Counterfeits—fake goods that infringe on the intellectual property of legitimate businesses—harm consumers, businesses, and the economy. Addressing the proliferation of counterfeits in online marketplaces will require better collaboration between stakeholders in government and industry. To foster these efforts, U.S. policymakers should amend existing laws and regulations that limit stakeholders from sharing data and establish a data sharing partnership to use advanced analytics to disrupt counterfeiting networks. If successful, these efforts could substantially reduce counterfeit imports, creating an additional 15,000 to 20,000 manufacturing jobs in America.
Counterfeits threaten the health and safety of U.S. consumers, lower public confidence in businesses and markets, harm U.S. innovation and economic growth, and unfairly prop up Chinese economic growth. When counterfeiters, most of whom are located in China, fraudulently misrepresent themselves as the manufacturers of products and as brand sellers, the legitimate manufacturers suffer financial and reputational losses—including job losses—while consumers are harmed by being sold knockoffs they believe to be reliable and legitimate products.
While brand sellers, online marketplaces, and law enforcement agencies all share an interest in stopping counterfeits, their efforts to detect and prevent their sale remain siloed and uncoordinated. Counterfeiters are strategic, adaptive, and opportunistic—and often evade these countermeasures.
The need for a coordinated approach to counterfeiting has become more urgent as the number of Americans shopping online continues to grow. The U.S. Government Accountability Office (GAO) recently found that “the growth in e-commerce has contributed to a shift in the sale of counterfeit goods in the United States, with consumers increasingly purchasing goods online and counterfeiters producing a wider variety of goods that may be sold on websites alongside authentic products.” Similarly, a 2020 report by the Office of the U.S. Trade Representative observes that “the rapid growth of e-commerce platforms has helped fuel the growth of counterfeit and pirated goods into a half trillion-dollar industry. This illicit trade has an enormous impact on the American economy by eroding the competitiveness of American workers, manufacturers, and innovators.” In addition, this illicit trade has an enormous positive impact on the Chinese economy, both by eroding the competitiveness of their U.S. competitors, and by providing revenue to a wide array of Chinese companies.
This proliferation of counterfeits has accelerated during the COVID-19 pandemic. As they practice social-distancing, consumers are shifting to e-commerce platforms to purchase essentials such as food, medicines, and personal protective equipment as well as non-essentials like cosmetics, household products, and children's toys. Counterfeiters see this shift in shopping habits as a growth opportunity and are taking advantage of e-commerce platforms to distribute fake products to American consumers.
To better address this vulnerability, the Customs and Border Protection Agency (CBP) at the Department of Homeland Security (DHS) should help establish a public-private partnership to share information across brand sellers, online marketplaces, and U.S. enforcement agencies—and foster data-driven strategies to both reduce the spread of fake goods and disable counterfeit networks.
Congress should direct CBP to use its authority in the 2015 Trade Facilitation and Trade Enforcement Act (TFTEA) to establish such a partnership through the National Intellectual Property Rights Coordination Center (IPR Center). A well-crafted data-sharing partnership could staunch the harm from counterfeiting and exploit advances in data analytics and artificial intelligence (AI) to identify and respond to the strategies and tactics of counterfeiters. Congress should also promote the needed coordination among brand sellers, online marketplaces, and enforcement agencies by removing legal impediments to cooperation concerning the creation of common standards for data collection and analysis.
If these efforts could cut counterfeit goods imports by 50 percent, it would create an additional 15,000 to 20,000 manufacturing jobs in America, while at the same time reduce the trade deficit. In this regard, expanding funding for federal agencies to fight counterfeit imports could very well be a cost-efficient strategy while offering a World Trade Organization (WTO)-legal way to defend against Chinese mercantilist practices.