Putting Amazon on USTR’s “Hit List”

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Getting recognized by the US Trade Representative’s Office (USTR) in its annual “Notorious Markets” piracy and counterfeiting report is not the sort of recognition that most companies seek. USTR’s hit list, one might even say *hit list, is best avoided. When you consider that among the entities on the list is The Pirate Bay, Alibaba’s ecommerce platform Taobao, dodgy websites such as Phimmoi (Vietnam), FMovies (Ukraine), MP3Juices, Rapidgator, and Sci-Hub (all based in Russia) and a number of others that you have probably never heard of hosted in countries from the Netherlands to Bulgaria to Bosnia, you can understand why Amazon was not thrilled to be included. Of course, it wasn’t Amazon.com (the US company) that was listed but rather Amazon’s sites in Canada, France, Germany, India and the UK. USTR is mandated only to report on IP infringing markets and online sites abroad, not stateside, so Amazon the parent company could not be listed–but putting five of its national sites on the Notorious Markets list cuts pretty close to home. In fact, I believe it is unprecedented for a US company to be listed, even via the ruse of using its offshore businesses as a target. What gives? 

First it is probably appropriate to give a bit of background about USTR’s Notorious Markets report, for those who don’t make reading government documents a normal part of their day. The Notorious Markets report is an adjunct to USTR’s annual “Special 301” report mandated by Section 301 of the US Trade Act of 1974. Actually, the preparation of Special 301 reports dates back only to the late 1980s when the US Congress amended the Act to include a report on the intellectual property practices and IP enforcement of US trade partners.  It has become an annual exercise to construct a list of countries that fail to protect intellectual property according to US standards or which deny “fair and equitable market access for U.S. firms that rely on intellectual property”. At first the list was used to threaten trade sanctions; later it became more of a “name and shame” exercise. 

The listing of Notorious Markets was first made part of the Special 301 report in 2006; from 2011 it has been published separately. Unlike the Special 301 report, it does not name countries but rather calls out specific marketplaces, both physical and online. Despite being an official US government document, USTR is quick to put in disclaimers, stating that the Notorious Market report “does not make findings of legal violations nor does it reflect the U.S. Government’s analysis of the general IP protection and enforcement climate in the countries connected with the listed markets.” This year most of the named markets are in Asia or Latin America, but in past years they have been closer to the US such as the Pacific Mall in the Toronto suburb of Markham, about which I wrote a year or so ago (here.) 

From a corporate perspective, the Amazon online sites in Canada, France, Germany, the UK and India are not so far away from the US either. In this age of COVID and self-isolation, ecommerce platforms like Amazon have come into their own as truly essential services. Judging by the volume of product that its fulfillment centres are shipping, Amazon must be keeping a lot of consumers happy by shipping them the “real stuff”. However, the problem lies not with the products that Amazon distributes directly from its warehouses, but with the third party sellers on its website, a certain number of which flog pirated and counterfeited product to unwary consumers, using the imprimatur of being “on Amazon” to gain credibility. These “third-party sellers” now constitute more than half of Amazon’s sales. 

While Amazon is a boon to small retailers who otherwise would have difficulty in reaching consumers online, the extensive presence of third party sellers exposes Amazon to accusations of tolerating—even turning a deliberate blind eye to–the sale of pirated and counterfeited goods, among other undesirable products. This has been a problem for some time. Some brand owners and organizations have gone so far as accusing Amazon of being “knowingly complicit” in the sale of counterfeits through the service. Back in 2018, the American Apparel and Footwear Association petitioned to get Amazon put on the Notorious Markets list because of the extensive presence of fake goods on the site. 

Amazon has responded that it has a policy against sale of pirated and counterfeit goods, that it takes its responsibilities to keep them off the site seriously (using algorithms and a brand registration service) but at the end of the day its position is that it is not responsible for what third party sellers do. Apart from the liability shield of Section 230 (used to evade responsibility in non-IP cases), another Amazon defence is that goods for sale on its sites displaying false trademarks may not technically be illegal if the US trademark is not registered in the country where the goods are being offered. In one notorious case, a Chinese company sold Kodi boxes (to enable illegal content streaming) on Amazon with fake FCC (Federal Communications Commission) logos, implying authenticity and conformity with tech standards. 

Part of the problem is that because Amazon has such amazing reach, it attracts miscreants of all kinds (as well as tens of thousands of legitimate retailers of course). That would suggest that with large market power comes large responsibility, but a lot seems to slip through Amazon’s automated and human checks. It is not just copyright infringing products that are problematic. The non-profit website The Markup reported on the ease with which they were able to find products banned by Amazon on the site with little difficulty, like pill presses for making opioids and parts for automatic weapons. Fraudsters and criminals can easily trick the system, as The Markup demonstrated;

“Last month, we successfully listed two banned items for sale: an AR-15 10-round magazine and an AR-15 armorer’s wrench. We removed them within minutes of confirming they had posted. We were able to evade detection by Amazon’s automated filters by purchasing a universal product code for the magazine and by both avoiding specific keywords and miscategorizing the items…The listings went up even though we had no seller history and had already twice been prohibited from listing the same items using more precise descriptions.”

