[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                     BUYER BEWARE: FAKE AND UNSAFE PRODUCTS 
                             ON ONLINE MARKETPLACES

=======================================================================

                                HEARING

                               BEFORE THE

                      SUBCOMMITTEE ON CONSUMER PROTECTION AND 
                                COMMERCE

                                 OF THE

                    COMMITTEE ON ENERGY AND COMMERCE
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                             MARCH 4, 2020

                               __________

                           Serial No. 116-108
                           
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                           


      Printed for the use of the Committee on Energy and Commerce

                   govinfo.gov/committee/house-energy
                        energycommerce.house.gov
                        
                                __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
53-687 PDF                  WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------     

                    COMMITTEE ON ENERGY AND COMMERCE

                     FRANK PALLONE, Jr., New Jersey
                                 Chairman
BOBBY L. RUSH, Illinois              GREG WALDEN, Oregon
ANNA G. ESHOO, California              Ranking Member
ELIOT L. ENGEL, New York             FRED UPTON, Michigan
DIANA DeGETTE, Colorado              JOHN SHIMKUS, Illinois
MIKE DOYLE, Pennsylvania             MICHAEL C. BURGESS, Texas
JAN SCHAKOWSKY, Illinois             STEVE SCALISE, Louisiana
G. K. BUTTERFIELD, North Carolina    ROBERT E. LATTA, Ohio
DORIS O. MATSUI, California          CATHY McMORRIS RODGERS, Washington
KATHY CASTOR, Florida                BRETT GUTHRIE, Kentucky
JOHN P. SARBANES, Maryland           PETE OLSON, Texas
JERRY McNERNEY, California           DAVID B. McKINLEY, West Virginia
PETER WELCH, Vermont                 ADAM KINZINGER, Illinois
BEN RAY LUJAN, New Mexico            H. MORGAN GRIFFITH, Virginia
PAUL TONKO, New York                 GUS M. BILIRAKIS, Florida
YVETTE D. CLARKE, New York, Vice     BILL JOHNSON, Ohio
    Chair                            BILLY LONG, Missouri
DAVID LOEBSACK, Iowa                 LARRY BUCSHON, Indiana
KURT SCHRADER, Oregon                BILL FLORES, Texas
JOSEPH P. KENNEDY III,               SUSAN W. BROOKS, Indiana
    Massachusetts                    MARKWAYNE MULLIN, Oklahoma
TONY CARDENAS, California            RICHARD HUDSON, North Carolina
RAUL RUIZ, California                TIM WALBERG, Michigan
SCOTT H. PETERS, California          EARL L. ``BUDDY'' CARTER, Georgia
DEBBIE DINGELL, Michigan             JEFF DUNCAN, South Carolina
MARC A. VEASEY, Texas                GREG GIANFORTE, Montana
ANN M. KUSTER, New Hampshire
ROBIN L. KELLY, Illinois
NANETTE DIAZ BARRAGAN, California
A. DONALD McEACHIN, Virginia
LISA BLUNT ROCHESTER, Delaware
DARREN SOTO, Florida
TOM O'HALLERAN, Arizona
                                 ------                                

                           Professional Staff

                   JEFFREY C. CARROLL, Staff Director
                TIFFANY GUARASCIO, Deputy Staff Director
                MIKE BLOOMQUIST, Minority Staff Director
            Subcommittee on Consumer Protection and Commerce

                        JAN SCHAKOWSKY, Illinois
                                Chairwoman
KATHY CASTOR, Florida                CATHY McMORRIS RODGERS, Washington
MARC A. VEASEY, Texas                  Ranking Member
ROBIN L. KELLY, Illinois             FRED UPTON, Michigan
TOM O'HALLERAN, Arizona              MICHAEL C. BURGESS, Texas
BEN RAY LUJAN, New Mexico            ROBERT E. LATTA, Ohio
TONY CARDENAS, California, Vice      BRETT GUTHRIE, Kentucky
    Chair                            LARRY BUCSHON, Indiana
LISA BLUNT ROCHESTER, Delaware       RICHARD HUDSON, North Carolina
DARREN SOTO, Florida                 EARL L. ``BUDDY'' CARTER, Georgia
BOBBY L. RUSH, Illinois              GREG GIANFORTE, Montana
DORIS O. MATSUI, California          GREG WALDEN, Oregon (ex officio)
JERRY McNERNEY, California
DEBBIE DINGELL, Michigan
FRANK PALLONE, Jr.,  New Jersey (ex 
    officio)
                             C O N T E N T S

                              ----------                              
                                                                   Page
Hon. Jan Schakowsky, a Representative in Congress from the State 
  of Illinois, opening statement.................................     2
    Prepared statement...........................................     3
Hon. Cathy McMorris Rodgers, a Representative in Congress from 
  the State of Washington, opening statement.....................     4
    Prepared statement...........................................     5
Hon. Frank Pallone, Jr., a Representative in Congress from the 
  State of New Jersey, opening statement.........................     6
    Prepared statement...........................................     8
Hon. Greg Walden, a Representative in Congress from the State of 
  Oregon, opening statement......................................     9
    Prepared statement...........................................    11

                               Witnesses

David Friedman, Vice President, Advocacy, Consumer Reports.......    12
Prepared statement...............................................    15
    Answers to submitted questions...............................   188
Dharmesh Mehta, Vice President of Worldwide Customer Trust and 
  Partner Support, Amazon........................................    33
Prepared statement...............................................    35
    Answers to submitted questions...............................   190
Lori Wallach, Director, Global Trade Watch, Public Citizen.......    42
Prepared statement...............................................    44
    Answers to submitted questions...............................   200
Amber Leavitt, Associate General Counsel and Head of IP, Ebay....    60
Prepared statement...............................................    62
Jeff Myers, Senior Director for Intellectual Property, Apple.....    65
Prepared statement...............................................    67
    Answers to submitted questions...............................   201
Andrew Love, Head of Brand Security/Investigations/Global 
  Enforcement, Specialized Bicycles..............................    69
Prepared statement...............................................    71
    Answers to submitted questions...............................   202

                           Submitted Material

Letter of March 3, 2020, to Ms. Schakowsky, and Ms. Rodgers, from 
  Jack Farley, Founder, PreClear, submitted by Ms. Schakowsky....   108
Letter of March 4, 2020, to Ms. Schakowsky, and Members of the 
  Subcommittee, by Larry Drummond, Executive Director, 
  International Precious Metals Institute, submitted by 
  Ms.Schakowsky..................................................   111
Letter of March 3, 2020, to Ms. Schakowsky, and Ms. Rodgers, by 
  Steve Pasierb, President and CEO, the Toy Association, 
  submitted by Ms. Schakowsky....................................   115
Report ``Combating Trafficking in Counterfeit and Pirated Goods'' 
  from Homeland Security.........................................   118
Letter of March 3, 2020, to Ms. Schakowsky, and Ms. Rodgers, by 
  Steve Pasierb, President and CEO, the Internet Association, 
  submitted by Ms. Schakowsky....................................   172
Statement of October 22, 2019, from National Association of 
  Attorneys General, submitted by Ms. Schakowsky.................   175
Letter of April 30, 2019, to Mr. Burgess, from the National 
  Highway Traffic Safety Administration, submitted by Ms. 
  Schakowsky.....................................................   187

 
     BUYER BEWARE: FAKE AND UNSAFE PRODUCTS ON ONLINE MARKETPLACES

                              ----------                              


                        WEDNESDAY, MARCH 4, 2020

                  House of Representatives,
  Subcommittee on Consumer Protection and Commerce,
                          Committee on Energy and Commerce,
                                                    Washington, DC.
    The subcommittee met, pursuant to call, at 10:00 a.m., in 
the John D. Dingell Room 2123, Rayburn House Office Building, 
Hon. Janice Schakowsky (chairwoman of the subcommittee) 
presiding.
    Members present: Representatives Schakowsky, Castor, 
Veasey, Kelly, O'Halleran, Lujan, Cardenas, Blunt Rochester, 
Soto, Rush, Matsui, McNerney, Dingell, Pallone (ex officio), 
Rodgers (subcommittee ranking member), Upton, Burgess, Latta, 
Guthrie, Bucshon, Hudson, Carter, Gianforte, and Walden (ex 
officio).
    Also present: Representative Eshoo.
    Staff present: Evan Gilbert, Deputy Press Secretary; Lisa 
Goldman, Senior Counsel; Alex Hoehn-Saric, Chief Counsel, 
Communications and Technology; Joe Orlando, Staff Assistant; 
Kaitlyn Peel, Digital Director; Lino Pena-Martinez, Staff 
Assistant; Alivia Roberts, Press Assistant; Chloe Rodriguez, 
Policy Analyst; Andrew Souvall, Director of Communications, 
Outreach and Member Services; Sydney Terry, Policy Coordinator; 
Anna Yu, Professional Staff Member; Jennifer Barblan, Minority 
Chief Counsel, Oversight and Investigations; Mike Bloomquist, 
Minority Staff Director; Adam Buckalew, Minority Director of 
Coalitions and Deputy Chief Counsel, Health; Robin Colwell, 
Minority Chief Counsel, Communications and Technology; Jerry 
Couri, Minority Deputy Chief Counsel, Environment and Climate 
Change; Jordan Davis, Minority Senior Advisor; Kristine 
Fargotstein, Minority Detailee, Communications and Technology; 
Margaret Tucker Fogarty, Minority Staff Assistant; Melissa 
Froelich, Minority Chief Counsel, Consumer Protection and 
Commerce; Theresa Gambo, Minority Human Resources/Office 
Administrator; Caleb Graff, Minority Professional Staff Member, 
Health; Brittany Havens, Minority Professional Staff, Oversight 
and Investigations; Peter Kielty, Minority General Counsel; 
Bijan Koohmaraie, Minority Counsel, Consumer Protection and 
Commerce; Tim Kurth, Minority Deputy Chief Counsel, 
Communications and Technology; Ryan Long, Minority Deputy Staff 
Director; Mary Martin, Minority Chief Counsel, Energy and 
Environment and Climate Change; Sarah Matthews, Minority Press 
Secretary; Brandon Mooney, Minority Deputy Chief Counsel, 
Energy; James Paluskiewicz, Minority Chief Counsel, Health; 
Brannon Rains, Minority Staff Assistant; Zach Roday, Minority 
Communications Director; Kristen Shatynski, Minority 
Professional Staff Member, Health; Alan Slobodin, Minority 
Chief Investigative Counsel, Oversight and Investigations; 
Peter Spencer, Minority Senior Professional Staff Member, 
Environment and Climate Change; Natalie Sohn, Minority Counsel, 
Oversight and Investigations; Danielle Steele, Minority 
Counsel, Health; Everett Winnick, Minority Director of 
Information Technology; and Greg Zerzan, Minority Counsel, 
Consumer Protection and Commerce.
    Ms. Schakowsky. The Subcommittee on Consumer Protection and 
Commerce will now come to order. We begin with member opening 
statements, and the Chair will now recognize herself for 5 
minutes.

 OPENING STATEMENT OF HON. JAN SCHAKOWSKY, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF ILLINOIS

    So I want to say good morning to all of you on this 
beautiful day and thank you for joining us for this hearing, 
examining how counterfeit products and fake reviews sold and 
found on the internet are making Americans less safe at home, 
at work, and on the road.
    When we began planning this hearing, I had two clear goals 
in mind. One, to strengthen the existing Consumer Products 
Safety Commission's relationship with the U.S. Customs and 
Border Patrol to keep counterfeit and unsafe products from 
entering our country. Number two, to examine what tools the 
Federal Trade Commission needs to combat the proliferation of 
fake reviews online, since recent cases like its settlement 
with cosmetic company Sunday Riley clearly demonstrates that it 
is not currently up to the task of taking on some of the worst 
problems.
    Shortly after we began planning for today, I was pleased to 
learn the administration's plan to combat counterfeits entering 
the marketplace under the leadership of Dr. Peter Navarro. I 
expect them to be able to partner with us in an effort to 
strengthen CPSC's relationship with customers. However, I have 
to say the vast majority of the commerce shipped to U.S. 
consumers skirts normal customs procedures and often all 
inspections because they enter the U.S. under de minimis 
waivers. Worse, Monday's announcement of Dr. Nancy Beck, her 
nomination, leaves me less hopeful about the prospect for 
collaboration, given her anti-consumer record at the 
Environmental Protection Agency and as an executive at the 
American Chemical Council.
    Unfortunately, these problems neither began nor end at 
ports of entry. Fake Reviews are becoming more and more 
widespread, and up to this point, the Federal Trade Commission 
has proven that it needs more tools to combat this growing 
concern by consumers. Organized retail crime selling 
counterfeits and stolen products poses a threat to consumers 
who are unwittingly purchasing these items online on online 
marketplaces.
    The emergence of these unregulated platforms has given 
criminal enterprises additional meaning to sell stolen and 
counterfeit goods to unsuspecting consumers. Online 
marketplaces need to place safety and accountability to 
consumers before profits. Unfortunately, we are seeing more and 
more companies characterizing online commerce as content, 
seeking to use the content liability shield granted through 
Section 230 of the Communications Decency Act, a law badly in 
need of reform.
    Making matters worse, the administration is seeking to 
further enshrine the law 230, by exporting it in trade 
agreements all over the world. Last week, I wrote a letter to 
Ambassador Lighthizer to associate myself with the Chair and 
ranking member of this full committee, requesting to leave this 
policy out of future trade agreements and I will continue to 
work with my colleagues on both sides of the aisle.
    I look forward to hearing from our witnesses today about 
the current state of play and how we can improve the situation, 
including by arming the Consumer Products Safety Commission and 
the Federal Trade Commission with the tools necessary to help 
root out this problem.
    [The prepared statement of Ms. Schakowsky follows:]

               Prepared Statement of Hon. Jan Schakowsky

    Good morning and thank you for joining us today for a 
hearing examining how counterfeit products and fake reviews 
sold and found online are making Americans less safe at home, 
at work, and on the road.
    When we began planning this hearing, I had two clear goals 
for it:
    .  To strengthen the existing Consumer Product Safety 
Commission's relationship with U.S. Customs and Border 
Protection to keep counterfeit and unsafe products from 
entering the country.
    2.  Examine what tools the Federal Trade Commission needs 
to combat the proliferation of fake reviews online since recent 
cases, like its settlement with cosmetics company Sunday Riley, 
clearly demonstrated that it's not currently up to the task of 
taking on this worsening problem.
    Shortly after we began planning for today, I was pleased to 
learn of the Administration's plan to combat counterfeits 
entering the country under the leadership of Dr. Peter Navarro. 
I expected them to be a partner in my efforts to strengthen 
CPSC's relationship with Customs. However, the vast majority of 
e-commerce shipments to U.S. consumers skirt normal Customs 
procedures and all inspections because they enter the U.S. 
under a de minimis waiver.
    Worse, Monday's announcement of Dr. Nancy Beck's nomination 
leaves me less hopeful about the prospect for collaboration, 
given her anti-consumer record at the Environmental Protection 
Agency and as an executive at the American Chemistry 
Council.Unfortunately, these problems neither begin nor end at 
ports of entry. Fake reviews are becoming more and more 
widespread, and up to this point, the FTC has proven that it 
needs more tools to combat this growing concern for consumers.
    Organized retail crime, selling counterfeits and stolen 
products, poses a threat to consumers who are unwittingly 
purchasing these items on online marketplaces. The emergence of 
these unregulated platforms has given criminal enterprises 
additional means to sell stolen and counterfeit goods to 
unsuspecting consumers.
    Online marketplaces need to place safety and accountability 
to consumers before profit. Unfortunately, we are seeing more 
and more companies characterize online commerce as content, 
seeking to use the content liability shield granted through 
Section 230 of the Communications Decency Act, a law badly in 
need of reform.
    Making matters worse, the Administration is seeking to 
further enshrine this law by exporting it abroad via trade 
agreements. Last week I wrote Ambassador Lighthizer to 
associate myself with the Chairman and Ranking Member of the 
full Committee's request to leave this policy out of future 
trade agreements. I'll continue to work with my colleagues on 
both sides of the aisle to see that Ambassador Lighthizer 
listens to this request.
    I look forward to hearing from our witnesses today about 
the current state of play and how we can improve the situation, 
including by arming the CPSC and the FTC with the tools 
necessary to help root out this problem.

    So now the Chair will recognize our ranking member of the 
subcommittee and you will have 5 minutes for your opening 
statement.

