute chaos.
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>> mr. snowden, i want to go back. senator klobuchar was asking you about protections, and i think you might want to explain. it sounded in your response that you do not support intellectual property protections for u.s. innovators and that's a protection to them under law. but when you said you have members that are for disclosure, members that are against disclosure, intellectual property protection is very important to this committee. >> and i 100% agree with you. it's important to us as well. what i was referring to with senator klobuchar, she was mentioning the self-prefacing part of her bill, and that was the part i said i would not make a comment on today. >> okay. so let's go to the country of origin labeling. where are your members on that? >> well, the country of origin is a challenge for us because
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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 all my marketplaces aren't just one company. i think someone said a moment ago this is about big tech. there are small tech online stores as well. when we try to track country of origin, a lot of that is protected by trade agreements, border patrol -- >> you think everyone in the online marketplace has a responsibility to know what they're selling and what they're bringing to the marketplace? >> what they're selling, yes -- >> do you agree with that? >> what they're selling, yes, but country of origin is difficult. >> mr. dugan, do you want to weigh in on that? >> we have plenty of home-grown thieves and crime organizations to deal with. transnational retail crime is
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part of this, but not a major factor as far as we can see right now. >> okay. my time is expired. ms. kammel, i'm going to come back to you on a written answer for the laws of 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 online place that consumers can feel and be certain that they know they're not getting fraudulent, counterfeited products. thank you. >> thank you, mrs. blackburn. i will preside while senator durbin is voting and recognize myself. as chair of commerce on
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protection, i've been focused on the role of consumer product safety commission and our consumer product safety laws, particularly in the struggle to get online marketplaces to take seriously their responsibility to recall people, 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 this 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-in-place sleepers that have been linked to 32 infant deaths.
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they have been laggard, slow, inconsistent in taking on responsibilities that other sellers and retailers observe, and i am considering reforms being made and we need to make sure products are covered by the safety and recall laws. let me ask the witnesses, all of you, what role you think that there are laws that are enforced, and we have a lot of
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new laws that are unenforced. dangerous? yes. we need to focus on enforcement and give the spc and the psp the tools that they need to ensure that the law is not dead. let me go down the panel. >> thank you. our conversations with cpsc and shared my information about the products we have and the infringers we see. i think the cpsc does an effective job at looking at the ports and bulk shipments coming into the united states, but i think they're very challenged as the postal service with the single parcels that come into the united states. they're small envelopes and it's hard for them to conduct a strategy to keep them from entering consumers' hands. it's sort of outside the scope of my knowledge of what we might do about it, but to me that's where i see a major problem.
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>> ms. kammel? >> the areas we researched was overlap with any product safety issues, so i think it's important for platforms or anyone who is in the business of providing the space for consumers to purchase product that whatever laws are in place, they uphold, whether they're brick and mortar or whether they are an online space. >> senator, i think this is something i would like to come and talk to you about more, but i will share that when we are notified of recalls or made aware of recalls, we do pull the product down in most cases when we can, and also we try to inform the consumer. in some cases when you try to inform the consumer, the product may have been bought three or four years ago and the e-mail address for a particular consumer we may not have or we may not be able to contact them. but that is something we're working on and we take it very
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seriously. >> i apologize, senator, that's beyond my role at cvs health. i'm not familiar with some of the laws you mentioned earlier, but i imagine we would be in support of any laws that help protect the consumer. >> thank you. let me ask one more question. you know, one of the obstacles to effective accountability currently is section 230 which, in effect, creates broad immunity for the platform. let me ask you, ms. kammel, whether you're familiar with the impediments of section 230 to affect accountability to consumers on the part of the platforms. i'm an advocate of performing section 230. we managed in certain discreet areas to do it. we are proposing additional measures.
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senator graham and i have a proposal which we introduced in past congress which is called the earnest act passed by the committee, just an example of what we can do for greater accountability if we pass section 230. >> thank you. i'm very aware of 230. it's not part of my current research but i would be happy to provide you with some follow-up afterwards. >> thank you. anyone else who has anything on section 230, i would welcome it. senator hawley? >> thank you to all the witnesses who are here. mr. dugan, i noticed something in your testimony that i thought was interesting. you said most of the problem of counterfeit goods online is due to problems online at brick and mortar stores and that people shoplift from those stores and turn around and sell the goods line, is that right?
