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SHOP SAFE threatens to upend America’s competitive edge

Last summer, the Senate passed the United States Innovation and Competition Act. This January, the House caught up in passing its own version, the America COMPETES Act. The current finished products don’t live up to their names. The House and Senate are headed into conference to hammer out a final version, and there remains a great deal of work to be done.

From its title, the America COMPETES Act of 2022, sponsored by Rep. Eddie Bernice Johnson, seems like a bill focused on making the United States more globally competitive. It’s a mammoth piece of legislation— over 2,000 pages long on every policy topic from telecommunications to manufacturing. Many of the attached provisions would directly undermine the bill’s stated goals. And tucked within the dark recesses of COMPETES is a provision that will crumble the competitiveness of American small e-commerce sellers.

At the last minute before its introduction in the House, the SHOP SAFE Act, an ill-advised piece of legislation on counterfeit goods that had failed to obtain enough support to move through Congress, snuck its way into the America COMPETES Act. SHOP SAFE narrowly focuses on how counterfeit goods are sold online only to hold law-abiding businesses and small sellers primarily responsible for that problem. It does not increase resources for law enforcement or other anti-counterfeit measures that would help actively mitigate the problem.  Rather, SHOP SAFE places new, onerous requirements on e-commerce sellers that will disproportionately hit small online marketplaces, retailers, and individuals. 

Right now, platforms proactively use a combination of software, AI, and human investigation to prevent counterfeits from appearing on their sites. When platforms are aware or become aware of counterfeit, illegal, or defective goods being sold on their marketplaces, they take steps to remove those listings. Tremendous resources are invested in procedures to combat bad actors, help customers who have been scammed, and maintain relationships with law enforcement and rights holders. 

Unfortunately, the SHOP SAFE Act, and its inclusion in the COMPETES Act, would upend this entire process and place the onus on small businesses. 

The bill would require sellers to verify the authenticity of the goods they are selling (even used or vintage clothing!) and hand over personal information to the marketplace including their contact information and home address.  If individual sellers aren’t able or are not comfortable overcoming these new federal mandates, they could be forced out of the marketplace or worse, decide not to engage at all. 

That means in practice, the SHOP SAFE Act could unintentionally drive many small online marketplaces like Etsy, Ebay, or OfferUp, out of business and take away the livelihood of millions of Americans who use those marketplaces to provide for their families. 

Our lawmakers noted the bill’s fundamental issues as SHOP SAFE passed through committee as its own stand-alone piece of legislation. Congress should not be making the same mistake twice.

When the SHOP SAFE Act passed out of the House Judiciary Committee, it did so with concerns raised by both Republican and Democratic members.  Even Darrel Issa (R-CA), the bill’s lead Republican cosponsor, described it as a “work in process,” and seemed ready to work with his colleagues on both sides of the aisle to address good faith concerns. Instead, Chairman Nadler went to Speaker Pelosi and had SHOP SAFE shoehorned into COMPETES behind the backs of his members. 

Both the Republicans and Democrats who raised policy concerns and were promised engagement failed to see followthrough by their peers—packaging broken policy as part of an omnibus without a solution with no substantive way to correct this death-knell for e-commerce.

COMPETES and SHOP SAFE are now in the hands of the Senate and Senators have an opportunity to fix the mess. Our lawmakers can take this opportunity to strip SHOP SAFE from the omnibus before millions of Americans are stripped of their competitive edge. But will they?