 OPENING STATEMENT OF HON. CATHY RODGERS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    Mrs. Rodgers. I thank the Chair. Good morning. Welcome, 
everyone, to the Consumer Protection and Commerce Subcommittee 
hearing on counterfeit products.
    I first want to recognize how President Trump and his 
administration are leading to combat counterfeit and pirated 
goods online. The President has made this a priority, which is 
clear in Phase 1 of the U.S.-China trade deal.
    For instance, China agreed to provide enforcement 
procedures to facilitate effective and quick takedowns; 
consider revoking e-commerce operating licenses for repeated 
failures; take action to stop the manufacturing of pirated and 
counterfeit products; take enforcement action against 
counterfeit medicines and other products that have made a 
significant impact on public health or safety; and increase the 
number of trained professionals to inspect, detain, and destroy 
any counterfeit goods found at the Chinese border.
    In addition, on January 24th, the Department of Homeland 
Security released its first report required by President 
Trump's April 2019 Memorandum on Combating Trafficking in 
Counterfeit and Pirated Goods. This was a call to action to 
fight against cheaters and bad actors gaming the e-commerce 
system. The government recommends where the government should 
take action and best practices for e-commerce platforms and 
other third-party marketplaces.
    Among the best practices, the administration is calling on 
companies to enhance the vetting of third-party sellers, limit 
high-risk products, clear transactions through banks that 
comply with U.S. law, and provide rapid notice and takedown 
procedures. Following the report, President Trump signed an 
executive order to ensure safe and lawful e-commerce products 
people and guard against intellectual property abuse.
    I commend the administration for their leadership. As I 
have said before, to win the future and beat China, America 
must be the global leader in the 21st-century economy. Just 
like we must lead to promote artificial intelligence and deploy 
autonomous vehicles, America must also lead to stop counterfeit 
goods and protect our intellectual property.
    If we don't step up, China will dictate the terms and the 
rules for the future. The Chinese Communist Party will win with 
the playbook they have always used, by undermining human 
rights, stealing from our innovators, and cheating and harming 
Americans. America innovates and creates, while China cheats 
and steals. According to a report by the Organization for 
Economic Cooperation and Development, China is ``the single 
largest producing market of counterfeit and pirated products.''
    Administration officials estimate that more than a hundred 
thousand packages from China arrive in America a day that can 
harm and defraud people. More than eighty-five percent of all 
contraband seized at our borders comes from China and Hong 
Kong. While the administration is taking decisive action, the 
government and regulations cannot solve this issue alone. The 
best way to predict the future is to invent it. American 
innovators must be equipped to win the future and beat China in 
artificial intelligence, block chain, IoT, and other emerging 
technologies.
    Companies today are leveraging AI to analyze data points to 
discover counterfeit listings and repeat offenders. IoT 
provides identification and traceability functions that can be 
used to address and track counterfeit sales. Block chain may 
provide a unique solution to this complex problem. For example, 
a tamper-proof chain of custody that uses smart tags can ensure 
only authentic products are included in the block chain and 
sold.
    As the DHS report suggests, we should leverage public-
private partnerships to develop a national awareness campaign. 
We should educate people about the risk of counterfeits as well 
as the various ways they can spot and report counterfeits 
online Etailz, in Spokane Valley, Washington, is also working 
with businesses to navigate online marketplaces and protect 
their brands from bad actors. They do it by helping small 
businesses conduct test buys, documenting counterfeits, and 
filing complaints, among other services. It is proactive, pro-
innovative, and pro-consumer, and actions like this should be 
encouraged, especially on e-commerce sites that are convenient 
for people and create more opportunities for small businesses 
to succeed.
    I thank the leaders at like Etailz for taking action for 
the health and safety of customers and I encourage this 
committee to lead by harnessing, not holding back the 
innovation and the agility of the private sector to address 
this pervasive problem of counterfeit products. Thank you and I 
yield back.
    [The prepared statement of Mrs. Rodgers follows:]

                Prepared Statement of Hon. Cathy Rodgers

    Good morning and welcome to the Consumer Protection and 
Commerce Subcommittee hearing on counterfeit products.
    I want to first recognize how President Trump and his 
Administration are leading to combat counterfeit and pirated 
goods online.
    The President has made this a priority, which is clear in 
``Phase 1'' of the U.S.- China Trade deal. For instance, China 
agreed to:
     Provide enforcement procedures to facilitate 
effective and quick takedowns;
     Consider revoking e-commerce operating licenses 
for repeated failures;
     Take action to stop the manufacturing of pirated 
and counterfeit products;
     Take enforcement action against counterfeit 
medicines and other products that may have a significant impact 
on public health or safety; and
     Increase the number of trained professionals to 
inspect, detain, and destroy any counterfeitgoods found at the 
Chinese border.
    In addition, on January 24th, the Department of Homeland 
Security released its first report required by President 
Trump's April 2019 Memorandum on Combating Trafficking in 
Counterfeit and Pirated Goods.
    This was a call to action to fight against cheaters and bad 
actors gaming the e-commerce system.
    The report recommends where the government should take 
action and best practices for e-commerce platforms and other 
third-party marketplaces.
    Among the best practices, the Administration is calling on 
companies to:
    1) enhance the vetting of third-party sellers;
    2) limit high risk products;
    3) clear transactions through banks that comply with U.S. 
law; and
    4) provide rapid notice and takedown procedures.
    Following the report, President Trump signed an executive 
order to ensure safe and lawful e-commerce protects people and 
guards against intellectual property abuse.
    The Administration should be commended for their 
leadership.
    As I've said before, to win the future and beat China, 
America must be the global leader in the 21st century economy.
    Just like we must lead to promote artificial intelligence 
and deploy autonomous vehicles America must also lead to stop 
counterfeit goods and protect our intellectual property.
    If we don't step up, China will dictate the terms and rules 
for the future.
    The Chinese Communist Party will win with the playbook 
they've always used by undermining human rights, stealing from 
our innovators, and cheating and harming Americans.
    America innovates and creates, while China cheats and 
steals.
    According to a report by the Organization for Economic 
Cooperation and Development, China is the ``single largest 
producing market'' of counterfeit and pirated products.
    Administration officials estimate that more than 100,000 
packages from China arrive in America a day that could harm and 
defraud people.
    More than 85 percent of all contraband seized at our 
borders come from China and Hong Kong.
    While the Administration is taking decisive action, the 
government and regulations cannot solve this issue alone.
    Because the best way to predict the future, is to invent 
it. American innovators must be equipped to win the future and 
beat China in artificial intelligence, blockchain, IOT, and 
other emergingtechnologies.
    Companies today are leveraging AI to analyze data points to 
discover counterfeit listings and repeat offenders.
    IOT provides identification and traceability functions that 
can be used to address and track counterfeit sales.
    Blockchain may provide a unique solution to this complex 
problem too.
    For example, a tamperproof chain of custody that uses smart 
tags can ensure only authentic products are included on the 
blockchain and sold.
    As the DHS report suggests, we should leverage public-
private partnerships to develop a national awareness campaign.
    We should educate people about the risks of counterfeits as 
well as the various ways they can spot and report counterfeits 
online.
    Etailz in Spokane Valley, Washington is also working with 
businesses to navigate online marketplaces and protect their 
brands from bad actors.
    They do so by helping small businesses conduct test buys, 
documenting counterfeits, and filing complaints among other 
services.
    It's proactive, pro-innovative and pro-consumer actions 
like this that we should encourage, especially on e-commerce 
sites that are convenient for people and create more 
opportunities for small businesses to succeed.
    I thank leaders like Etailz for taking action for the 
health and safety of customers and encourage this committee to 
lead by harnessing-not holding back--the innovation and agility 
of the private sector to address this pervasive problem of 
counterfeit products.
    Thank you. I yield back.

    Ms. Schakowsky. The gentlelady yields back, and now the 
Chair recognizes Mr. Pallone, chairman of the full committee, 
for 5 minutes for his opening statement.

OPENING STATEMENT OF HON. FRANK PALLONE, Jr., A REPRESENTATIVE 
            IN CONGRESS FROM THE STATE OF NEW JERSEY

    Mr. Pallone. Thank you, Madam Chair, and thank you for 
holding this very important hearing. And I do also want to--
while I don't agree with Mrs. Rodgers in terms of what she said 
about the Trump administration leading on this issue, I don't 
think they are, but I do want to thank you for pointing out 
that there is a lot more that the private sector could do, and 
also for coming down very hard on China because I think you are 
absolutely right. That there is so much of this that is coming 
from China, and that they are very much to blame for a lot of 
the counterfeiting and outright fraud that we are seeing.
    But I want to say that thanks to the growth in e-commerce, 
we can purchase products from our computers, phones, tablets, 
or our smart speakers at any hour of the day, with the 
expectation that the products will be delivered at our doorstep 
within days or even hours. Third-party sellers on online 
marketplaces such as Amazon, eBay, and others are responsible 
for much of the convenience, providing a seemingly endless 
collection of products for consumers.
    On Amazon, where nearly half of online U.S. shoppers start 
their product searches, sales by third-party sellers now make 
up sixty percent of total sales. But the problem is that this 
convenience has come at a price, and that is a proliferation of 
dangerous counterfeit goods that endanger consumers and 
property, and an army of counterfeit merchants from overseas, 
particularly China, that undermine American small businesses 
with unscrupulous tactics. And the practices and policies of 
the online platforms have made it increasingly difficult for 
even the savviest consumers to avoid fake and unsafe products.
    For years, brick-and-mortar stores have had policies in 
place to ensure the integrity of their supply chain. The stores 
also take responsibility for defective or unsafe products and 
these traditional practices simply do not exist on the online 
marketplace. In fact, many online marketplaces seem to be 
taking the opposite approach, abdicating any responsibility 
because they are thriving off the sale of fake goods.
    A recent survey found that twenty-six percent of American 
consumers have been conned into purchasing at least one 
counterfeit product in the past year. Too many consumers don't 
realize they have purchased counterfeits until it is too late 
and this can result in tragic consequences. Hoverboards with 
counterfeit batteries caught on fire while charging, burning 
down someone's house; fake beauty products have reportedly 
caused people's eyelashes to fall out in clumps; and 
counterfeit products can result in chronic health effects that 
do not present until years later, like water filter cartridges 
that not only don't remove contaminants, but actually add new 
carcinogens to water.
    Investigations by various media outlets have uncovered a 
huge number of knockoff children's products that pose serious 
safety risks. There have been troubling reports of car seats 
that don't meet the National Highway Traffic Safety 
Administration's crash test standards; bicycle helmets--I see 
Mr. Love brought some. I don't mean yours are bad, but bicycle 
helmets that don't meet the Consumer Products Safety 
Commission's performance standards and recalled products and 
knockoffs of recalled products that federal regulators know can 
or already have caused serious death or injury, and these 
knockoff products proliferate on online marketplaces.
    And consumers and authentic brands cannot fight the 
combination of lax policies of online platforms and deceptive 
practices of unscrupulous sellers trying to edge out legitimate 
businesses. Fake and incentivized reviews drown out authentic 
reviews or are used to take down legitimate rivals. On many 
marketplaces, misleading user interfaces obscure the identity 
of the actual seller for each purchase. And a person may think 
they are buying from Amazon when they are instead buying from a 
foreign third party who merely ships through Amazon, and a 
platform's decision to comingle inventory from different 
sellers makes it virtually impossible for anyone to reliably 
track whether they received a counterfeit or authentic product.
    Counterfeiters also have become much more sophisticated, 
producing products that appear authentic and setting prices 
more on par with authentic goods to better trick consumers. And 
savvy consumers who turn to the online store of a trusted 
brick-and-mortar business in search of authentic goods are 
increasingly finding a marketplace of third-party sellers, 
instead of a place to directly purchase their trusted brands.
    Many large traditional retailers--Walmart, Target, Macy's, 
Crate and Barrel--have launched third-party marketplaces to 
keep pace with Amazon and bolster lagging sales, so it is these 
hybrid marketplaces in which a site acts as both a seller and a 
platform for third-party sellers that I think are most 
confusing. While some of these platforms screen and curate 
their sellers, others do less vetting and can give those 
sellers an aura of credibility, often undeserved.
    So, this week is National Consumer Protection Week, and I 
think we can help bring attention to issues that are causing 
consumer problems. This week is a perfect time to get answers 
from our panel on the scope of the problem and solutions we can 
implement to protect consumers. And again, I think this is a 
very important hearing. Thank you, Madam Chair.
    [The prepared statement of Mr. Pallone follows:]

             Prepared Statement of Hon. Frank Pallone, Jr.

    Thanks to the growth in e-commerce, we can purchase 
products from our computers, phones, tablets, or our smart 
speakers at any hour of the day with the expectation that the 
products will be delivered at our doorstep within days or even 
hours.
    Third-party sellers on online marketplaces such as Amazon, 
eBay, and others are responsible for much of the convenience, 
providing a seemingly endless selection of products for 
consumers. On Amazon, where nearly half of online U.S. shoppers 
start their product searches, sales by third-party sellers now 
make up 60 percent of total sales.
    But this convenience has come at a devastating price: a 
proliferation of dangerous counterfeit goods that endanger 
consumers and property, and an army of counterfeit merchants 
from overseas that undermine American small businesses with 
unscrupulous tactics.
    The practices and policies of the online platforms have 
made it increasingly difficult for even the savviest consumers 
to avoid fake and unsafe products. For years, brick-and-mortar 
stores have had policies in place to ensure the integrity of 
their supply chain. The stores also take responsibility for 
defective or unsafe products. These traditional practices 
simply do not exist in the online marketplace. In fact, many 
online marketplaces seem to be taking the opposite approach--
abdicating any responsibility because they are thriving off the 
sale of fake goods.
    A recent survey found that 26 percent of American consumers 
have been conned into purchasing at least one counterfeit 
product in the past year. Too many consumers don't realize 
they've purchased counterfeits until it's too late, and this 
can result in tragic consequences. Hoverboards with counterfeit 
batteries have caught on fire while charging, burning down 
someone's house. Fake beauty products have reportedly caused 
people's eye lashes to fall out in clumps. And counterfeit 
products can result in chronic health effects that do not 
presentuntil years later, like water filter cartridges that not 
only don't remove contaminants but actually add new carcinogens 
to water.
    Investigations by various media outlets have uncovered a 
huge number of knock-off children's products that pose serious 
safety risks. There have been troubling reports of car seats 
that don't meet the National Highway Traffic Safety 
Administration's crash test standards. Bicycle helmets that 
don't meet the Consumer Product Safety Commission's performance 
standards. And recalled products and knock offs of recalled 
products that federal regulators know can or already have 
caused serious death or injury. These knock off products 
proliferate on online marketplaces.
    Consumers and authentic brands cannot fight the combination 
of lax policies of online platforms and deceptive practices of 
unscrupulous sellers trying to edge out legitimate businesses.
    Fake and incentivized reviews drown out authentic reviews 
or are used to take down legitimate rivals. On many 
marketplaces, misleading user interfaces obscure the identity 
of the actual seller for each purchase. A person may think they 
are buying from Amazon, when they are instead buying from a 
foreign third party who merely ships through Amazon. And a 
platform's decision to commingle inventory from different 
sellers makes it virtually impossible for anyone to reliably 
track whether they received a counterfeit or authentic product.
    Counterfeiters also have become much more sophisticated-
producing products that appear authentic and setting prices 
more on par with authentic goods--to better trick consumers.
    Savvy consumers who turn to the online store of a trusted 
brick-and-mortar business in search of authentic goods are 
increasingly finding a marketplace of third-party sellers 
instead of a place to directly purchase their trusted brands. 
Many large traditional retailers--Walmart, Target, Macy's, 
Crate and Barrel--have launched third-party marketplaces to 
keep pace with Amazon and bolster lagging sales.
    Such ``hybrid'' marketplaces, in which a site acts as both 
a seller and a platform for third-party sellers, can be 
confusing for unsuspecting customers. While some of these 
platforms screen and curate their sellers, other platforms that 
do less vetting can give those sellers an aura of credibility-
often undeserved.
    This week is National Consumer Protection Week, when we can 
help bring attention to issues that are causing consumers harm. 
Consumer Protection Week is a perfect time to get answers from 
our panel on the scope of the problem and solutions we can 
implement to protect consumers and businesses from this 
unprecedented and growing threat.
    Thank you, I yield back.

    Ms. Schakowsky. Well, thank you for pointing out that it is 
National Consumer Protection Week, OK, so this hearing is 
totally appropriate.
    The gentleman yields back.
    The Chair recognizes Mr. Walden, the ranking member of the 
full committee, for 5 minutes.