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>> i don't think i commented on counterfeit goods. maybe stolen goods? >> yes, i'm sorry. there are goods online that are stolen, they steal them from brick and mortar stores and turn around and sell them online. do i got that right? >> yes. >> you were quoted, i think, as saying our security officers are assaulted on a pretty regular basis in san francisco and that san francisco is one of the epicenters of organized retail crime. have i got that right? >> yes, you do. >> can you say more about that, because i think this is something that has not been widely reported and it's not widely understood, the part of the problem that we're seeing in counterfeit or, in this case, stolen goods online. we have a deluge of these goods that are linked also, it turns out, to the crime wave we're seeing across the country. maybe say some more about that. >> thank you for that question, senator. i will start out by saying this is not a big city crime, that this occurs in all 50 states. thefts of organized retail crime
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occur just as much in low-crime suburban neighborhoods as they do in many of america's cities. i know that's probably news to a lot of folks but it's not covered by the media as it is in some of our major cities. what i meant to say is we were talking about san francisco specifically. there is a lot of stolen product there that gets filtered to other states, specifically texas, north carolina and new jersey. they take a lot of that stolen product from san francisco, so the point i was trying to make was even though the product is stolen in one area, the problem is statewide. >> in other words, it can be stolen from one place, san francisco, new york, st. louis, wherever, but then it finds its way online, so it shows up in online marketplaces in some context and it's competing with legitimate goods with goods that are entirely legal online, and you've got competition that's making its way to the marketplaces that's due to organized crime at the brick and
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mortar level. is that fair to say? >> it's fair, but i would say it's unfair competition. they're getting the products for much, much cheaper, but that's what our team does. we track these investigations state to state all across the country and 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? >> i think the swift passage of the act is a vital first step. >> thank you for that. i want to turn to the amazon self-preferencing question here for a moment. mr. muderick, i think you testified to senator klobuchar earlier that your product in particular, that amazon for a while had an amazon basics knockoff of your product. do i have that right? >> that's correct. >> it's now been taken down? >> it was taken down only because it accidentally infringed on some of our registered trademark.
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>> i want to highlight this problem because i think it's central. last year it was reported that amazon gives detailed information so they can copycat the product. it was said it was standard procedure. amazon denied that. they said they had procedures in place examining the practice. has that been your experience? >> i have no knowledge of how amazon looks at their products, but there was another strikingly unique product to one we had on amazon. >> and it was said that amazon encouraged people to break those procedures, and amazon's own internal documents reveal they're still doing the same thing. the market has reported evidence that amazon is systematically
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reducing its search engine for products. we can talk all day about the products of counterfeit goods, and that's significant, but that's not going to make a huge dent unless we do something about the self-preferencing on these platforms. i joined legislation by senator klobuchar and senator grassley that heads in the same direction, and i just want to under line that i think it's absolutely vital that we tackle this issue. last thing, mr. muderick, in my few remaining seconds here, senator blackburn was asking about some of the country of origin issues, and i want to highlight this. your product -- tell us about the problem of counterfeiters using high-strength magnets in some of the knockoffs of your product. and i think some of these were not made in the united states of america, is that right? >> that's correct, these samples i got last week were not made in the united states. this one says made in china,
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this one says nothing at all. and they do contain these high-strength magnets which cause significant hazard to children when they're playing with this product. >> absolutely, and i just want to underline that we're talking a lot about hazard issues which is important when we're talking about supply chain, but their counterfeits, they're made abroad, parents don't have any way of knowing this, very difficult to find out. they're not only endangering children, they're also taking jobs away from you and your company that are made here in this country and they're putting children at risk as well as their own economy. we need to find a way to push back against this simultaneous problem of counterfeiting, of misrepresentation of goods, and also, frankly, offshoring. thank you for bringing that to our attention. mr. chairman? >> thank you, senator hawley.
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senator rowan. >> thank you, mr. chairman. did you mention that the formatting should be changed as soon as possible? the manufacture of this product needs to have a date until after the point of sale. do you support that change? >> i used to work with them here in the senate. i'm not a legislator. i think i'll leave that to the legislators, if i could. >> shouldn't they get information to the customer before the consumer purchases the goods? >> i support that, yes. >> since mr. dugan supports it, do you also support it? >> we want to work with the committee to fine-tune some things in the bill, particularly
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timelines and thresholds, which are very important. >> it sounds as though you support the concept of disclosure information? >> correct. >> 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. i'm wondering whether -- where the online platform receives money for advertising the products, whether they should be exposed to liability. what do you think? any of you.