According to people who have worked at Amazon, the automated systems and algorithms used by the company tend to look back at past bad behaviour to weed out products that should not be listed, but human ingenuity (unfortunately) can usually stay a step ahead of AI systems, especially when there are illicit profits to be gained. Clearly Amazon has a problem, whether it is with products that infringe IP or other products that violate the company’s own standards. 

This year’s Notorious Markets report (which deals only with IP infringing goods) notes that USTR did not request submissions on U.S. based ecommerce platforms and online third-party marketplaces, such as Amazon.com, but commented that the Administration has been looking further at their role following last year’s Presidential Memorandum addressing trafficking in counterfeit and pirated goods.  With respect to Amazon’s foreign domains, this excerpt gives a good indication of the nature of the problem according to USTR; 

“…right holders expressed concern that the seller information displayed by Amazon is often misleading such that it is difficult for consumers and right holders alike to determine who is selling the goods and that anyone can become a seller on Amazon with too much ease because Amazon does not sufficiently vet sellers on its platforms. They also commented that Amazon’s counterfeit removal processes can be lengthy and burdensome, even for right holders that enroll in Amazon’s brand protection programs. In addition, as the scale and sophistication of the counterfeiters have continued to grow and evolve over the years, these right holders indicate that Amazon should commit the resources necessary to make their brand protection programs scalable, transparent, and most importantly, effective. More specifically, they ask that Amazon take additional actions to address their concerns, including by collecting sufficient information from sellers to prevent repeat infringers from creating multiple storefronts on the platforms, making detailed information about the real seller of a product obvious to consumers and right holders, being more responsive to complaints of counterfeits by right holders, and being more proactive in preventing counterfeit goods from appearing on the platform.”

The report outlines a series of best practices that should be followed by ecommerce platforms to address such problems. 

Is Amazon that big a problem? Given its scale, anything that happens on Amazon has enormous impact. Amazon has implemented a number of policies to combat the presence of fake or pirated goods on its site and is a member of the Alliance for Creativity and Entertainment (ACE), a grouping of 30 plus companies from around the world, including the major Hollywood studios, that have come together to fight online piracy, but many would argue it is not doing enough. 

Recently Amazon-owned site Twitch, which styles itself as “the world’s leading live streaming platform for gamers” has come under fire for allowing use of copyright infringing music in streams put up by gamers, even though its music guidelines specifically require that the music be owned or licenced by the streamer. As the site has become more popular, the music industry has started to take notice and recently began issuing takedown notices for clips that in some instances had been up for a couple of years or more. Under US legislation, Amazon is not liable for copyright infringing material posted on Twitch, but it is required to take it down when notified by rights-holders. The music industry would like Amazon to licence music for use by Twitch creators. 

In the background to the USTR listing of Amazon’s foreign sites is the ongoing open “warfare” between Amazon CEO Jeff Bezos, reputedly the world’s richest man, and Donald Trump which has touched on many issues including Bezos’ control of one of Trump’s nemeses, the Washington Post. Indeed, an Amazon spokesperson claimed that “This purely political act (the USTR listing) is another example of the administration using the U.S. government to advance a personal vendetta against Amazon.”

Maybe. Or maybe Amazon could be more pro-active in searching out and delisting third-party sellers who pass off infringing or counterfeit goods (and list other undesirable products), and who confuse consumers by hiding in plain sight on Amazon’s site. The company is so big, and has so many resources, that it has no need to attract consumers with an offer of substandard products, and has the wherewithal to ensure that its listings are properly and thoroughly vetted. It just requires the will to do so. To depend on rights-holders and brand owners to police the Amazon site, especially in cases where pirated or non-genuine products are clearly on offer, is to hide behind legalities, a position not becoming of a company like Amazon. 

Perhaps next year, Amazon’s foreign sites will be off the USTR hit list, or perhaps USTR will do something that has never been done in a Notorious Markets report—directly list a US company. Will there be political factors involved? By next year, it may, or may not be, the “Trump Administration” that we are talking about and if there is a new Administration after November 3, and if Amazon is off the 2021 list, will it be because they upped their game in tackling infringing content and products on the Amazon.com and related sites, or will it be because the Administration changed? There are so many elements to this puzzle that it is impossible to separate out the various factors involved, or to predict what will happen. 

One thing is certain. Amazon will still be around, bigger and likely more essential than ever. 

© Hugh Stephens 2020. All Rights Reserved. 

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