   OPENING STATEMENT OF HON. GREG WALDEN A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF OREGON

    Mr. Walden. Good morning, Madam Chair. And welcome to our 
panelists. We appreciate your being here on this hearing at 
counterfeits and unsafe products. When I chaired the committee, 
we held a series of hearings on platform responsibility. 
Today's hearing builds on I think that really important work we 
did in this committee last Congress. Chair Schakowsky, thanks 
for holding this hearing where we can explore what steps online 
platforms and marketplaces with rights holders are taking to 
address counterfeit goods online.
    Online marketplaces are attractive digital storefronts that 
allow consumers to quickly locate products on their own time. 
This low search cost provides consumers with high visibility 
and access to so many different options and price points that 
allow aspiring small business owners to reach more potential 
customers. But within an increased use and attractiveness of 
these entities also comes an increase of bad actors, as you all 
know. They seek to game the system and sell counterfeit 
products and illicit products.
    We, of course, have seen these supply channels come via 
China, touch every part of this committee's jurisdiction. Given 
that, I am pleased that the Trump administration has taken this 
issue very seriously, as we can all agree that counterfeit 
products threaten our economy, public safety, and consumer 
trust. After all, we have an obligation to ensure the e-
commerce policies this committee helped put in place continue 
to have positive impacts for American consumers.
    We can now order groceries and household supplies online 
and expect them to be at our door within hours. This 
convenience is truly remarkable, especially for individuals who 
do not have access to, or the capability to visit brick-and-
mortar storefronts. But again, the success and benefits of 
these marketplaces has given rise to those peddling counterfeit 
and illicit products for a quick buck.
    Counterfeiters do not care about the existing laws, nor do 
they care about the small businesses and people that they 
actually hurt. I say that recognizing the complexity involved 
here for all of you on the panel. If you find and remove an 
account or product today, a bad actor can create a new account 
and begin selling the same product tomorrow under a different 
name or a different site. Just like the hydra, if you cut off 
one head, others generate in its place.
    Despite these challenges, the Trump administration does 
deserve credit for countering the widespread distribution of 
counterfeits. Just last month, the Department of Homeland 
Security issued its Combating Trafficking and Counterfeit and 
Pirated Goods report. After that report was released, President 
Trump issued an executive order making clear this 
administration is focused on cracking down on the sale of 
counterfeit goods online.
    Now let's go to the report. In fiscal year 2018, U.S. 
Customs and Border Protection, CBP, seized over 28,000 
products. That is what the report found. It also showed the 
market for counterfeit pharmaceutical drugs had expanded to 
include everything from cancer medications to opioids. Fake 
prescription opioids are often laced with fentanyl. That is a 
deadly compound that its lethal dose is the size of a few 
grains of salt, and much of the fentanyl entering our country 
originates in China.
    Republicans and Democrats on this committee have worked 
together in the past to address the public health crisis of 
fake medications and the influx of fentanyl entering our 
country, but we all know we have a lot more work to do on this 
front. The fight against counterfeits and illicit products must 
also include consumer education and awareness. Counterfeits can 
be difficult to spot online, especially when stolen graphics 
and other forms of deception are used, but sometimes we just 
need to know when a deal is too truly good to be true, it 
probably is. You can't get the new Apple AirPods Pro in 
whatever color you would like for a few bucks.
    All sectors must work with appropriate government agencies 
to increase awareness among consumers to help them better 
identify and report potential conflicts and counterfeits. I am 
eager to hear what e-commerce platforms and marketplaces are 
doing to address this problem and how they are incorporating 
feedback from the Department of Homeland Security report to 
increase safety and educate consumers on their platforms.
    I also look forward to hearing what steps rights owners are 
taking to protect their brands and how they are collaborating 
with platforms and marketplaces to do so. I believe 
collaboration can and must occur between online platforms and 
marketplaces, law enforcement, and rights owners. We have to 
all get-together and protect our consumers.
    So I want to thank you all for being here today. And, Madam 
Chair, I want to thank you for holding this hearing. I know 
your cause is consumer protection and so we will look forward 
to moving forward, and I yield back.
    [The prepared statement of Mr. Walden follows:]

                 Prepared Statement of Hon. Greg Walden

    Good morning and welcome to the Consumer Protection and 
Commerce Subcommittee hearing on counterfeits and unsafe 
products. When I chaired this Committee, we held a series of 
hearings on platform responsibility. Today's hearing builds on 
that important work. Chair Schakowsky, thank you for holding 
this hearing, where we can explore what steps online platforms 
and marketplaces with rights holders are taking to address 
counterfeit goods online.
    Online marketplaces are attractive digital storefronts that 
allow consumers to quickly locate products on their own time. 
This ``low search cost'' provides consumers high visibility and 
access to so many different options and price points and allows 
aspiring small business owners to reach more potential 
customers. But, with an increased use and attractiveness of 
these entities also comes an increase of bad actors seeking to 
game the system to sell counterfeit and illicit products. We of 
course have seen these supply channels come via China and touch 
every part of this committee's jurisdiction. Given that, I am 
pleased that the Trump Administration has taken this issue very 
seriously as we can all agree that counterfeit products 
threaten our economy, public safety, and consumer trust.
    Afterall, we have an obligation to ensure the e-commerce 
policies this committee helped put in place continue to have 
positive impacts for American consumers. We can now order 
groceries and household supplies online and expect them to be 
at our door within hours.
    This convenience is truly remarkable, especially for 
individuals who do not have access to or the capability to 
visit brick-and-mortar store fronts. But, again, the success 
and benefits of these marketplaces have given rise to those 
peddling counterfeit and illicit products for a quick buck. 
Counterfeiters do not care about existing laws nor do they care 
about the small businesses and people they hurt. I say that 
recognizing the complexity involved here for all of you. If you 
find and remove an account or product today, a bad actor may 
create a new account and begin selling the same product 
tomorrow under a different name or on a different site. Just 
like the Hydra, if you cut off one head, others will regenerate 
in its place.
    Despite these challenges, the Trump Administration deserves 
credit for countering the widespread distribution of 
counterfeits. Just last month, the Department of Homeland 
Security issued its ``Combating Trafficking in Counterfeit and 
Pirated Goods'' report. After the report was released, 
President Trump issued an executive order making clear this 
Administration is focused on cracking down on the sale of 
counterfeit goods online.
    According to the report, in Fiscal Year 2018, U.S. Customs 
and Border Protection (CBP) seized over 28,000 products. The 
report also shows that the market for counterfeit 
pharmaceutical drugs has expanded to include everything from 
cancer medications to opioids. Fake prescription opioids are 
often laced with fentanyl, a deadly compound that's lethal dose 
is the size of a few grains of salt--and much of the fentanyl 
entering our country originates in China. Republicans and 
Democrats on this Committee have worked together in the past to 
address the public health crisis of faked medications and the 
influx of fentanyl entering our country.
    The fight against counterfeits and illicit products must 
also include consumer education and awareness. Counterfeits can 
be difficult to spot online, especially when stolen graphics 
and other forms of deception are used, but sometimes we just 
need to know when a deal is truly too good to be true, it 
probably is--you can't get the new Apple Airpods Pro in 
whatever color you like for ten bucks. All sectors must work 
with appropriate government agencies to increase awareness 
amongst consumers to help them better identify and report 
potential counterfeits.
    I am eager to hear what e-commerce platforms and 
marketplaces are doing to address this problem and how they are 
incorporating feedback from the DHS report to increase safety 
and educate consumers on their platforms. I also look forward 
to hearing what steps rights owners are taking to protect their 
brands and how they are collaborating with platforms and 
marketplaces to do so. I believe collaboration can and must 
occur between online platforms and marketplaces, law 
enforcement, and rights owners to protect consumers.
    I want to thank the witnesses for their time, and I look 
forward to your testimony. I yield back.

    Ms. Schakowsky. The gentleman yields back. And now the 
Chair would like to remind Members that pursuant to committee 
rules, all Members' written opening statements shall be made 
part of the record.
    And now I will introduce the witnesses that we have today, 
and I welcome all of you. Dr. David Friedman is Vice President 
of the Advocacy at Consumer Reports. Mr. Dharmesh Mehta, Vice 
President of World Customer Trust and Partner Support at 
Amazon. Oh, I skipped--who did I skip? OK. Next, is my friend, 
Lori Wallach, who is Director of Global Trade Watch at Public 
Citizen.
    And then, Ms. Amber Leavitt, Associate General Counsel and 
Head of IP at eBay. Mr. Jeff Myers, Senior Director for 
Intellectual Property at Apple, and finally, Mr. Andrew Love, 
Head of Brand Security/Investigations/Global Enforcement at 
Specialized Bicycles. Welcome all of you, and we want to thank 
the witnesses for joining us today. We look forward to your 
testimony.
    And at this time, the Chair will recognize each witness for 
5 minutes to provide your opening statement. Before we begin, I 
want to explain the lighting system. I think most of you know 
but, if not, I want to tell you that in front of you is a 
series of lights. The light will initially be green at the 
start of your opening statement. The light will turn yellow 
when you have 1-minute remaining, and please begin to wrap up 
your testimony at that point. The light will turn red when your 
time expires, and we would really like you to keep to that 5 
minutes.
    So, Mr. Friedman, you are recognized for 5 minutes.

    STATEMENTS OF DAVID FRIEDMAN, VICE PRESIDENT, ADVOCACY, 
 CONSUMER REPORTS; DHARMESH MEHTA, VICE PRESIDENT OF WORLDWIDE 
   CUSTOMER TRUST AND PARTNER SUPPORT, AMAZON; LORI WALLACH, 
 DIRECTOR, GLOBAL TRADE WATCH, PUBLIC CITIZEN; AMBER LEAVITT, 
  ASSOCIATE GENERAL COUNSEL AND HEAD OF IP, EBAY; JEFF MYERS, 
 SENIOR DIRECTOR FOR INTELLECTUAL PROPERTY, APPLE; AND, ANDREW 
LOVE, HEAD OF BRAND SECURITY/INVESTIGATIONS/GLOBAL ENFORCEMENT, 
                      SPECIALIZED BICYCLES

                  STATEMENT OF DAVID FRIEDMAN

    Mr. Friedman. Try that again, how is that?
    Ms. Schakowsky. There you go.
    Mr. Friedman. Technology. Thank you, Chairwoman Schakowsky, 
Ranking Member Rodgers, and members of the subcommittee for 
inviting CR to testify today. We are here today because 
American families face new threats in the marketplace. A 
patchwork of poorly enforced regulations offers few safeguards 
for Americans grappling with seismic shifts in the economic and 
media landscapes.
    With little governing of the accuracy of online claims, 
consumers face a true uphill battle engaging the value, the 
quality, and the authenticity of goods and products available 
to them. Now what is so stunning about this is it is the exact 
same challenge Consumer Reports faced when we were founded in 
1936. Eighty-four years later we are asking the same 
fundamental question: How do we ensure that the marketplace 
works for consumers? Of course, this time, it is the digital 
marketplace.
    Fueled by the incredible power and reach of the internet, 
today's 3.4 trillion-dollar global e-commerce system provides 
what appear to be hundreds of millions of reasonable choices. 
But all too often, it leaves consumers on their own to figure 
out which products are defective and dangerous, which ones are 
counterfeit, and whether the reviews they rely on are fake or 
the websites they are using are manipulating their buying 
decisions.
    The fact is, core parts of the e-commerce system are 
broken. There is no other way to explain the fact that just 
this morning, I was able to find Fisher Price Rock 'n Play 
Sleepers for sale on both Facebook Marketplace and Craigslist 
and from one online retailer, You Are My Everything, despite 
the fact that the product was recalled more than ten months ago 
after being tied to dozens of infant deaths. Or why you could 
buy other hazardous inclined sleepers on Amazon, BuyBuy Baby, 
eBay, and Walmart websites until those companies stepped up and 
pulled the products after the CPSC and Consumer Reports reached 
out.
    There is also no other way to explain the fact that until 
CR shed light on the problem, you could buy a potentially 
counterfeit bike helmet on websites operated by Amazon, Sears, 
Alibaba, and LightInTheBox, despite the fact that they did not 
have mandated safety certifications, or that in one afternoon, 
a Consumer Reports reporter spotted over a dozen different 
products on Amazon with inflated ratings fueled by thousands of 
fake reviews, including an Amazon's Choice headphone adapter 
with reviews for a totally different product, an eyelash growth 
serum, of all things.
    Today, a core problem in the e-commerce is clear: there is 
a fundamental lack of online platform accountability, and 
accountability that can be created in three steps. First, 
online marketplaces should absolutely be held responsible when 
they are or should be reasonably aware of hazardous products or 
illegal behavior, including fake reviews and other manipulative 
practices. They should also be required by law to reasonably 
search for and deter abuses like these.
    Second, after being undermined for decades, the authorities 
of critical consumer protection agencies must be strengthened 
in order to address the limitations or gaps hindering their 
ability to police online marketplaces. This is especially true 
for the FTC. Finally, the CPSC, FTC, and NHTSA have about half 
as many people--half--working for them today compared to 1980, 
while the economy has tripled in size and dramatically changed. 
Congress should at least double their budgets and significantly 
increase their staff so consumers don't have to carry such a 
large burden to keep themselves and their families safe in both 
the digital and physical marketplaces.
    Members of the committee, you are here to help your 
constituents, in other words, consumers, and too, often the 
digital marketplace is failing them. It is time to fix the 
system by shifting greater responsibility to online platforms 
and ensuring consumer protection agencies can create and 
enforce accountability in the system, accountability that will 
spur companies to put their innovative power to use to help 
their customers.
    Consumer Reports will continue to expose dangerous 
products, counterfeits, fake reviews, and other schemes because 
consumers deserve a fair, safe, and transparent digital 
marketplace, one that they can trust and that fundamentally 
delivers on its immense promise. We look forward to working 
with this subcommittee and any company interested in realizing 
a digital marketplace that puts consumers first. Thank you.
    [The prepared statement of Mr. Friedman follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Schakowsky. The gentleman yields back.
    And, Mr. Mehta, you are recognized for 5 minutes.

                  STATEMENT OF DHARMESH MEHTA

    Mr. Mehta. Thank you, Chairwoman Schakowsky, Ranking Member 
McMorris Rodgers, and members of the subcommittee for inviting 
me to participate in today's hearing. I would also like to 
thank the full committee, including Chairman Pallone and 
Ranking Member Walden.
    My name is Dharmesh Mehta and I am the vice president of 
Worldwide Customer Trust and Partner Support at Amazon. I have 
the privilege of leading the teams that are dedicated to 
ensuring that we prevent fraud, counterfeits, fake reviews, and 
other forms of abuse from harming our customers, brands, and 
selling partners, as well as the teams dedicated to helping 
support our selling partners and succeeding in our stores. I 
also work very closely with the Amazon teams dedicated to 
ensuring that we prevent unsafe or otherwise noncompliant 
products from being sold in our stores.
    Amazon's goal is to be Earth's most customer-centric 
company and we are regularly cited as one of the leading 
companies in this regard. Stores like ours provide tremendous 
selection, convenience, and value to consumers but, 
unfortunately, this also presents an attractive target for 
criminals and bad actors that attempt to attack our stores. To 
maintain Amazon's high level of trust with customers, we make 
record investments in proactive technology-driven systems and 
expert human investigators.
    We launch innovative tools and capabilities that continue 
to improve, and we partner with government agencies, 
policymakers, and law enforcement to hold bad actors 
accountable. We know that if customers don't trust us, they can 
and will shop elsewhere, and a key part of earning customers' 
trust is ensuring that only authentic and safe products are 
sold in our stores.
    We strictly prohibit the sale of counterfeit products and 
we require all products to comply with applicable laws, 
regulations, and Amazon policies. But even more importantly, 
Amazon invests tremendous resources in preventing counterfeits, 
unsafe products, and other types of abuse. In 2019 alone, we 
invested over $500 million and had more than 8,000 employees 
who focused on preventing fraud and abuse.
    As a part of these investments, Amazon invests heavily in 
proactive efforts designed to stop bad actors before they are 
able to create new selling accounts and to stop bad listings, 
including counterfeits and unsafe products, from ever being 
seen in our stores. Third parties trying to create a new 
selling account go through a set of enhanced vetting, including 
a number of identity and payment-related verifications, and we 
also use proprietary machine learning technology to stop bad 
actors before they can list a single product for sale. In 2019, 
our proactive efforts blocked over 2.5 million bad actor 
account creation attempts before they were able to publish a 
single product for sale.
    We also continue to monitor all seller accounts over time, 
including through technology that scans each of the more than 
five billion listing updates that are submitted daily to our 
catalog. When we find something concerning, we may block that 
listing, require additional verification to sell that product, 
and/or conduct further investigation. We have similar ongoing 
processes in place to monitor or stop potentially fake or 
abusive reviews.
    As a result of these efforts, in 2019, we proactively 
blocked over six billion suspected bad listings and proactively 
blocked more than 100 million suspected fake reviews. Our 
efforts have ensured that 99.9 percent of pages viewed in our 
store have not had a valid report of counterfeit infringement. 
In addition, we have developed industry-leading brand 
protection tools such as Brand Registry, Transparency, and 
Project Zero. These tools empower rights owners to partner with 
us and help protect their brands so that collectively we can 
drive counterfeits to zero.
    And they are working. For brands that are using all of our 
brand protection tools, we have been able to, together, 
virtually eliminate counterfeits for these brands. But we know 
we are not perfect and so we also continuously listen to more 
than 45 million pieces of weekly feedback that we receive from 
customers and others to search for any indication of an issue, 
helping us to swiftly remove bad listings that made it past our 
proactive controls. Where we find an issue, we not only quickly 
take action to address the specific defect, but we also use 
this to constantly improve our proactive controls to prevent 
these issues from occurring in the first place, allowing our 
proactive controls to continually get better.
    This monitoring of large amounts of customer feedback can 
also allow us to find potential issues well before other 
industry participants or regulators have detected them or 
developed clear guidelines on how to handle a situation. As a 
result, we also regularly alert regulators to the issues we are 
seeing and we work together to establish new guidelines, not 
just for Amazon, but for the entire industry.
    We also partner with government agencies and law 
enforcement to hold bad actors accountable. We report all 
counterfeiters that we block from our stores to the Department 
of Homeland Security and the National Intellectual Property 
Rights Coordination Center, aiding them in putting together 
stronger criminal cases against bad actors. We also pursue 
litigation both on our own and in partnership with rights 
owners. Since 2015, we have brought lawsuits against over 1,000 
defendants for attempted abuse in our stores.
    Amazon will continue to invest heavily and continue to 
innovate on behalf of our customers and our selling partners to 
ensure that only authentic and safe products are sold in our 
stores. However, we know that success will require all of us 
across the private and public sectors to partner together in 
this fight to stop counterfeit and unsafe products.
    We welcome the opportunity to work with this committee and 
anyone else who is committed to eradicating counterfeits and 
unsafe products from the retail industry. I look forward to 
continuing this discussion and I am happy to answer any 
questions.
    [The prepared statement of Mr. Mehta follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Schakowsky. Thank you.
    And now I recognize Ms. Wallach for 5 minutes.