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>> i'm not sure if i fully understand your question. >> right now it supports the online marketplace, google and amazon. let's just use amazon, that whatever the content, they have no responsibility for monitoring or doing anything, proposing anything. so there is -- i am co-sponsor of -- what is it, the safe tech 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 received money for that item to be advertised on their platform. >> section 230 allows us to actually take down the content, that's why it's so vital that we have that liability protection. so anything that would harm or dilute that protection would be a concern of ours. >> well, except that if the
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platform does not take down the ads, as in the case of mr. muderick, wouldn't there be liability attaching? right now there is nothing on these platforms to take those precautions. if they want to, they can, but if they don't, don't they have liability protection? >> there is a law that says if we are notified of such, we have to take it down, so we do that. mr. muderick, i don't know all his examples, this is the first time i'm hearing about it so i can't comment on what he's saying, but there is a law that says if we're notified of something, we must take it down. >> that's surprising because this committee has had other hearings where video, for example, is very harmful. the platform is asked to take down a video, for example, a
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father whose daughter was shot online, 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 if it's requested, you have to take something down. >> what mr. muderick said, there were products infringing on his trademarks. once we're notified of that, there is a law there that says we have to take it down. >> if i may -- >> yes. >> on a monthly basis we would send in lists of products which did not infringe our marks but were in violation of several safety standards, and on a monthly basis we would follow up with the same list of not only the same products but even in many cases the same exact listing that had not been it taken down. >> i'm among members of this committee who are looking at the section 230 immunity provisions to make some changes.
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i realize 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 that and 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. over the last several years, we've seen repeated efforts in democrat-controlled cities and states to effectively decriminalize theft. california, for example, said 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 that both cvs and walgreen's say
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shoplifting in san francisco outpaces thefts at their stores across the country. makes common sense. if you remove or greatly reduce the penalty for stealing things, theft gets worse. what exactly are the figures for non-employee theft in cvs stores around the country, and in particular, have the rates of theft differed in jurisdictions with so-called progressive prosecutors who decline to prosecute shoplifting versus jurisdictions where law enforcement is enforcing laws against theft? >> thanks for that question, senator. unfortunately, i'm not going to be able to disclose cvs financial information about loss, but if you'll allow me to comment, this is not a big city problem, right? criminalization is contributing to the problem, you're right, sir. >> is there more theft in san francisco than elsewhere? >> no, sir. >> there's not? >> relative to the amount of stores and market share that we
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have, it's higher, but -- >> 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 had no effect. >> i never said it had no effect. >> you said there was not more shoplifting in san francisco. >> that doesn't have an effect, sir. >> does have an effect or not? >> of course it does. the fact that shoplifting is different from retail crime. if you're talking about shoplifting, it's different than retail crime. >> what's the effect? you guys have the data. >> i'm not sure i understand your question, senator. do we take offense to
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shoplifting? >> and are there position to see legalize shoplifting? your answer is not making sense, sir. zy. >> i respectfully disagree. >> so why would you oppose every jurisdiction legalizing shoplifting? >> why are we not going to oppose shoplifting? >> we're not going to do that. 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 is organized retail crime. >> that's really quite remarkable. let me ask a different question. you go into great detail about
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organized criminal organizations, but i want to point you to something in ms. kammel's testimony where she cites the work of employee theft. it has an interesting paragraph on the second page which is relevant to this discussion. it says, quote, 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 costs victimized businesses in the u.s. economy as much as$400 million a year. moreover, employee theft costs businesses more than non-employee theft within the same businesses. in your experience, what is the relative magnitude of employee theft versus non-employee theft for retailers? >> my scope at cvs is to
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investigate the external part of the theft. i don't have the internal figures necessarily at cvs. i will say overall as the president of coalition and retail, that number is down. i can certainly provide you a report with those figures, senator, if you'd like me to. >> do you have any assessment which is bigger, employee theft or non-employee theft? >> i'm in the area every day watching retail crime. i see it happening every day. >> sir, with all due respect, i'd like an answer to my question. do you have an opinion which is bigger, employee theft or non-employee theft? i'm hearing it's ten times larger. >> i wouldn't agree with that. >> do you have an opinion which is bigger? >> i would say non-employee theft.
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>> thank you. >> 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 on the senate judiciary committee. we have jurisdiction issues which suggests that the senate commerce committee has jurisdiction over this issue. we have jurisdiction over senator koons' aspects of it. that's for us to worry about, but the problem is real and we now have all major players on board, apparently, toward doing something about it. i'm going to do my best to go through this committee to encourage the commerce committee to join with us in this effort. 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 senator standards, but by normal human standards. thank you for joining us today.
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with that the committee stands adjourned.
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