A sticking point in Chinese competition law: What to do about counterfeit products?

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Both the House and Senate get back to work in Washington next week, and one item on their to-do list is the completion of a bipartisan innovation and competition package.

The Senate passed its version of such legislation last June (the US Innovation and Competition Act), then the House of Representatives passed its version in February (the America COMPETES Act), and negotiators must now reconcile them.

This legislation is expected to provide more than $50 billion in subsidies to chipmakers SMH,
-0.71%

SOXX,
-0.81%,
along with billions more for other industries to expand US manufacturing capacity and compete with China.

Other regulations could target the sale of counterfeit goods on online marketplaces, but there are competing approaches and a lobbying battle over it.

The US Senate Innovation and Competition Act includes a bill known as the INFORM Consumers Act that would require e-commerce sites to verify and disclose information about their top-selling third-party providers. Proponents say it would prevent anonymous sellers from selling counterfeit products online.

The House of Representatives America COMPETES Act, on the other hand, includes both the INFORM Consumers Act and the SHOP SAFE Act – which would make online platforms liable if a third party sold a harmful counterfeit product and that platform failed to follow certain best practices.

The INFORM Consumers Act has a 75% or 80% chance of being included in a final competition law, while the tougher SHOP SAFE Act has only a 25% chance, estimates Owen Tedford, senior research analyst at Beacon Policy Advisors.

There is “a lot of resistance in the industry” against SHOP SAFE, Tedford told MarketWatch in an interview. “There’s also resistance to it among tech-friendly Democrats and Republicans, so it really does have a smaller support base, and I’m not sure I’m seeing that dynamic change.”

Lobby group TechNet sent a letter to leading lawmakers on April 7 calling for the INFORM Consumers Act but not SHOP SAFE to be included in the competition package, saying the latter measure’s “strict disclosure requirements would provide sellers with an unprecedented level of compliance.” burden that would be challenging, if not impossible, to meet except for companies with significant resources.”

“Small businesses and individual sellers would be forced to leave online marketplaces and abandon their customers in the face of these disclosure requirements, compliance costs and uncertainties. Shifting the balance of online marketplaces in favor of large retailers is at odds with the goal of improving competitiveness,” reads the letter from TechNet, whose membership includes Amazon AMZN.
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ebay ebay,
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etsy,
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and metaplatforms FB,
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Facebook Marketplace is one of its business areas. TechNet declined an interview request from MarketWatch.

The manufacturers, for their part, urged the inclusion of INFORM Consumers and SHOP SAFE in a letter dated April 13 to the top legislators.

“The SHOP SAFE Act would make e-commerce platforms liable for counterfeit products sold on their platforms – just like their brick-and-mortar counterparts – unless they take a number of reasonable preventive measures,” the letter reads from more than 100 organizations including the National Association of Manufacturers, Honda’s HMC,
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North American business, Bayer BAYN,
-0.15%,
Lilly LLY,
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Mattel MAT,
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and Philip Morris International PM,
-1.48%.

A representative of the National Association of Manufacturers said in an interview that there are commercial and consumer arguments for SHOP SAFE.

“Counterfeit products harm American consumers, support criminal activity and hurt manufacturers, and that’s not just a talking point — the data actually supports it,” said Chris Netram, NAM’s managing vice president of Tax and Domestic Economic Policy. Selling counterfeit goods cost the US economy about $131 billion and more than 325,000 jobs in 2019, and then selling counterfeit testing kits and PPE during the COVID-19 pandemic has “really put people’s lives at risk.” , he said.

When asked about TechNet’s concerns, Netram said SHOP SAFE has gone through a “robust legislative process” and incorporated input from a range of stakeholders, so it’s “really trying to strike a proper balance” rather than taking a “draconian approach.” pursue.

Overall, at least 40 organizations have disclosed lobbying lawmakers on the SHOP SAFE Act in 2021, according to data collected by OpenSecrets.org. Disclosures filed Wednesday show the measure remained a focus for lobbyists in the first quarter of this year, with Amazon and eBay among organizations reporting it was a problem for their Washington, DC teams

At least 67 groups have campaigned for the INFORM Consumers Act over the past year, and Facebook parent Meta and Etsy were among those revealing on Wednesday that they are focusing on it in the first quarter of 2022.

Biden reiterated his call for Congress to put comprehensive innovation and competition legislation on his desk last week when he delivered a speech on US manufacturing in Greensboro, NC

“Congress, put this bipartisan bill on my desk. North Carolina needs it. America needs it,” said the president, who has dubbed the legislation the Bipartisan Innovation Act.

Beacon’s Tedford predicts Congress could pass the package before Memorial Day or possibly by Independence Day.

“I’d be surprised if I was in slips by the fall. I would say before the August break at the latest,” said the analyst.

This report was first published on April 21, 2022.

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