                   STATEMENT OF LORI WALLACH

    Ms. Wallach. Thank you, Madam Chairwoman and the ranking 
member and the full committee and ranking member chairs. I am 
Lori Wallach from Public Citizen's Global Trade Watch. Public 
Citizen is a national public interest organization founded in 
1974, with half a million members and supporters nationwide. 
Thank you for the opportunity to testify today on this serious 
threat posed to the American consumers by a growing tsunami of 
unsafe products facilitated by e-commerce sales.
    When many people think about counterfeits or fakes, they 
think of knockoff Gucci bags or fake Rolexes and they're being 
sold on street corners. But increasingly and to a great extent, 
because of the exponential growth of e-commerce as a means by 
which Americans buy products, consumers are being widely 
exposed to serious consumer health and safety risks by fake 
products. Fake products being those which are now bought online 
of higher value and high consumer risks.
    Fake and unsafe products produced anywhere in the world 
gain millions of potential customers with sales and delivery 
made quick and easy listed on well-branded, e-commerce 
platforms which provide an air of legitimacy. In the face of a 
business model designed to evade responsibility with online 
retailers claiming not to be sellers and thus not responsible 
for the accuracy of the listing or the safety of the good--in 
contrast to brick-and-mortar retailers--e-commerce consumers' 
last resort is on the government agencies that are responsible 
for health and safety.
    But no, because today, online retailers are able to use 
trade law loopholes to skirt normal Customs procedures and 
inspections. Buried in the 2015 Trade Facilitation and Trade 
Enforcement Act was a change that has functioned like a deep-
sea earthquake, spawning the tsunami of potentially fake and 
dangerous e-commerce imports that evade U.S. safety inspection. 
That change was to Section 321 of the Trade Act of 1930.
    It allowed goods, it allowed Customs to allow goods with a 
value below eight hundred dollars to be imported by one person 
on one day, admitted duty-free, tax-free, without any of the 
normal data required with respect to where good was made, 
detailed descriptions of what it is, or any kind of a 
classification number or a tariff number. The idea is 
efficiency. We all know of de minimis when you can, for a long 
time, list two hundred dollars' worth of goods when you are 
flying back in from a trip overseas.
    By moving it from two hundred to eight hundred, two very 
big consequences emerged. First, products of a much higher 
value can get de minimis treatment and so the variety of 
products that could be sold expanded enormously. Now e-commerce 
retailers use it to bring in millions of individually packaged 
goods every day as compared to the two hundred-dollar level 
which mainly was travelers. Many of these goods were too 
valuable to enter duty-free, tax-free, and inspection-free when 
the rate was two hundred dollars, so there are many goods that 
have a high risk to consumers: Electric scooters we have heard 
about, hoverboards, airbags, medical equipment, major 
electronics, et cetera.
    Second, the volume of de minimis shipments skyrocketed 
because the eight-hundred-dollar limit made it commercially 
viable. It is not just individual travelers. So, right now, 
according to the Customs Department, 1.8 million de minimis 
shipments arrive and are cleared without inspection every day--
1.8 million every day--one million from China by air alone.
    And because the de minimis shipments skirt the normal 
Customs procedures, it effectively handcuffs the ability of the 
Consumer Products Safety Commission and the other agencies 
responsible for our safety inspections who are co-located with 
Customs in ports, because they all rely on the data that isn't 
capped for those products to be able to do the risk assessments 
and targeting. So, typically, the CPSC has somebody from their 
import surveillance operation in a port and they have data in 
advance. Normal shipments come in and in advance, under Customs 
rules, if it is not de minimis, you have to know where it came 
from, it has various codes.
     The risk is----
    Ms. Schakowsky. You need to begin to wind down. We are past 
time. Oh, no. Yes, we are.
    Ms. Wallach. There is a risk assessment system that allows 
these goods to be caught. As a result, now we have goods coming 
in that are not being caught, and I recommend to the committee 
the CPSC's Office of Import Surveillance's report, e-Commerce 
Assessments, that lays out the deficiencies and what the agency 
needs to deal with them. Thank you very much.
    [The prepared statement of Ms. Wallach follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Schakowsky. I thank you.
    And now, Ms. Leavitt, you are recognized for 5 minutes.

                   STATEMENT OF AMBER LEAVITT

    Ms. Leavitt. Chairman Schakowsky, Ranking Member McMorris 
Rodgers, members of the subcommittee, I appreciate the 
opportunity to appear before you. My name is Amber Leavitt and 
I am Associate General Counsel and Head of IP for eBay. eBay is 
a global commerce platform that connects buyers and sellers 
around the world and promotes commerce that is driven by 
people.
    Founded in 1995, eBay's core purpose has never changed, 
connecting people and empowering economic opportunity for all. 
eBay enables hundreds of thousands of American small businesses 
in every corner of the country and reaches 183 million buyers 
in more than 190 markets around the world. Over a third of 
American small businesses on our platform are from rural or 
small towns, and thirty-six percent operate a brick-and-mortar 
store.
    eBay is not a retailer. We do not buy or sell goods, nor do 
we compete with our sellers by manufacturing or selling 
products on our own. We succeed when entrepreneurs and small 
businesses that use our platform succeed. eBay's commitment to 
consumer safety and intellectual property rights protection is 
longstanding and a central value to our company. Our platform 
is built on trust, trust that a buyer will receive whatever he 
or she has purchased and that a seller will be paid for that 
good. The vast majority of listings on eBay come from honest, 
law-abiding sellers.
    Counterfeits and harmful items are simply not welcome on 
eBay, but bad actors will always try and game the system. We 
fully recognize that more needs to be done and we must work 
collectively to stop bad actors from using eBay or any other 
medium for criminal or illicit activity. As threats against 
consumers and rights owners continue to evolve, eBay 
continuously seeks to improve our efforts to fight against the 
bad actors and remove any product that shouldn't be on the 
site.
    We started this process a long time ago, but as e-commerce 
grows, we, too, need to enhance our efforts. We invest heavily 
each year to fight unlawful listings, including counterfeit 
goods that appear on the platform. eBay takes an aggressive 
approach of prevention, detection, and enforcement to keep 
prohibited items off the site, remove them as quickly as 
possible if and when they do appear, and take action against 
those bad actors improperly using the platform.
    Central to eBay's anti-counterfeiting efforts is our 
partnership with over 40,000 registered rights owners through 
our verified rights owner program, otherwise known as VeRO. 
Participation in the VeRO program, which was launched in 1998, 
enables rights owners to report potentially unlawful listings 
to eBay, including copyright and trademark infringement claims. 
The VeRO program allows eBay to promptly remove a listing 
typically within 24 hours of being reported by an intellectual 
property rights owner.
    eBay has invested heavily in a complementary mix of human 
resources and technical tools and mechanisms to keep prohibited 
items off the site. With over 1.4 billion listings on our site 
globally at any given time, eBay continues to develop new 
technology focused on the proactive detection of potentially 
problematic listings on the site. eBay has a well-established 
global investigations team in place to provide support to law 
enforcement agencies in the investigation and prosecution of 
cases impacting eBay's services, including the sale of 
counterfeit goods.
    Our teams not only support law enforcement by providing 
relevant records upon request, but also conduct our own 
investigations into misuse of our platform. We proactively 
refer counterfeit goods cases to law enforcement for potential 
investigation and prosecution, in particular where the 
counterfeit items pose a health or safety risk to eBay's users. 
In addition, eBay supports the IPR Center's e-commerce working 
group which is exploring ways to share data on bad actors among 
participants.
    Finally, the investigations teams often work closely with 
rights owners who are the true subject matter experts on their 
products and can help eBay build a strong case for referral to 
law enforcement. We continue to work both proactively and 
reactively with law enforcement on cases involving the sale of 
counterfeit goods.
    eBay is deeply committed to our users' protection. As an e-
commerce leader in developing policies and tools to combat 
infringing or unsafe goods, we are committed to working with 
you and other partners to combat counterfeit goods and protect 
American consumers. Thank you and I look forward to your 
questions.
    [The prepared statement of Ms. Leavitt follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Schakowsky. Thank you.
    And now, Mr. Myers, you are recognized for 5 minutes.

                    STATEMENT OF JEFF MYERS

    Mr. Myers. Good morning, Chairwoman Schakowsky, Ranking 
Member McMorris Rodgers, and members of the subcommittee. My 
name is Jeff Myers and I am Apple's Senior Director for 
Intellectual Property. I lead a team that works every day to 
protect Apple's revolutionary products and the customers who 
use them. I appreciate the opportunity to participate in this 
important hearing about the sale of counterfeit goods, an issue 
that is first and foremost, about customer safety. I would like 
to share my perspectives on the problem, what Apple is doing to 
address it, and what more can be done.
    Apple is a proud American company with a 40-year history of 
innovation. We take pride in making the best products, and the 
customer experience is at the heart of everything we do. While 
this commitment to our customers has been the foundation of 
Apple's success, it has also made Apple a target for criminals 
who deceive customers into purchasing counterfeit Apple 
products, which puts customers at risk of serious safety 
issues.
    Today, criminals increasingly use online third-party 
marketplaces to sell counterfeit Apple products. Fraudsters use 
Apple's name, logos, designs, and marketing images in their 
online offers to deceive customers into believing that fake 
Apple products are the real thing. Even after making a 
purchase, customers might be unaware that they purchased a fake 
product, and when that product does not meet Apple's high 
standards for safety and performance, it diminishes customers' 
trust in the quality of Apple's products and can have serious 
safety implications.
    Take counterfeit power adapters and replacement batteries, 
for example. Unlike genuine Apple products, these products are 
not subject to industry standard safety testing and they tend 
to be poorly constructed with inferior or missing components, 
flawed design, and inadequate electrical installation. This 
poses a serious safety threat to customers. UL, one of the 
world's leaders in product safety testing and certification, 
examined four hundred counterfeit iPhone power adapters and 
found that ninety-nine percent of them failed basic safety 
tests, sometimes posing a risk of fire or even lethal 
electrocution.
    Apple works tirelessly to combat counterfeits at all 
stages, from global production and distribution, to sale in 
both online and brick-and-mortar stores. My enforcement group 
consists of over thirty dedicated professionals operating out 
of nine global offices and working with law enforcement 
authorities in more than a hundred countries. Apple monitors 
over seventy-five online marketplaces around the world.
    When we discover counterfeit Apple products, we notify 
online marketplaces of the problem so they can remove the 
offers and hopefully take action against the sellers. While 
online marketplaces generally remove these listings when we 
report them, the impact can be fleeting as criminals simply 
relist counterfeit goods creating a game of whack-a-mole.
    We also work collaboratively with industry and governments 
around the world to identify trends and to share intelligence 
about criminal networks. Apple is participating in the 
administration's work to combat the counterfeit trade and we 
collaborate with the U.S. Customs and Border Protection and 
Homeland Security investigations among many other agencies. By 
working with federal authorities to better identify counterfeit 
Apple products at the border, we have supported over one 
thousand seizures per year.
    Of course, Apple cannot address these challenges alone, and 
we believe there are actions the marketplace should take to 
better protect customers. We agree with many of the best 
practices outlined in the recent reports from the Senate 
Finance Committee and the Department of Homeland Security, 
including the following:
    First, marketplaces should do a better job of vetting 
sellers to ensure they are real, reputable companies that will 
stand behind the goods they sell. If a seller can't pass simple 
vetting requirements, they should not be allowed on the 
marketplace. Marketplaces should adopt better policies to 
address repeat offenders and kick them off marketplaces for 
good.
    Third, marketplaces should offer customers more information 
about the identity of sellers on offer pages, or they could 
provide notifications when they learn that a seller was 
supplying counterfeits. Fourth, marketplaces should work more 
closely with companies like Apple and law enforcement to bring 
criminal actions against counterfeiters. We have done this with 
some marketplaces and we appreciate those efforts. Finally, 
there should be greater proof of authenticity requirements for 
certain categories of products where counterfeits comprise a 
significant portion of what is sold, particularly if safety 
concerns are present.
    Thank you for your attention to this issue. Part of the 
solution to this problem is increasing public awareness of the 
ubiquity of counterfeits online, and we appreciate the 
opportunity to appear today in that effort.
    [The prepared statement of Mr. Myers follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Schakowsky. Thank you.
    And now, Mr. Love, I see that you have some show-and-tell 
as well. You are recognized for 5 minutes.

                    STATEMENT OF ANDREW LOVE

    Mr. Love. Thank you very much for this kind invite, and 
thank you, committee members, for all of your legislative work 
when it comes to cycling.
    Chairman Schakowsky, thank you for sponsoring the Bicycle 
Commuter Act of 2019 and being a member of the bipartisan 
Congressional Bike Caucus. And I am grateful for so many 
members of this committee who are supportive of cycling with 
your actions. When I looked into all of you and what you have 
done, almost all of you are active in some respect in your 
local communities.
    My name is Andrew Love and I am the head of Brand 
Protection and Global Investigations for Specialized Bicycles. 
Specialized created the first production mountain bike, the 
Stumpjumper, in 1981, and our entire mission since has been 
innovation and improving the ride for both experienced cyclists 
and those just discovering the sport. Everybody counts.
    May I see a show of hands of the people in this room who 
ride, casually or seriously? Great. I have been fighting 
counterfeits for the past 12 years on e-commerce and social 
media platforms. Other panelists here are speaking very 
eloquently on a macro level. I am a hands-on investigator and 
so I will speak granularly and make my testimony here as 
immediate and tangible as the counterfeit bikes and helmets I 
have brought with me.
    When I started fighting fakes in 2008, I remember being 
able to go through the entirety of the threatened parts of the 
eBay cycling section in a day or two. I could look at it all 
and think with satisfaction, my job here is done. Fast forward 
12 years. As of last night, the eBay cycling section has 2.57 
million new items for sale and 154,000 used ones.
    Of the new items, 1.27 million of them were being sold 
direct from China, half of those being branded; half of them 
are unbranded, generic items I will speak more about later, and 
eBay is one of eighty-five marketplaces and social media 
outlets we are active on. Mrs. Wallach, one of the other 
panelists, referred to the tsunami and that is an exact 
description of what we face.
    I am grateful for the longstanding partnership I have had 
with eBay's investigators and VeRO teams. As tough as the fight 
is, it would be so much worse without their engagement, not 
just for counterfeits but also for bike theft and fraud that 
threaten consumers. The counterfeit bicycle you see here is a 
model called the Specialized Tarmac SL6. One of our athletes, 
Julian Alaphilippe, led the Tour de France for three weeks last 
year on a bike that looked exactly like that.
    Success and being an innovative technology driver have made 
Specialized the number one target in the cycling industry. When 
our professional athletes win, the counterfeiters see a 
business opportunity. When this counterfeit frame and wheels 
were surrendered to Specialized, it was a complete bike, so I 
took it for a ride. The rear wheel frame's interface was so 
badly made, I pulled the rear wheel out of the dropouts twice 
in the first couple miles. In my 15-minute, very tentative 
ride, it showed itself to be a terrible bike with all sorts of 
basic construction problems and a front fork with the 
structural integrity of a wet sponge.
    We all ride at Specialized and so do our families. Safety 
is so personal to us. These helmets you see here, I ride the 
real version of these fakes and so does my wife, so does my 
daughter, and so does my mother. I am very passionate about the 
danger these counterfeits represent. And during the question 
and answer session, if someone asks me to, I will happily 
destroy one of these fake helmets in a rough approximation of 
the CPSC test.
    I have read all the submitted testimony from my fellow 
panelists and I fully support the big pictures they outline as 
well as the points laid out in the January 24th Presidential 
Memorandum on combating counterfeiting, and I would like to 
highlight a few specifics that would help Specialized protect 
cyclists.
    One, platforms need to provide more seller information so 
consumers know who they are buying from and investigators like 
me can peel the onion layers and see which sellers are very bad 
actors. De minimis at eight hundred dollars is way too high; we 
have all been speaking to that. It needs to come down. And 
generic items for sale on e-commerce marketplaces that don't 
bear trademarks must have someone take responsibility. The eBay 
cycling helmet section as of last night, has 27,406 listings 
being sold directly from China into the United States. Now I am 
sure some of those helmets are fine. I am equally sure that 
many of them are not.
    And Consumer Reports did some investigations on this. I 
have privately emailed CPSC and spoken to every platform 
privately, urging action. Also, financial attack vectors are 
crucial. If you can frustrate the counterfeiters moving money 
around that hurts them. People talk about the frustration of 
anti-counterfeit work as being like whack-a-mole. I prefer to 
starve and poison the moles. It works very well. Follow the 
money is an old and effective tactic.
    In summary, our main advantage versus the bad guys is 
exactly what we are doing right now, collaboration. We have an 
internal saying here at Specialized: Together we win. I deeply 
believe that. And thank you so much for your time and your very 
thoughtful engagement today.
    [The prepared statement of Mr. Love follows:]
    [GRAPHIC] [TIFF OMITTED] T3687.101
    
