Round Table: E-commerce Legislative Developments – What Changes Should Brands Push For?

In light of recent developments in e-commerce legislation in both Europe and the US – specifically the Digital Services Act, Shop Safe Act and INFORM Consumers Act – members of the brand protection community joined a round table discussion. IP and brand protection experts from legal partners, brands, and online platforms discussed how the legislation changes had been received, the impact they might have on brands and platforms, and the changes stakeholders should be asking for in the interests of better protection for themselves and their consumers online.

E-COMMERCE LEGISLATIVE DEVELOPMENTS IN EUROPE

The Digital Services Act

The purpose of the Digital Services Act (DSA) is to update the European Union's legal framework, in particular by modernizing the E-commerce Directive adopted in 2000.

The proposed DSA was released by the European Commission on 15^th Dec 2020, sent to the European co-legislator, which includes the European Parliament and member councils.

Brand and content owners have welcomed the European Commission’s proposal but have pointed out some gaps which could be detrimental to. To build trust in the online environment and to ensure a robust DSA which will stand the test of time, many brand and content owners are calling for modifications. This will take time, as the legislation is broad and there are factors to consider.

The act covers more than just e-commerce and online marketplace legislation – it’s essentially a horizontal regulatory framework for digital services and platforms in the EU, covering all online illegalities.

The scope is to cover organizations within the EU, as well as platforms that target EU consumers. It includes updates to safe harbours, and clarifying liability privileges. It includes introducing due diligence obligations, such as elaborating specific rules for notice and action; trusted flaggers who get quicker action. It also contains a provision of KYBC (know your business customer), which at the moment only covers online marketplaces.

There will be different degrees of obligations or conditions to comply with depending on different types of intermediaries, In particular, a greater degree of regulation for very large online platforms (VLOPs).

Regulation will introduce a structure with digital service coordinators, whereby national authorities appoint enforcers of regulations by jurisdictional criteria.

To find out more about the Digital Services Act, read analysis by Ted Shapiro, Partner at Wiggin, here.

The Digital Services Act: Top changes stakeholders are asking for:

Due diligence obligations must be met as a threshold condition to qualifying for the hosting safe harbour. Idea comes out of US DMCA with 2 threshold conditions.

KYBC provisions extend to all intermediaries (social media platforms, for instance) not just online marketpaces. Other due diligence obligations to extend to all intermediaries too.

Requests for stay down for notice-in-action procedure.

Repeat infringers to be suspended, or regulations strengthened, made broader, or repesat infringers to be removed completely from online platforms.

To find out more about the volume of repeat infringement, the current approach by platforms, and how the issue could be tackled, read our Three Strikes and Out white paper.

E-COMMERCE LEGISLATIVE DEVELOPMENTS IN THE US

The Shop Safe Act

The US Shop Safe Act Amends the Trademark Act of 1946 (The Lanham Act), with the addition of a section to make e-commerce platforms liable for trademark infringement and counterfeiting if they do not follow a number of best practices such as screening sellers and enforcing upon repeat offenders.

The Act holds a key consumer heathy and safety component.

To find out more about the Shop Safe Act, read analysis by Ashly Sands, Partner at Epstein Drangel LLP.

The Shop Safe Act: Top changes stakeholders are asking for:

The definition of electronic commerce platforms needs to cover social media platforms. This is currently vague, and it’s unclear whether or not the likes of TikTok or Instagram – fundamentally social media platforms but also with increasingly significant e-commerce operations – would be subject to this act.

The language that limits liability to goods that implicate health and safety needs to be clarified or removed. These currently imply ruling on food and beverage, pharmaceutical, and some electrical goods, but the likes of toys, fashion, sports equipment etc. are seemingly not covered.

To implement a regulatory process for takedowns, as currently there is no regulatory process for takedown action.

The INFORM Consumers Act

The US INFORM Consumers Act (The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers), requires online marketplaces to collect, verify and disclose certain information from high-volume third-party sellers.

This was originally a lower threshold, but following recent discussions in the senate, e-commerce platforms lobbied to define high-volume third-party sellers to include those that conduct 200 or more transactions resulting in total revenues of $7,000 or more during a continuous 12-month period.

The regulations require online marketplaces to acquire 1) bank account information, 2) government-issued identification, 3) tax ID numbers, 4) contact information, among other documentation.

To find out more about the INFORM Consumers Act, read analysis by Ashly Sands, Partner at Epstein Drangel LLP, here.

The INFORM Consumers Act: Top changes stakeholders are asking for:

The threshold requirement for sellers that are required to disclose information should be removed. This requirement was increased, however would actually offer more protection for brands and consumers if it was removed.

A penalty to be enforced for the provision of false identifying information. Currently, there’s no real course of action under this act for false identification. The only penalty of note currently is removal from the platform, but no real liability for the platform itself, and platforms should be required to enforcing and disclosing this information, and penalize offenders if necessary.

Platforms to prevent bad actors from opening multiple storefronts. Many requirements under the act seem to have loopholes whereby sellers can open additional stores to avoid some of the threshold requirements, for example high-volume sellers can split their inventory and revenue between several accounts.

What do brands think?

In light of these suggestions from legal experts, brands also had a range of other suggestions for amendments to the regulations:

If a platform discovers that a counterfeit item has been sold to a consumer, the platform should be required to inform the consumer, particularly where issues with health and safety are in question, as if the consumer is not made aware there is a genuine risk.

In the same event, platforms should be required to let the infringed brand owners know.

There is the potential for a general report that crosses all platforms to provide the legislative bodies with numbers, trends and insights, so that bodies can better centralize information and enforce new regulation where needed.

Social media has been evolving, and continues to evolve, to adopting a more commerce focused approach. Brands agree that social media platforms should be included in the draft, rather than having to return and make amendments in the near future. There is also the danger that if online marketplaces are heavily regulated and social media platforms avoid the same regulations, bad actors will flock to social media and these platforms will become rampant with infringements. This is a modern concern, where regulations struggle to modernize at the pace of technological change.

There needs to be consistent regulations across the board (for the DSA). For platforms and brands selling cross borders, it’s not feasible to manage different regulations across different European countries.

Certain sectors, for instance fashion, are requesting the regulations to be applied across all goods, whether or not the products in question fall in line with health and safety issues.

What do platforms think?

The round table discussion included legal representatives from two major global online marketplaces, and their thoughts were as follows:

The platforms tend to agree that there needs to be more regulation, particularly where the health and safety of consumers is compromised. However, there are also a lot of variables to consider, that keep moving with the pace of change in the industry and different local regulations, that make legislation difficult.

The platforms agree with the type of products that the legislations are targeting. However, it can be confusing for platforms to be able to distinguish whether or not something has a health and safety component. This makes infringements more difficult to detect, target, and enforce upon. Platforms hope that when the legislations are refined this will be clarified.

Lobbying for change

The experts agreed that significant progress could be made if brands pulled together to continue sharing their opinions, and lobby for change in legislation. At Corsearch this is something we wholeheartedly agree with. It’s one of the many reasons why INSYNC was created — to drive global change in platform practices and empower rights holders with positive change.

White Paper ; Three Strikes and Out

How e-commerce platforms can protect consumers from repeat offenders

Corsearch's white paper provides brands, e-commerce platforms and legislators with data on the proportion of repeat infringements undertaken by the same sellers, who use key global online marketplaces and social media platforms to infringe intellectual property.

Learn how platforms can protect brands and consumers can by implementing strong seller verification and a ‘three-strikes-and-out’ policy.