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Post: Washington Watch: As Washington gets closer to delivering an innovation and competition package, online marketplaces are battling with manufacturers over provisions aimed at fake products

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

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

Such legislation is expected to include more than $50 billion in subsidies for chip makers

 along with billions more for other industries to build out U.S. manufacturing capacity and compete with China.

Other provisions could take aim at the sale of counterfeit goods on online marketplaces, but there are competing approaches and a lobbying battle over them.

The Senate’s U.S. Innovation and Competition Act incorporates a bill known as the INFORM Consumers Act, which would require e-commerce sites to verify and disclose information about their high-volume, third-party sellers. Supporters say it would deter online sales of fake products by anonymous sellers.

The House’s America COMPETES Act, on the other hand, incorporates both the INFORM Consumers Act as well as the SHOP SAFE Act — which would make online platforms liable when a third party sells a harmful counterfeit product and that platform hasn’t followed certain best practices.

The INFORM Consumers Act has a 75% or 80% chance of getting included in a final competitiveness law, while the sharper-toothed SHOP SAFE Act has just a 25% chance, reckons Owen Tedford, senior research analyst at Beacon Policy Advisors.

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

Lobbying group TechNet sent a letter on April 7 to top lawmakers that called for including the INFORM Consumers Act but not SHOP SAFE in the competitiveness package, saying the latter measure’s “stringent disclosure requirements would saddle sellers with an unprecedented compliance burden that would be challenging, if not impossible, to meet, except for companies with significant resources.”

“Small firms and individual sellers, when faced with these disclosure requirements, compliance costs, and uncertainty, would be forced to leave online marketplaces and abandon their customers. Tipping the balance of online marketplaces in favor of large retailers is antithetical to the goal of enhancing competitiveness,” said the letter from TechNet, whose members include Amazon

and Meta Platforms
which counts Facebook Marketplace among its businesses. TechNet declined a MarketWatch interview request.

Manufacturers, for their part, pushed for the inclusion of both INFORM Consumers and SHOP SAFE in an April 13 letter to top lawmakers.

“The SHOP SAFE Act would hold e-commerce platforms liable for counterfeit products sold on their platforms — just like their brick-and-mortar retail counterparts — unless they take a specific set of common-sense, preventative measures,” said the letter from more than 100 organizations, including the National Association of Manufacturers, Honda’s

North American business, Bayer

and Philip Morris International

One National Association of Manufacturers official said in an interview that there are economic and consumer arguments in favor of SHOP SAFE.

“Counterfeit products harm American consumers, support criminal activity and harm manufacturers, and that’s not just a talking point — the data actually supports that,” said Chris Netram, NAM’s managing vice president of tax and domestic economic policy. The sale of counterfeit goods cost the U.S. economy about $131 billion and more than 325,000 jobs in 2019, and then the sale of fake test 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 “really tries to strike an appropriate balance” rather than take a “draconian approach.”

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

For the INFORM Consumers Act, at least 67 groups lobbied on it last year, and Facebook parent Meta and Etsy were among those disclosing Wednesday that they were focused on it in 2022’s Q1.

Biden last week repeated his call for Congress to send broad innovation and competition legislation to his desk, as he gave a speech on U.S. manufacturing in Greensboro, N.C.

“Congress, get this bipartisan bill to my desk. North Carolina needs it. America needs it,” said the president, who has been referring to the legislation as the Bipartisan Innovation Act.

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

“I would be surprised if in slips until the fall. I would say the latest would be before the August recess,” the analyst said.

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