    [GRAPHIC] [TIFF OMITTED] T3687.102
    
    [GRAPHIC] [TIFF OMITTED] T3687.103
    
    Ms. Schakowsky. Thank you very much.
    So we have now concluded the witness opening statements, 
and at this time we will move to member questions. Each Member 
will have 5 minutes to ask questions of the witnesses and 5 
minutes total for your answers. I will start by recognizing 
myself for 5 minutes.
    Ms. Wallach, in your testimony you explained how a vast 
majority of e-commerce shipments to the United States skip 
normal, or at least we thought normal, Customs procedures and 
all inspections because they enter the United States under a de 
minimis waiver. I said my goal is to increase CPSC's staff 
presence at ports of entry.
    Why do I need to care about de minimis waivers, and what 
actions do you think need to be taken to make sure that we 
protect consumers?
    Ms. Wallach. Thank you, Madam Chairwoman.
    Number one, why to care about de minimis is that right now 
the policy under which most e-commerce individual packages are 
entering basically makes it almost impossible for the Consumer 
Products Safety Commission or the other agencies of the 
government responsible for health and safety to actually screen 
dangerous goods.
    So Customs did a spot inspection in 2017 of de minimis 
goods that would otherwise not be inspected. They found a 43 
percent fail rate. They found a variety of dangerous drugs. But 
they also found many counterfeit and dangerous products. In 
2018, there was another round of this at seven international 
mail, not shipping, not ocean shipping facilities, 
international mail and express package deliveries, and they 
found again an enormous number of violations. Two-thirds of it 
is from China, Hong Kong is second, with Turkey and a couple of 
other countries.
    What it means is that all of the CPSC good targeting and 
risk assessment programs basically are skirted. So the answer, 
according to the CPSC, is on three levels. One, they need the 
data. Right now, because of the de minimis data runaround, they 
don't know what the good is to be able to figure out if they 
ought to be inspecting it.
    Number two, they need to be basically funded and slightly 
reorganized to be at the places where the de minimis shipments 
come. The surveillance, the import surveillance unit found that 
seventy-five percent of de minimis packages come in five ports 
where express shipments come in, and CPSC has people at only 
one of them part-time at JFK. So all the other places where 
CPSC has folks are the places that used to make a lot of sense, 
the big ports where lots of high-value shipments came and they 
got advance notice of containers.
    That is not where these shipments are coming. So they need 
more staff in different places and, currently, only Customs has 
any information about the international mail shipments. So the 
numbers that CPSC has laid out of what they face, which--brace 
yourself--they think fifty-seven percent of all the products 
under their jurisdiction that come into the country will be 
coming in under de minimis, which, if not changed, means 
uninspected, by 2023. Right now, that number is--and that would 
be sixty million packages. Right now, it is thirty-six million 
packages, thirty-eight percent of the stuff that CPSC is 
supposed to be looking at.
    So the change is dramatic. It means the difference between 
goods being inspected and not.
    Ms. Schakowsky. Thank you.
    So I think I am going to move on. Mr. Love, do de minimis 
waivers affect your company? If products aren't inspected at 
ports of entry, what does that mean for people who are buying 
bicycle helmets and what does it mean for your business?
    Mr. Love. It absolutely affects us. And what you were 
describing of it, there is five ports where de minimis 
shipments come in. When I have looked into the fake ID buys I 
make of counterfeits, and I have hundreds and hundreds of 
these, I found it is actually only three ports where China 
postal comes into the U.S. Postal Service and all of these 
shipments are de minimis. They are very inexpensive. Even that 
counterfeit bicycle, the fake sold for $650. That is under the 
eight-hundred-dollar de minimis level, so that package that 
that bike came in would not have been inspected. And it is not 
a huge number, as you pointed out, of places that you would 
need to put a number of people to make an impact.
    Ms. Schakowsky. Thank you. I am just about running out of 
time. But fake reviews have crowded out real comments. They 
trick consumers into buying unworthy products and they put 
honest sellers at an unfair disadvantage. And, let's see. Let's 
see, Mr. Friedman, I wonder if you wanted to comment on that.
    Mr. Friedman. Look, fake reviews under current law are 
illegal, but the platforms do not have an incentive right now 
to police them. In fact, in many ways the better the reviews, 
the more products they sell, the more money they make. That is 
why we have to completely upend the incentives in the system. 
Even actions that are illegal right now are going on day after 
day after day in the system.
    And I appreciate that the platforms are trying to police 
them, but even as you heard earlier, Amazon talking about 
investing, say, 500 million dollars in policing their system, 
that is a rounding error in their annual revenues. That is not 
what we need from these companies and that is why we need both 
the companies and government to step up and require them to 
take more responsibility.
    Ms. Schakowsky. OK. The 5 minutes goes fast. And I now 
recognize Ranking Member Mrs. Rodgers for 5 minutes.
    Mrs. McMorris Rodgers. Thank you, Madam Chair.
    During times of panic and anxiety like we are currently 
experiencing with the spread of coronavirus here in the United 
States, and it is hitting my home state Washington State 
particularly hard, bad actors try to prey on consumers.
    Mr. Mehta, I imagine you are seeing a lot of traffic on 
your platform right now, both with people worried to leave 
home, scammers trying to sell fake products promising to treat 
or cure coronavirus. What steps is Amazon taking to prevent the 
sale of fake products related to the coronavirus?
    Mr. Mehta. Thank you, Ranking Member, for the question. It 
absolutely is a trying time; as someone who just flew in from 
Washington two nights ago, I can tell you, that there are a 
number of actions Amazon is taking to prevent the spread of 
fake products related to the current coronavirus situation. 
Whether it is products making false claims, products attempting 
to gouge customers, there is no place for false claims or price 
gouging on Amazon.
    We have removed proactively more than a million products 
making false claims and tens of thousands of products that were 
attempting to price gouge customers. This is a rapidly evolving 
situation and we are being vigilant in making sure we continue 
to monitor as things develop and that we protect customers to 
the best of our abilities.
    Mrs. McMorris Rodgers. Thank you. E-commerce platforms and 
third-party marketplaces online provide undeniable benefits to 
consumers and small businesses alike, but they also present 
opportunities for bad actors. This problem is complex and it is 
clear that the heavy hand of government will not solve it. We 
must leverage technology and innovation here.
    Ms. Leavitt, can you explain the technological tools eBay 
uses to identify counterfeit listings?
    Ms. Leavitt. Thank you for your question. Yes, as I 
mentioned in my opening statement, we are focused heavily on 
prevention, detection, and enforcement. With respect to 
prevention, we have a number of different filtering methods in 
place to try to block listings that we suspect may be 
problematic from appearing on the site. We also have different 
algorithms in place that are monitoring for seller behavior and 
flagging different sellers for review.
    So we have the technological means and then we also have 
human review that is taking place. Important to this is the 
partnership that we have with third parties, with brand owners, 
industry associations, and government agencies to provide the 
inputs that we need to continually go back and improve those 
methodologies that we use. We also have different measures in 
place to prevent sellers who have been suspended from using our 
services, from reappearing on the site again.
    Mrs. McMorris Rodgers. Thank you.
    Mr. Mehta, would you address Amazon's use of technology 
addressing counterfeit vetting?
    Mr. Mehta. Thank you, Ranking Member, for the question. 
Absolutely. Technology is critical to preventing counterfeit at 
scale. As part of the investments we make, we invest in a large 
amount of not only technology and machine learning to 
constantly scan every listing update as it comes into our 
store, but we have also delivered innovative solutions such as 
Transparency.
    As you mentioned in your opening remarks, being able to 
trace every individual product unit from manufacturing through 
the supply chain to the end customer is critical to how we 
solve this at scale. Transparency is a program we launched two 
years ago that allows brands and manufacturers to apply a 
unique code to every unit they manufacture. We have over 7,500 
brands with over 25,000 products that are using Transparency 
that have allowed us to stop 400,000 counterfeit products 
before they were ever shipped to a customer. And it is those 
types of technological solutions that we think really will work 
at scale.
    Mrs. McMorris Rodgers. Thank you.
    Mr. Myers, as I noted in my opening statement, China is the 
main source of counterfeit and fake products coming into the 
United States. How does the administration revising the trade 
agreement with China combined with DHS enforcement efforts 
provide us an opportunity to reset the fight to combat the 
counterfeit issue? How does it impact Apple's thought process 
when it comes to your own supply chain and countering 
counterfeits coming out of Chinese factories?
    Mr. Myers. So I think relative to counterfeiting, you know, 
at Apple, customer experience is everything and safety comes 
first for our customers. And we view the counterfeit problem as 
a definite global problem, something that affects what we see 
worldwide. We have team members all over the world. We monitor 
seventy-five platforms worldwide in a hundred countries, and so 
China is definitely one that we monitor closely. And I think, 
you know, we certainly think that it is not necessarily 
surprising that that might be the fact given the number of 
consumer electronics that are manufactured in that region.
    Mrs. McMorris Rodgers. Is the trade agreement helping?
    Mr. Myers. I would say that is something that I would, you 
know, I would look into to tell you definitively if that is 
helping and what provisions therein are helping. I think that 
we are focused, certainly, on working in any and all capacities 
and interested in doing so with any government and customs 
agency, law enforcement, et cetera.
    Mrs. McMorris Rodgers. OK, thank you. Thank you all. I 
yield back.
    Mr. Cardenas. [presiding]. The gentlelady yields back. The 
Chair recognizes Mr. Pallone, the chairman of the full 
committee, for 5 minutes.
    Mr. Pallone. Thank you.
    I wanted to start with Mr. Mehta. I wanted to get more 
clarity on Amazon's practice of comingling inventory from 
different sellers. Under this practice from what I understand, 
consumers purchasing a product from a third-party seller or 
even from Amazon directly may unknowingly receive a product 
supplied by a different seller, and I think that can create 
serious problems when unsafe counterfeit products are mixed 
together with authentic goods.
    I wrote to Amazon on this issue before, but really did not 
receive an adequate response. So let me ask, yes or no, Mr. 
Mehta. Does Amazon comingle inventory from different sellers?
    Mr. Mehta. Thank you, Chairman Pallone, for the question. 
By work----
    Mr. Pallone. I am only trying to make it quickly because I 
have to go to Mr.--I have another series of questions for----
    Mr. Mehta. The question of comingling is often used to 
refer to our practice of virtually tracking different units 
that are identical and shipping the one closest to a customer. 
Yes, we do engage in that practice.
    Mr. Pallone. OK.
    Mr. Mehta. As part of our fulfillment.
    Mr. Pallone. All right. So is there any way for customers 
to be sure that they are getting the products supplied by the 
seller they see listing the product or to know when they 
aren't?
    Mr. Mehta. Thank you for the question. So when we virtually 
track products and deliver them, the program is designed to 
deliver the identical product that is closest to a customer. We 
do this because it allows us to deliver products to customers 
faster. We allow any one of our sellers to opt-out if they 
don't----
    Mr. Pallone. Well, I think the answer is no, right? You may 
not be able to, you know, in other words like an example, I 
will go on and I will see a book that I want to buy, right. Now 
it may be new, it may be old, various qualities. Presumably, if 
you are buying the older one, you are not going to switch that, 
I would assume, right?
    Mr. Mehta. We do not virtually track and ship the nearest 
product for used products as every used product is different.
    Mr. Pallone. All right, but with new products, presumably 
it would be the one from the seller, but it may not be. That is 
what you are saying and that is the problem.
    Mr. Mehta. Well, what I would say is the root of the 
problem is if there was ever a counterfeit or unsafe product in 
our store, the root of the problem is how did that product get 
available for sale, how is it ever shipped into our fulfillment 
centers? And that is where we put our energy in how we 
proactively stop----
    Mr. Pallone. All right. But I mean, I do think that is a 
problem. I think the answer is no. There is no way for 
customers to be sure they are getting their products supplied 
by the seller they see listed or know when they aren't. The 
answer is no at this point, correct?
    Mr. Mehta. Currently, we do not display anything to 
customers.
    Mr. Pallone. OK. All right, and let me ask you this. In 
your testimony you say that you proactively provide refunds for 
any consumers who received a counterfeit product. If the 
inventory is comingled, how do you know which consumers receive 
the counterfeit or unsafe product?
    Mr. Mehta. Thank you for the question. Again, we refer to 
this as virtual tracking. For every unit in our fulfillment 
centers we know where the source of that unit was and where it 
was sent to. And so----
    Mr. Pallone. So a person would get a refund if they want 
it?
    Mr. Mehta. I am sorry? I didn't----
    Mr. Pallone. In other words, if I say, look, I am concerned 
that the product is counterfeit or it is unsafe, you know, I 
can always get a refund, right?
    Mr. Mehta. Every purchase in our store is protected by our 
A to Z guarantee. And so regardless if whether Amazon sold the 
product or a seller sold the product, if that customer has a 
problem and the seller doesn't take care of them, Amazon will 
take care of them. In addition, if a customer doesn't come to 
us and we learn of a counterfeit, we know the source of that 
inventory and we know the customer that purchased it, we 
proactively refund customers.
    Mr. Pallone. All right, so you will give them a refund. I 
mean, I think you are saying I will give them the refund, but 
the problem is how are they going to know? I mean that is the 
problem because you don't have any--there is no way for them to 
know for sure whether that product was supplied by a given 
seller. They may not know it is counterfeit.
    Mr. Mehta. A customer may be able to determine this, a 
rights owner may tell us, or we may detect it on our own. There 
is a variety of means.
    Mr. Pallone. Maybe. Maybe. All right.
    All right, Mr. Myers, you stated in your testimony, keeping 
up with all the unscrupulous sellers on online marketplaces is 
like a game of whack-a-mole. You shut one down only for another 
to pop up. You also say that online marketplaces should adopt 
better policies to address repeat offenders and make sure they 
are kicked off marketplaces for good. Just tell me, what are 
some policies online marketplaces could implement to accomplish 
this, you know, how effective are you, you know, are they at 
accomplishing this and preventing unsafe counterfeit products 
from reaching consumers?
    Mr. Myers. Sure. And I think one of the things and the 
issues are that counterfeiters, the incentives that they have 
are mainly profit. It is not safety and so it is a significant 
issue. And so we think if you look at the sellers who are 
actually selling the actual products, and there is better 
vetting done of who they are, actually knowing that they are a 
reputable business and there is something behind the particular 
entity.
    In addition, in the repeat offender problem, I mentioned 
that in my opening statement but that is a significant issue. A 
lot of times, individuals who sell counterfeit products will 
have multiple listings, will have multiple sorts of stores 
within marketplaces, and it is difficult for an outsider, not 
the marketplace necessarily, to understand what is going on and 
how prolific that and how quickly that seller can actually 
repost something.
    But also, for consumers, better identity of who the sellers 
actually are, who am I buying something from and understanding 
who that entity is. In some marketplaces, that is difficult to 
determine as well as notifications when a counterfeit is 
identified. Letting the consumer know that something they 
purchased was counterfeit, and then information sharing with 
marketplaces such that we can together build criminal cases 
together that would be helpful to do as well.
    And then, finally, there are certain high-risk categories 
of products where we have found in our test buy programs are 
highly counterfeited and that they also present safety issues. 
And those are areas we would love to have a different way to 
focus on those types of products where authenticity is really 
something that we should, you know, increase the rigor of our 
review prior to those being listed on a marketplace, for 
example.
    There are also other things that can be done. You know, I 
think this hearing is great, again, I think creating an 
opportunity for the public to learn more about the 
counterfeiting problem. I think more resources for law 
enforcement and Customs. We work considerably with both 
agencies and I think more resources there would be incredibly 
valuable.
    Design rights, design patents. Today in Customs you cannot 
use design rights to address a counterfeit problem and it is a 
situation in which, you know, counterfeiters become more 
sophisticated and they will remove trademarks from your, the 
counterfeited products so that you can't use your trademark or 
copyright, potentially, to address the issue. So having design 
rights is another tool.
    Mr. Cardenas. The gentleman's time has expired.
    The Chair now recognizes the ranking member of the full 
committee, Mr. Walden.
    Mr. Walden. Thank you, Mr. Chairman, and thanks again to 
the witnesses. As I mentioned, we have hearings going on 
upstairs and downstairs, so. I want to again thank all of you 
for being here, and I appreciate the work the President has 
done as well and his administration because I think they have 
been laser-focused on this. And it is clear the President is 
committed to fighting against this massive form of illicit 
trade that inflicts harm on American consumers and businesses.
    And Chair Schakowsky and now Mr. Chairman, I would like to 
offer the DHS report entitled ``Combating Trafficking and 
Counterfeit and Pirated Goods'' for the record. Mr. Chairman, 
without objection, would you accept that?
    Mr. Cardenas. Without objection.
    [The information appears at the conclusion of the hearing.]
    Mr. Walden. Mr. Mehta, I am pleased to hear that Amazon is 
supportive of the administration's efforts on this complex 
issue and, in particular, many of the recommendations included 
in that DHS report. Can you explain some of the practices that 
Amazon implements that are suggested in the report?
    Mr. Mehta. Thank you, Ranking Member, for the question. We 
agree. There are a number of best practices in that report that 
we already implement today or plan to in the future, including 
the enhanced vetting of sellers, the efficient and fast notice 
and takedown processes, the higher qualification requirements 
for risky products and who can sell those. And we would also 
like to see even above and beyond that increased enhanced 
prosecution for counterfeiters. That as many folks have talked 
about are about resources for the Department of Justice and 
other law enforcement agencies.
    But, in addition, efforts like the current administration's 
Phase 1 agreement that is requiring China to increase 
prosecution for counterfeiters, we need to strike in more 
countries around the world, including in America.
    Mr. Walden. Is that a good proposal what the administration 
is doing with China?
    Mr. Mehta. I am not intimately familiar with all the 
details.
    Mr. Walden. All right.
    Mr. Mehta. But specifically as it relates to counterfeiting 
and increasing the penalties and stopping the manufacturing and 
distribution in China, we absolutely support that initiative.
    Mr. Walden. Are there other big state actors or other 
countries where this is prevalent that we need to focus on? I 
mean we focus on China a lot, but.
    Mr. Mehta. You know, thank you for the question. 
Unfortunately, we find bad actors in every country, whether it 
is China, whether it is Russia, Ukraine, but also America.
    Mr. Walden. Yes.
    Mr. Mehta. And so we have got to stop counterfeiters 
everywhere.
    Mr. Walden. Wherever they are, OK. Then in your testimony 
you reference Project Zero, which is a new program. It gives 
power to brands and rights owners to remove counterfeits 
directly from the platforms themselves. Can you speak about the 
verification process for brands receiving access to remove 
these counterfeit listings?
    Mr. Mehta. Thank you for the question. So Project Zero is a 
new program and it really is a way for us to partner with and 
empower rights owners so collectively we can drive counterfeit 
to zero. We have over 9,000 brands that are already 
participating in Project Zero. It includes automated 
protections, and product serialization capabilities, but also 
allows brands to directly remove a counterfeit from our store. 
They don't need to report it to us and have us investigate. We 
have now given them the power. It does mean a great deal of 
power that now sits with rights owners to control what is in 
our store.
    Our vetting includes vetting who the brand is, the accuracy 
of their submissions, and we continue to monitor that over time 
to ensure that type of tool is not used to harm small or medium 
businesses.
    Mr. Walden. Yes. Yes, you don't want an anticompetitive 
situation to crop up, either.
    So, Mr. Love, bicycles and related accessories are items at 
high demand and especially for many of my constituents in the 
great state of Oregon. Anybody who ever visits my colleague, 
Mr. Blumenauer, will walk away with a plastic bicycle pin. They 
rely on this for recreation and everyday transportation.
    So, I understand helmets are a highly counterfeited good on 
e-commerce marketplaces. Are there any tips we can arm 
consumers with that might help them identify the counterfeit 
bicycle accessories before they are purchased? Turn on your 
mike there.
    Mr. Love. Absolutely. There are a couple of things you can 
do. Specifically, for Specialized products, we have a part of 
our website on specialized.com at the bottom, it is called 
``counterfeit awareness,'' at the very, very bottom of the 
opening page. And you can look, and if you have a helmet, you 
can ID it based on some things we talk about.
    The problem with putting items like this online, which we 
do, is the counterfeiters are pretty web-savvy, so when they 
see that they will fix the problem. So the biggest thing I can 
tell--and I have seen that. I have seen that.
    Mr. Walden. Yes.
    Mr. Love. Yes, the biggest thing I can tell customers to do 
is to be very savvy. And all of you have bike shops in your 
neighborhoods. You can think of them right down--I know many of 
the dealers in Oregon. You can think of the bike shops down 
your street.
    Mr. Walden. Literally.
    Mr. Love. Yes, visit those businesses.
    Mr. Walden. A block away.
    Mr. Love. And buy from them.
    Mr. Walden. Yes.
    Mr. Love. And if you are going to buy online in the 
marketplace, use common sense. Counterfeits fly in flocks. You 
won't just see fake Specialized helmets. You will also see fake 
helmets from a number of companies. And for some reason, the 
counterfeit Specialized helmets and fake Oakleys always go 
together. I don't know why.
    Mr. Walden. All right.
    Mr. Love. So just use your common sense and if you see a 
two hundred dollar helmet for sale for fifty bucks, yes.
    Mr. Walden. Yes.
    Mr. Love. So.
    Mr. Walden. I think I said that in my opening statement. 
Maybe yes, too good of a deal is too good of a deal.
    Thank you, Mr. Chairman, and thanks to all of you for the 
work you are trying to do to protect consumers. We join you in 
this effort, and I yield back the balance of my time.
    Mr. Cardenas. The gentleman yields back. The chairman, I 
will recognize myself for 5 minutes.
    All the burden seems to be on the patent or copyright 
holder to police the online marketplace for infringing and 
unsafe versions of products. For startups and small businesses 
that might just, who might just have a few employees, this can 
divert significant resources and make it almost impossible to 
do anything about it. It is unfair that bad actors can so 
easily swoop in and enjoy all the success without shouldering 
any risk or investing in any of the research or design or 
testing of their product.
    Take Magformers, the popular toy that young people can use. 
I have some knockoffs here and I have some originals. And the 
bottom line is, when you look at them you cannot tell the 
difference. As an adult you can't tell the difference and as a 
child wanting to play with them, they probably could care less 
if they are originals or not. And it is really important to 
understand that for example, the knockoff that I have here, it 
is broken, and the issue here is that you have these strong 
magnets, it is even hard to get a hold of one.
    These strong magnets, once it breaks can get and be 
ingested by a child. This is very dangerous. It might not seem 
like much. You would probably think that the magnet will just 
pass through. But no, the child has to go through a dangerous 
surgery if they are found to have swallowed one of these 
magnets.
    In many districts across America, you have children who 
have swallowed these magnets. For example, to date we have 
recorded at least 1,600 poison control centers, excuse me, 
1,600 cases in our poison control centers just for these kinds 
of magnets that have been ingested by children all across 
America. This is something that affects rural America, big city 
America; this affects our most vulnerable population, our 
innocent children.
    Mr. Mehta, in your testimony, you talk about a new brand 
protection program called ``Amazon Transparency.'' Transparency 
allows brands to use bar code technology to protect their brand 
from counterfeits and enable customers to authenticate 
products. How much does it cost for businesses to participate 
in this program?
    Mr. Mehta. Thank you for the question, Congressman. The 
Transparency program has two primary costs for brands that 
choose to use it and one is a per unit fee that they pay Amazon 
that ranges between one penny to five pennies per unit. It 
decreases for higher volume. And then, secondly, brands will 
have some implementation costs, because the glory of the 
Transparency program is that as part of the manufacturing 
process, rather than having the same UPC code or the same ISBN 
code on every product, brands will apply a unique Transparency 
code on every product that uniquely identifies it. And when 
products are sold----
    Mr. Cardenas. So when you say ``per product,'' it is like 
this comes in a package of a few units. So what you are saying 
is the bar code that is on the outside box that consists of one 
unit?
    Mr. Mehta. That box would have a unique code.
    Mr. Cardenas. And that is considered one unit. That is one 
box.
    Mr. Mehta. And that is one unit, so.
    Mr. Cardenas. Not if this has a hundred units inside the 
box it is the actual container.
    Mr. Mehta. The box.
    Mr. Cardenas. OK, go ahead.
    Mr. Mehta. So it goes on the packaging or the outside of 
the product, or a swift tag if it is a, you know, apparel item, 
and that code uniquely identifies that package.
    Mr. Cardenas. OK. Does this cost--is that cost exactly what 
it costs Amazon to administer this?
    Mr. Mehta. That cost is basically to cover our variable 
costs for maintaining that program and scanning every one of 
those products. We don't design this program as a place to make 
profit. It really is to help brands and us.
    Mr. Cardenas. So Amazon is a break--this is a breakeven 
technique, technology and opportunity for Amazon?
    Mr. Mehta. This is a program and technology that is about 
how we better protect customers and better protect brands.
    Mr. Cardenas. But when it comes to the costs, because there 
are costs. I talked about small businesses earlier.
    Mr. Mehta. Yes.
    Mr. Cardenas. All I am saying is, so what you are telling 
us on the record is this is a breakeven system within Amazon.
    Mr. Mehta. What I would tell you today is this program is 
not even breakeven. We lose money on that program, but we do it 
because----
    Mr. Cardenas. OK, thank you. It could have saved us a whole 
minute if you would have just told me that from the beginning. 
I am glad to hear that. Thank you so much for your commitment.
    Mr. Love, does Specialized's use of Amazon Transparency, is 
that something that you are aware of?
    Mr. Love. We don't sell on Amazon, so--and we have no plans 
to. So it is a--we are committed to our local bike shop network 
for the distribution of our products.
    Mr. Cardenas. OK, thank you.
    Ms. Wallach, how can we make sure all the burden isn't on 
the small businesses and that the online marketplaces and law 
enforcement are doing their part?
    Ms. Wallach. Thank you, Mr. Cardenas, for that question and 
that is an excellent question. There need to be changes on two 
levels. One is for the government changes with respect to the 
funding and the authorities for the Consumer Products Safety 
Commission that I reference in my written testimony, as well 
for the FTC to step up and do its job. It has its authorities. 
And for Customs to make some of the changes so that the other 
agencies can have the data.
    However, as well there is a strong responsibility on the 
companies. And with respect to some of the programs Mr. Mehta 
is mentioning, those are some of the same responses made when 
the Wall Street Journal did its scary expose about all the 
products it found. And just over the weekend I went through the 
Prohibited Products List and found six different prohibited 
categories of goods on the website, so that it is not clear 
that the technological fixes are addressing the safety issues. 
And, moreover, Amazon clearly has very powerful technology to 
be able to deal with these problems because since then, the 
times I have gone on Amazon I am getting advertisements for 
small crossbows, flares, and other prohibited items.
    Mr. Cardenas. Thank you very much. Next, the Chairman 
recognizes Mr. Burgess for 5 minutes.
    Mr. Burgess. And I thank the Chair.
    Mr. Friedman, I noted in your testimony you referenced 
counterfeit airbags. This subcommittee did some of the original 
work and it has continued to do work on the Takata airbag and 
the subsequent recalls. In fact, just this weekend I learned 
that a manufacturer said that their airbag was un-recalled, and 
then I was informed by NHTSA that a recall can't be recalled, 
so I am fighting that fight on another front.
    But counterfeit airbags are really something that was 
unknown to me until perhaps a year and a half ago. There was a 
story widely reported on our television stations back in the 
Dallas-Fort Worth market and on the radio. I have become very 
familiar with the case. I will say upfront, I never was able to 
obtain a privacy waiver from the family so I can't talk, don't 
feel I can talk about specifics even though the case was 
mentioned in the news media.
    But it dealt with a crash in 2017 involving a counterfeit 
airbag in a 2013 Kia Soul. I did contact the National Highway 
Traffic Safety Administration. They wrote me back and they have 
issued recommended dealer guidance for managing counterfeit 
airbags, along with the fact that an airbag could be 
counterfeit. As you might imagine, in this crash in 2017, the 
counterfeit airbag not only did not deploy, it had nothing 
within the guts of the airbag to deploy. It was filled with a 
shop rag and some other junk, but was not really an airbag.
    The car had been in a crash, the airbag had deployed, 
insurance had almost totaled it but not quite, went to a repair 
shop, got this aftermarket item inserted, and then was sold on 
a car lot. And an unsuspecting consumer bought the car and his 
daughter subsequently was involved in a very, very serious 
accident and did not survive. I don't know whether it was 
survivable with a real airbag, but I know it wasn't survivable 
with a counterfeit airbag.
    Now the reason I am bringing this up--and, Madam Chair, I 
am going to ask to make a copy of this letter available for the 
record. NHTSA did say they are going to be vigilant and they 
are going to coordinate across state, local, and federal 
government agencies. To date, the full scope of the problem 
remains difficult to assess. Industry plays a crucial role in 
this effort and NHTSA is therefore pleased that the Automotive 
Anti-Counterfeiting Council has formed to work on identifying 
and eliminating counterfeit auto parts. So I have gone a long 
way to say that their website is A2C2.com. It is a rare 
problem, but it can be a fatal problem when encountered. And 
again, I would ask that a copy of this be made available for 
the record.
    Now, Mr. Mehta, just before my time expires, I was also 
intrigued in your testimony. You talked a little bit about what 
you were doing with the--in the realm of copyright infringement 
or patent infringement. This committee also worked a lot on 
patent letters. In fact, there was a bill out of this 
subcommittee that I don't think ever got to completion, but it 
was the Targeting Rogue and Opaque Letters Act, or the TROLL 
Act, interestingly named, of several years ago.
    You talk about this voluntary effort that Amazon has. 
Parties put forward a deposit and it is sort of like the winner 
gets the--if there is a dispute: the winner gets their money 
back and it avoids having to go through the litigation process. 
I do wonder if people will give up the litigation process 
because it does seem to be very profitable to some people, 
probably our brethren in the legal profession. And I know the 
Eastern District of Texas has been one of the most active 
places for these types of lawsuits.
    But it is significant and it is a problem. I am just 
intrigued by your approach because it is not a legislative 
approach; it is a voluntary approach and I just wonder what 
type of success you have had with it.
    Mr. Mehta. Yes. Thank you, Congressman, for the question. 
And the program you are referring to is a Utility Patent 
Neutral Evaluation program. The challenge with utility patents, 
as you note, in some cases, there are absolutely patent owners 
who want to go through the litigation and they will go through 
the cost of that given the significant value a formal court 
proceeding will provide them if successful.
    The challenge is, there are many utility patents that are 
not worth that effort for rights owners. And because utility 
patents are so complex, it is tough for marketplaces, stores, 
or service providers to figure out which utility patents to 
enforce. So this program allows each entity to put up a 
deposit. If either entity doesn't put up a deposit, they lose, 
and that deposit pays for an outside evaluator/mediator to look 
at the case and make a decision.
    And Amazon will uphold that case. That doesn't uphold in a 
court of law, but it makes a decision for Amazon. And we have 
noticed a number of other stores who watch Amazon's decision 
and use that to make the same utility patent decision on their 
sites.
    Mr. Burgess. So it has been useful.
    Mr. Mehta. It has been super useful, and the rights owners 
that have been part of that program, so far, love it because it 
takes a process that can be years and millions of dollars----
    Mr. Burgess. Right.
    Mr. Mehta [continue]. And turns it into weeks and no cost 
if they are successful.
    Mr. Burgess. Very good. I thank you. I yield back.
    Mr. Cardenas. The gentleman yields back. The Chairman now 
recognizes Ms. Blunt Rochester.
    Ms. Blunt Rochester. Thank you, Mr. Chairman, and thank you 
to the panel. As Mr. Pallone stated in his opening, it is 
fitting that during National Consumer Protection Week we 
discussed the significant safety concerns of online counterfeit 
products. After all, between 2015 and 2019, e-commerce doubled, 
and in fiscal year 2019, the Customs and Border Patrol seized 
$1.5 billion in fake or pirated goods.
    It is obvious that the number of seized fake products is 
merely a fraction of the total number of faked goods. Many 
studies suggest counterfeits have proliferated the online 
marketplace. They also suggest that virtually everyone in this 
room has purchased a potentially hazardous counterfeit product. 
That should give us all pause. And while there is certainly a 
discussion about stolen intellectual property, these 
counterfeits pose a significant public health and safety risk. 
Fake phone chargers can cause fires. Batteries that burst can 
do harm. And even counterfeit water filters are being sold. 
This is especially timely as many members of this committee and 
constituents in Delaware understand having access to safe and 
clean drinking water is a major concern.
    Currently, it appears refrigerator filters are the main 
culprit, but filtration manufacturers like DuPont and Ecosoft 
are increasingly reporting other counterfeit filters like 
reverse osmosis systems. With increasing concerns for 
contaminants like lead, arsenic, and most recently, PFOA and 
PFAS, this trend is worrisome.
    Mr. Friedman, how widespread is the counterfeit water 
filter problem online and how can Congress facilitate improved 
transparency and accountability?
    Mr. Friedman. Thank you very much for the question. We see 
this as a really serious issue. Back in 2018, we looked at this 
very carefully because we were trying to help consumers get 
water filters that were less expensive. And what we found is we 
really had a hard time finding brands on Amazon that were 
certified to international quality and safety standards at all. 
I mean that is just shocking. It is shocking that was not a 
requirement. It is shocking that also wasn't always clearly 
disclosed. Only one of the aftermarket brands had a proper, 
verifiable certification for its filter, and these were the 
only ones we identified that even came close to matching the 
high standards that most refrigerator brand filters need.
    So it is a serious issue. One, we need to call on all of 
these platforms to step up. They are investing, effectively, 
pennies when they should be investing dollars in informing 
consumers, getting these products off their platforms, and 
putting their consumers instead of their profits first.
    And in terms of Congress, I think it is a mix of things. 
One, again they have to be held accountable for when they knew 
or should have known about these problems, and they have to be 
required to actively police these problems. Until then, the 
incentives are upside down and their innovations are going to 
tend to go towards marketing more than they are going to go 
towards protecting their consumers.
    Ms. Blunt Rochester. Thank you.
    And, Ms. Wallach, I wanted to build on the points of Mr. 
Pallone and Ms. Schakowsky. I understand that counterfeiters 
avoid scrutiny by sending the filter and packaging in separate 
shipments. How does this avoid scrutiny by CBP and do 
counterfeiters employ other tactics?
    Ms. Wallach. Thank you, Congresswoman, for the question. 
Yes, by sending in separate packages, the package is considered 
under the de minimis Customs level and therefore skirts all of 
the normal Customs procedures. Not only aren't the goods 
inspected, some 1.8 million packages each day cleared by de 
minimis, individual packages that then go on to consumers and 
that doesn't count the 475 million, annually, international 
postal packages. That is just the express consignment hubs and 
the air shipments.
    All of that goes uninspected because, in part, the data is 
not even required to be able to figure out. For instance, if 
you knew that filters were a crisis that would go into the 
Office of Import Surveillance at CPSC to start targeting, to 
look for the actual either tariff code or SIC product code for 
that category of goods to start inspecting. Except that basic 
information isn't even provided, so there is no way to actually 
get on top of it.
    Ms. Blunt Rochester. Thank you.
    And, Mr. Mehta, I will follow up with you because I only 
have about ten seconds left, but I wanted to ask if you could 
talk about your seller verification process. So in second 
seconds, if you could.
    Mr. Mehta. Yes. So we have a very robust seller 
verification process. It includes a number of verifications 
about the identity of a person, their payment instruments, 
where they are located. And in addition, we invest tremendously 
in machine learning to be able to monitor behaviors or signals, 
the devices, the places these folks are signing in from to 
detect related accounts and bad actors that we detected in the 
past explicitly to prevent whack-a-mole type of situations.
    Ms. Blunt Rochester. I know my time has expired and I will 
follow up with you just to make sure that we talk about 
disproportionately targeting, you know, marginalized 
communities with algorithms. We have a lot of concerns about 
those issues as well. Thank you and I yield back.
    Mr. Cardenas. The gentlewoman very cleverly yields back. 
The Chairman now recognizes Mr. Guthrie.
    Mr. Guthrie. I thank the Chair for the recognition.
    And, look, these questions are for Mr. Mehta and Ms. 
Leavitt. Last year, Dr. Burgess has left, but I went to visit 
the JFK International Mail Facility at his request because when 
you are there it is just amazing what the volume of product 
that flows through, and there were counterfeit items they found 
and some of them on your platforms.
    The second thing, I have three Amazon facilities in my 
district. I have been there. It is just, when you go through it 
is just the sheer volume, how big our economy is and how big a 
player Amazon is and the volume moving forward. I know in your 
testimonies, I know both of eBay and Amazon have tools that try 
to figure out how to prevent counterfeit items from coming 
through.
    First, Mr. Mehta, since your Amazon has a lot of employees 
in my district, and Ms. Leavitt, if you would kind of describe 
your processes and how the efforts that you have underway. And 
also I notice that a lot of items were from China and it seemed 
China was a big culprit in counterfeit, and do you agree with 
that and what process do you have to make sure things that come 
from China are authentic?
    So, Mr. Mehta, if you go first.
    Mr. Mehta. Yes. Thank you for the question, Congressman. We 
want to prevent counterfeits regardless of the country they 
come from. We outlaw them. We have significant technology 
investments that scan every listing, every seller before they 
are able to sell in our store, before a listing is able to be 
published and available for sale.
    In addition, we have programs like Transparency that every 
unit that shows up at one of our fulfillment centers we scan 
that product and know whether it is authentic or not, and can 
reject the product before it even ends up being stored in our 
fulfillment centers and potentially sold to someone. But there 
is more we can do here. As you note, and I am glad you visited 
one of our fulfillment centers as well as the Customs 
facilities, there is more we can do to partner with Customs in 
being more effective.
    There have been comments earlier about requiring pre-
arrival information for every shipment whether it is above or 
below the de minimis threshold. We are currently engaged in a 
pilot as part of the Section 321 with Customs and Border Patrol 
not only to get some of that information, but for Amazon to 
provide the information we have so that collectively, we can 
aid Customs in finding potentially risky products at the ports 
or at the facilities where those products come in.
    And, in addition, when Customs finds an issue, we would 
love to have them share information with us because we may have 
other shipments from that same bad actor. We may be able to 
shut their account down. We may be able to hold their funds and 
take greater action that can put together a better criminal 
case to go after those bad actors.
    Mr. Griffith. And, Ms. Leavitt, and I will say it this way 
because I know the Customs situation, so maybe domestically. 
One of the big issues in my area is people who distill spirits, 
bourbon, Kentucky bourbon, particularly the high-end bourbons 
that people are buying not from a distillery, but from somebody 
who goes and buys a bottle of Pappy Van Winkle and they put it 
on the marketplace, or one of the Heaven Hill Brands. I should 
list all my distilleries, shouldn't I?
    But, and so it is going from one person to another, but it 
tends not to be not the real product, counterfeit. So how do--I 
know you are not supposed to sell alcohol on your site, but I 
don't know if people do. And if they do, how do you try to 
trace this down and make sure? Not just bourbon, but products 
from me to you, domestically, are also not counterfeit.
    Ms. Leavitt. So, in that instance where there is a good 
that is maybe stolen and then sold under a different brand, we 
have a team who is dedicated to working with law enforcement. 
They are our global asset protection team and they are focused 
both on proactive investigations, so they have their own 
internal referrals from different sources throughout the 
business. They have different analytics and tools that they use 
to essentially find that behavior and do investigations and if 
it is--if it looks to be a more serious level case, then they 
will work to refer those cases out to law enforcement.
    And then vice versa, if law enforcement is aware of that 
type of activity, they can make data requests through our--we 
have an external facing portal that law enforcement uses to 
request data on users that they are conducting criminal 
investigations for, and then they will also share additional 
information from investigations just to help us, you know, both 
address the issue at hand, but then also implement proactive 
measures so that we can prevent those types of situations from 
arising in the future, both on the listing product-specific 
level, but then also the seller level as well.
    Mr. Griffith. So, Mr. Mehta, your fulfillment center is 
about five miles from Jim Beam, so how do you ensure your 
fellow corporate citizens of Bullitt County that their products 
aren't being counterfeited?
    Mr. Mehta. Yes, so we invest heavily in that. You know, as 
I mentioned in my testimony, last year in 2019, we invested 
over $500 million in preventing fraud and abuse, and that is 
primarily focused on proactive means. And so, every listing, 
every seller that attempts to enter our store, we are scanning 
multiple data points. We have expert human investigators, but 
we also have advanced machine learning that is scanning every 
one of these.
    It is the reason that last year; we stopped over six 
billion suspected bad listings before they were published to 
our store, and over 99.9 percent of pages viewed in our store 
have never received or reported counterfeit infringement. But 
it is not perfect. We have got to keep working until we get 
that to a hundred percent and zero counterfeit.
    Mr. Griffith. Well, thank you very much. And my time has 
expired, I yield back.
    Mr. Cardenas. The gentleman yields back. The Chair 
recognizes Mr. Rush.
    Mr. Rush. I want to thank you, Mr. Chairman. Mr. Mehta, 
what is Amazon doing to ensure proper compliance with state 
alcohol laws and regulations, including how the purchaser 
receives the product, the price and terms of the sale, and the 
limits on retail sales imposed by the states?
    Mr. Mehta. We require all sellers in our store, whether 
that is Amazon the seller or the third-party sellers in our 
store, to adhere to all applicable laws, regulations, and 
Amazon policies. In addition, we invest tremendous resources in 
proactively screening every product before it is published to 
our store in looking for signs of potential infringement or 
violation of policies.
    And we constantly monitor over forty-five million pieces of 
feedback that we receive every week from customers, regulators, 
and others for anything we have potentially missed to learn 
from that and figure out how we proactively prevent that in the 
future.
    Mr. Rush. I am also concerned that bad actors are using 
social media sites like Facebook to recruit people to leave 
false positive reviews of products that are often in your 
store. And as a result, these bad actors are able to make 
shoddy products look more legitimate, and this is a practice 
that results in both defrauding and creating great risk for 
consumers and also manufacturers.
    What is Amazon doing to combat these practices?
    Mr. Mehta. Thank you, Congressman, for that question. It is 
absolutely true that bad actors, one of the tactics they 
attempt to use to generate fake reviews is they go to social 
media sites. They create private groups with otherwise honest, 
American customers, and offer incentives or free product to try 
and get positive reviews. The challenges in these situations is 
often that communication in that activity is only known by the 
social media sites.
    Amazon doesn't have any data about what is going on, we 
just see these reviews coming up on our site from otherwise 
honest-looking customers. There is a great deal we do to look 
for signs or behaviors that look abusive to us. We report those 
to social media sites to get those groups broken up and taken 
down. It doesn't always move as fast as we would like, but this 
is absolutely another area where we have all got to partner 
together, and social media sites have to do more to detect such 
abusive behavior on their sites and to partner with the rest of 
us to stop those types of fake reviews.
    Mr. Rush. So has Amazon made other manufacturers and 
customers aware of these shoddy practices? How are you all 
proactively alerting and informing the buying public and also 
manufacturers of these practices?
    Mr. Mehta. Thank you, Congressman. Yes, so when customers 
may have thought they were just getting a free product or a 
heavy discount to provide a positive review, if we detect that 
we will warn that customer. We will notify them that such 
practice is not OK. It violates our policies, and in some 
cases, violates laws. If there is continued fake review 
activity, we will ban customers from being able to leave 
reviews or Q&A responses or other types of community content.
    And, similarly, for every one of the sellers and brands and 
manufacturers in our store who are selling products, they are 
made aware of these policies and if they don't take the 
appropriate action, we will close their accounts. We have had 
over a thousand defendants that we have gone after through 
civil litigation. We have provided information to the FTC and 
are partnering with them to similarly stop these types of 
practices.
    Mr. Rush. Well, Mr. Friedman, I am very much appreciating 
your mention of existing federal limits on lead and the use of 
small, high-powered magnets in toys. In '08, I was the chairman 
of this subcommittee and drafted the Consumer Product Safety 
Improvement Act in response to a plethora of reports of 
children being injured by lead, high-powered magnets and on the 
dangers that were present in toys. Needless to say, I am 
severely disappointed that here, some 12 years later, we still, 
this practice is still going on.
    Given that these dangerous products are most often coming 
from third-party sellers, should online marketplaces collect 
and record information about third-party sellers like the name, 
location, and contact information to ensure that people are 
purchasing what they intend to and not an imitation or a 
knockoff?
    Mr. Friedman. Absolutely, they should. And, Mr. Rush, I 
also just want to thank you for your leadership on consumer 
protection in general and on these important areas. I would 
also like to say it is great to hear about what a lot of the 
companies are doing to help consumers, but the fact of the 
marketplace is it hasn't been enough. People are being exposed 
to these dangerous products, they are not investing enough, and 
they need to do a lot more.
    Mr. Rush. I want to thank you. I ran out of time. Thank you 
so much. I yield back the rest of my time.
    Ms. Schakowsky. The gentleman yields back, and now Mr. 
Carter is recognized for 5 minutes.
    Mr. Carter. Thank you, Madam Chair. And thank all of you 
for being here. This is certainly an important subject, one 
that we are obviously very interested in and want to help in 
every way we can.
    I want to start off by saying that the ranking member, Ms. 
McMorris Rodgers, in her opening statement she talked about 
emerging technology. And, Mr. Mehta, I know that you, or I 
should say Amazon has invested a lot of money, a lot of 
employees in this. I am just wondering, obviously, you are 
using AI as well? Are you doing that? Is this in any way a part 
of your game plan?
    Mr. Mehta. Thank you, Congressman, for the question. AI and 
machine learning is absolutely a part of the game plan, as is 
the use of expert human investigators. As we address these 
problems and prevent counterfeits from entering our store, the 
only way that we can collectively stop counterfeits at scale is 
through technology. Bad actors are using technology. They have 
hired their own engineers and their own scientists. These 
organized criminal organizations are attempting to find any 
crack between our systems.
    So we absolutely use technology, whether it is in the 
vetting of our sellers and the way we were able to stop two and 
a half million accounts that bad actors attempted to create 
last year, or the six billion bad listings that we stopped 
before they were published to our store. The only way we do 
this is through technology that is mining hundreds of different 
signals about the person, about their product, about 
information that brands and rights owners about their brands 
and their logos and their distribution that helps us be more 
effective in stopping counterfeits and unsafe products.
    Mr. Carter. Great, thank you.
    Ms. Leavitt, what about you? Does your company utilize AI 
at all?
    Ms. Leavitt. We have made significant technology 
investments as well and continue to look to do so in 2020.
    I would like to note one thing about AI and machine 
learning. I think an important part of all of this is 
collaboration, because our AI or machine learning is only as 
good as the information that we are feeding into it. And so, I 
think, increasingly, it is important that the platforms are 
coordinating with social media sites, with the brands, with 
consumer protection groups, to make sure that the data and the 
inputs that we are using to build and to strengthen and to 
modify those technologies is accurate and up to date. Because I 
think we all know we wouldn't be here today unless 
counterfeiters were pretty savvy, right?
    Mr. Carter. Right.
    Ms. Leavitt. And they know what to do, they know how to 
evade. And so, I think that is an important piece that when we 
talk about technology. Yes, technology is extremely important, 
but the collaboration that goes into building that technology 
amongst all the stakeholders is key.
    Mr. Carter. And that is a good point and I appreciate you 
bringing it up.
    To kind of dovetail onto that, Mr. Mehta, tell me about 
your Amazon Brand Registry. How many products do you have on 
that and how is that working?
    Mr. Mehta. Thank you, Congressman, for the question. So we 
launched the Amazon Brand Registry in 2017. It is a completely 
free service for any rights owner with a registered trademark. 
To date, we have over 350,000 brands worldwide that are 
enrolled in Brand Registry. They have enrolled for free. They 
don't have to have any kind of economic relationship with 
Amazon. They don't have to sell on Amazon. And those brands 
span from large, global multinational brands to small 
entrepreneurs who have invented a product out of their garage.
    What Brand Registry does is in partnership rights owners, 
they provide us with a basic set of information about their 
intellectual property, their logos, and their distribution, and 
we use that to aid our machine learning and our technology, so 
that as we are vetting sellers, as we are scanning listings 
before they are published, we are able to more effectively 
detect potentially infringement products and stop them 
proactively without a rights owner or a customer or anyone else 
having to find them.
    Since the launch of Brand Registry, on average for brands 
reporting infringement to Amazon, brands in Brand Registry 
report ninety-nine percent fewer infringements per brand than 
before the launch of Brand Registry.
    Mr. Carter. Really. That is quite impressive. You mentioned 
earlier social media sites and what they were doing to recruit 
bad people and to leave false and fake positive reviews. What 
about that? How are you handling that? How are you approaching 
that?
    Mr. Mehta. Yes. So we have absolutely seen situations where 
bad actors are using social media sites, often private groups 
within social media sites that are not visible easily to 
companies like ours or to the government, and using, bad actors 
use those groups to recruit people and provide them discounted 
or free products to get incentivized reviews. It is completely 
unacceptable that type of activity would occur.
    We sometimes detect it because we see irregular patterns of 
reviews being left on products. When we see that and we 
investigate, we report those to social media sites and expect 
them to take those sites down. It is something we are working 
with a number of social media sites to get that process to not 
only be faster and more effective but, more importantly, for 
social media sites to proactively monitor for such types of 
abuse and inform other partners in this fight.
    Mr. Carter. Well, great. Well, thank you for your efforts. 
Thank all of you for your efforts. And as you know, if it is on 
the internet it is true, so we have to always keep that in 
mind. Thank you and I yield back.
    Ms. Schakowsky. The gentleman yields back, and now Mr. 
McNerney is recognized for 5 minutes.
    Mr. McNerney. I thank the Chair and I thank the witnesses 
for this testimony. It is useful and informative.
    Mr. Mehta, how does your company determine what products 
receive the Amazon Choice badge?
    Mr. Mehta. Thank you, Congressman, for the question. We 
have designed the Amazon Choice badge to really help customers 
simplify their discovery and shopping experience.
    Mr. McNerney. Right, but how does that badge come about?
    Mr. Mehta. So that badge is designed to show well-priced, 
highly-rated products that are available for delivery.
    Mr. McNerney. How does that badge get awarded?
    Mr. Mehta. It is awarded through an algorithm that uses 
products that have been popular that have high ratings that 
have low return rates. It uses a number of factors that 
indicate that other customers purchasing that product have had 
a great experience.
    Mr. McNerney. Thank you. In order for a product to receive 
the Amazon Choice badge, is it required to undergo any safety 
testing by Amazon? Please answer with a yes or no.
    Mr. Mehta. Congressman, no. There is no unique safety 
testing to get that badge.
    Mr. McNerney. OK, thank you. In order for a product to 
receive the Amazon Choice badge, is it required to undergo any 
screening to ensure that the product is authentic?
    Mr. Mehta. Congressman.
    Mr. McNerney. Please answer with a yes or no.
    Mr. Mehta. There is no unique screening for authenticity to 
receive that badge.
    Mr. McNerney. Well, do you think it is possible that some 
customers may interpret the Amazon Choice badge to signal that 
the product is one that Amazon trusts?
    Mr. Mehta. Congressman, we use that badge to show a product 
that other customers have found to be highly rated, to have 
great prices, and to be available for delivery. Amazon does not 
manually curate or assign that badge.
    Mr. McNerney. So the customer may think that is some sort 
of a promotion by Amazon.
    Mr. Friedman, do you have a comment on that?
    Mr. Friedman. I don't know how a consumer could see it any 
other way. I mean it is Amazon's Choice. And this is a brand 
that has worked very hard to be a trusted brand and yet you 
have Amazon Choice products as we found that are littered with 
fake reviews. They are not policing the system. They are not 
doing enough.
    We have heard a lot of ninety-nine percent here in terms of 
impressive numbers of what they are talking about. Well, one, 
there is lies, damn lies, and statistics. Part of what you----
    Mr. McNerney. I am a mathematician, so be careful.
    Mr. Friedman. Statistics can be great, but it can also be 
misused.
    Mr. McNerney. Right.
    Mr. Friedman. They are talking about, basically, with a lot 
of these ninety-nine percent, ninety-nine percent are verified 
reported things. They are saying consumers. Sellers are the 
ones who have the burden to report these problems to them and 
when they finally figure it out, potentially, after being hurt 
or misled, then they do something about it. We can't wait for 
the problems to happen. They need to be on this in the first 
place.
    Mr. McNerney. Thank you. You have discussed review 
hijacking. Can you walk us through what that means and how it 
works?
    Mr. Friedman. Sure. Review hijacking is, it basically 
manipulates one of the systems on Amazon where in various ways 
you can associate a review with one product with other 
products. Sometimes it is great. For example, if you have a 
blue version of product A and a red version of product A, it 
makes sense to be able to associate those reviews together. But 
when you have a review of a bicycle helmet and a review of an 
eyelash lengthener, there is no reason why those should be able 
to be associated.
    But loopholes in the system allow people to either take 
dormant reviews or reviews from their own products and package 
them together.
    Mr. McNerney. So how widespread to you think this problem 
is, review hijacking?
    Mr. Friedman. We have certainly, in our investigations we 
have seen it rather consistently. And what is even more 
troubling is while Amazon responds when we point it out to 
them, for a while we monitored what was happening on their site 
and didn't report things and we saw the practice continue. So, 
clearly, they are waiting until victims speak up rather than 
proactively protecting their customers.
    Mr. McNerney. Well, I mean, I use Amazon all the time, so I 
want to have confidence in what I am getting.
    Mr. Myers, can you talk a little about review hijacking, 
what it means to consumers?
    Mr. Myers. I think that is, certainly, we monitor all 
marketplaces including Microsoft--or including Amazon, excuse 
me. And in terms of counterfeit related products what we do are 
test buys. So we don't necessarily look closely at the reviews, 
per se, but what we do look at is the test buys. And when we do 
that across all platforms, we still find a significant degree 
of counterfeit items on those sites.
    Mr. McNerney. OK, thank you.
    Ms. Wallach, why is it important for customers to be able 
to easily discern who is selling the product?
    Ms. Wallach. Thank you for the question, Congressman. For a 
customer to be able to make an informed decision about what 
product might be reliable or safe, they need to have the right 
information. And to your point about what kind of investment by 
the company is put into deciding to have a choice label, and 
this reflects other questions that I have been asked by your 
colleagues, I note that while Amazon has reported in spending 
half a billion dollars in enforcement, they in the same period 
have invested fifteen billion in making it easier with a 150 
more tools to get more third-party sellers.
    So to reflect the comment Mr. Friedman made, the level of 
investment as well as the decisions made, for instance, of what 
gets to be chosen but even what gets to be listed. As you have 
pointed out, these things aren't pretested. They aren't 
certified. It is not an invitation only, it is the wild, wild 
West.
    Mr. McNerney. Thank you. All right. And I understand how 
hard it is to verify products so, but Amazon and eBay and all 
the online platforms need to make the right investment because 
they are making money doing this.
    Thank you. I yield back.
    Ms. Schakowsky. And now I recognize Mr. Lujan for 5 
minutes.
    Mr. Lujan. Thank you so much, Madam Chair. And I want to 
thank everyone for making time to be here today. I have two 
lines of questions, the first of which is something that you 
may not have been asked before, with the exception of eBay who 
we were able to contact before the hearing. And I want to thank 
them for the work they did, but I will get into that with the 
line of questioning.
    In New Mexico, Native American art and work is critically 
important. It amounts to one in eighteen jobs that Native 
Americans participate in, twice the rate of other workers. It 
generates one billion dollars in economic activity. However, by 
one estimate, Native artists lose about 500 million dollars' 
worth of income a year to fake goods sold from non-Native 
sources.
    My home state of New Mexico accounts for eighteen percent 
of all Indian Arts and Craft Board complaints. An estimated one 
in three fraudulent Native American products originates from an 
online sale, second only to retail sales.
    Ms. Leavitt, what steps has eBay taken to work proactively 
with tribal governments and dealers to help authenticate 
sellers and combat misrepresentation?
    Ms. Leavitt. Yes. Thank you for the question, Congressman. 
So, just to clarify, your question isn't so much about the 
tribal entities, it is more about seller verification; is that 
correct?
    Mr. Lujan. That is correct.
    Ms. Leavitt. OK. Yes, so we have a number of steps in place 
during the registration process to try to verify a seller's 
identity. In addition to that we implement a number of limits 
or controls on what a seller can sell and what quantities they 
can sell, because they are not, you know, ``trusted'' yet, they 
are new to the platform.
    And in addition to that, you know, currently, eBay does not 
intermediate most payments, so we don't have access to the same 
financial data that perhaps some other platforms or some of our 
intermediation platforms such as PayPal may have. But as eBay 
moves more into that space, our objective is to leverage that 
data better, financials and other data sources that we will 
have as a result of that and the federal obligations that we 
will have to improve our processes for vetting sellers.
    Mr. Lujan. I appreciate that.
    Mr. Mehta, does Amazon have any work in this space that you 
partner or you work with the Indians Arts and Crafts Board?
    Mr. Mehta. Thank you, Congressman, for the question. So we 
actually have an explicit policy that bans sellers from selling 
illegal Native American burial items or products that have been 
removed from Native American sites. We would be happy to 
continue to engage with you and your office on this area.
    Mr. Lujan. Very good.
    Mr. Mehta. It is a very important topic.
    Mr. Lujan. And so it is not so much the artifacts that have 
been taken, it is the imposters. It is the fakes.
    Mr. Mehta. Yes.
    Mr. Lujan. There is actually a federal law that requires 
the stamping of the country of origin on these pieces of art, 
but it doesn't exist, and so what we are hoping to do is to 
work with you to make sure that is a reality and the policy. 
And again, to eBay specifically, we reached out to some local 
art dealers in northern New Mexico and it was flagged for 
several listings of counterfeit Native American goods currently 
being sold on eBay.
    When we shared those with you all, it is my understanding 
that they were taken down; is that correct?
    Ms. Leavitt. That is correct.
    Mr. Mr. Lujan. I really appreciate that so we want to work 
closer in that area.
    Now because I also am a cyclist, Mr. Love, I really 
appreciated you being here today, especially after a recent 
tumble on a mountain bike where I found myself going over my 
handlebars into a bed of rocks. Sadly, I don't have any video 
footage of it, so I am sure everyone would appreciate that. It 
was not pretty. But nonetheless, that bicycle helmet saved me.
    Bicycle helmets, as you know, according to one meta-
analysis of the available research, reduce head injury by 
forty-eight percent, serious head injuries by sixty percent, 
traumatic brain injuries by fifty-three percent. Can you tell 
me what happens if someone is wearing a counterfeit bike helmet 
or what is happening with goods that are being counterfeited 
and what it could mean to the detriment of people's health?
    Mr. Love. And it is also appropriate that just down the 
hall from us there is some traumatic brain injury symposium 
going on right now. And I can absolutely tell you what would 
happen, but I would much rather show you what would happen. I 
would love your assistance in the destruction of a counterfeit. 
Would you like to come down and destroy a helmet?
    Mr. Lujan. Madam Chair, with your permission?
    Ms. Schakowsky. So ordered.
    Mr. Love. So what we are going to do here is the CPSC test 
replicates an impact which is about six feet in the air, about 
a 200-pound guy, head first, onto either a rock or a curb. Now, 
I am almost six feet tall, I am 200 pounds, and I have done 
that. It is a terrifying impact. Now in a CPSC test, any impact 
over 300 gs fails the test. So over 300 gs that is the brain 
injury death line. A real specialized helmet will keep you down 
to 100 gs-ish and you are going to walk away. It doesn't feel 
good after a hit like that. But I would like you to jump on 
this or just hit this hard and let's see what happens to this 
counterfeit helmet.
    Mr. Lujan. Jump on it?
    Mr. Love. Yes, if you can.
    Mr. Lujan. Ready?
    Mr. Love. Do it.
    Now, I said you--the 300 g----
    Ms. Schakowsky. I just want to point out the gentleman is 
already out of time, but finish your sentence.
    Mr. Love. OK. The 300 g line is the death line. This 
registers 994 gs, on our testing equipment. And our testing 
equipment only goes to 994 gs. It is worse. So this is why we 
are so passionate and we really appreciate working with you all 
on this.
    Mr. Lujan. Thank you.
    Ms. Schakowsky. So Mr. Lujan would have been in serious 
trouble had that been a fake.
    Mr. Lujan. And, Madam Chair, I know my time is up. I 
wouldn't be standing here today if I would have been wearing a 
helmet like this with that tumble that I told you about. I went 
into two boulders. I went headfirst in. I rolled it. I popped 
my shoulder out. I probably would have been dead on the side of 
that trail until someone found me or with some traumatic brain 
injury.
    Ms. Schakowsky. We are very happy that you aren't. I mean 
dead, that is. Thank you.
    Mr. Love. Mrs. Leavitt has had a similar crash. She is also 
a serious mountain biker, so helmets make an impact.
    Ms. Schakowsky. Thank you.
    Ms. Dingell, you are next, 5 minutes.
    Mrs. Dingell. Thank you, Madam Chair, for holding this 
hearing, and thank you to all of the witnesses. I am from 
Michigan, as you all know, and I am a car girl, so I want to 
start with a few questions on automotive safety.
    As you know, counterfeit airbags and their components pose 
a severe danger to consumers just like we saw with the helmet. 
I understand that while other major e-commerce platforms have 
moved to ban the listing of airbags and their components 
because these products are particularly even more prone than 
the helmet to counterfeiting, eBay continues to allow the 
listing of airbags and components. A recent search for airbag 
and component listings on eBay generated hundreds of results 
for airbags and various airbag components.
    So, Ms. Leavitt, I want to ask you a few questions on this. 
Why has eBay refused to adopt the industry norm to ban the 
listing of airbags and safety restraint components?
    Ms. Leavitt. Thank you for your question, Congresswoman. So 
eBay has worked with the National Highway Traffic Safety 
Administration as well as the automotive manufacturers on 
several of our policies around airbags. So you are aware----
    Mrs. Dingell. They are not happy.
    Ms. Leavitt [continue]. There is a big recall.
    Mrs. Dingell. Yes, very. It hurt people.
    Ms. Leavitt. Yes. And so----
    Mrs. Dingell. It killed people.
    Ms. Leavitt. Correct. And that is very unfortunate. And we 
worked very closely with NHTSA on the communications not only 
with past purchasers of the airbag that had been recalled, but 
also worked with them to remediate through sanctioning and 
essentially--
    Mrs. Dingell. OK, but you still haven't--I know that I only 
have a short amount of time. How do you verify the authenticity 
of airbag and airbags components, and what do you do to--what 
are you doing now to keep people from buying bad parts that 
could kill them?
    Ms. Leavitt. Thank you. Yes, so we do ban airbag covers 
because those can be used to circumvent, right. You could put 
something in the airbag cover that could be an airbag, 
essentially, so those are banned on the site. In terms of the 
other airbags and parts that are allowed, they are only allowed 
by a group of vetted sellers, and those sellers have to provide 
proof or demonstrate that they have sourced those items 
directly from the manufacturer.
    Mrs. Dingell. So can you tell me how the auto industry is 
working, you are working with them to make the public aware of 
the safety risks posed by these counterfeit bags, and if you go 
quickly because I want to do--
    Ms. Leavitt. Oh, yes. So we work closely with A2C2 which I 
am sure you are familiar with.
    Mrs. Dingell. Yes, I am.
    Ms. Leavitt. Yes. We are actually meeting with them in our 
offices in San Jose, I believe, next week. And so, again, the 
purpose of those meetings is to sit down, reassess our measures 
doing----
    Mrs. Dingell. This matters. We really are talking about 
lives.
    Ms. Leavitt. Yes, absolutely. And I suspect----
    Mrs. Dingell. So I hope you will pay attention.
    Ms. Leavitt [continue]. This will be a big topic of 
conversation.
    Mrs. Dingell. Thank you.
    Now with the remainder of my time I want to focus on the 
coronavirus. Anytime there is a danger or fear will almost be 
certainly be someone offering a product designed to protect 
against that fear. But this in turn becomes very dangerous when 
the product doesn't work and, in fact, helps perpetuate the 
problem.
    So, Mr. Mehta and Ms. Leavitt, this represents a real 
public health risk. How are Amazon and eBay addressing this 
issue? I will start with Mr. Mehta.
    Mr. Mehta. Thank you, Congresswoman, for the question. The 
coronavirus situation is rapidly evolving, but from the moment 
it started, we started to actively scan our site, proactively 
looking for any seller who is trying to list a product, making 
false claims, claiming that the product could cure their virus, 
claiming that the product would save them in some fashion.
    In addition, we look for bad actors who are trying to take 
advantage of a crisis situation to try and price gouge 
customers. We have no tolerance for false advertising claims or 
price gouging in our store. We have removed a million products 
that had false claims in them. We removed tens of thousands of 
products that were listing products at gouging type of levels 
from a pricing perspective, and we are continuing to monitor 
our site. This is a very fast-evolving situation.
    Mrs. Dingell. So let me ask you two questions before we go 
to Ms. Leavitt. How quickly can you take it down, and then, for 
instance, I tried to order bleach and I got a notice this week 
my order had been canceled. I don't know why. It didn't give me 
a reason. But when you think someone is gouging or it is not 
there and a customer is trying to order, do you try to replace 
their order? Do customers think they are getting something? So, 
for instance, if they ordered it a week ago and you said it was 
coming, how do you deal with customer expectations?
    Mr. Mehta. Yes. Congresswoman, in terms of the question on 
how quickly we can respond, we monitor every listing as they go 
up and then we continue to monitor them. And so sometimes this 
is happening before the listing ever gets up and sometimes 
within minutes of it being in our store. If a customer ever did 
purchase a product and was unhappy with that product whether it 
was sold by Amazon or sold by a third party, every product is 
covered by our A to Z guarantee. I am not sure what happened 
with your bleach order.
    Mrs. Dingell. Well, I don't care about that. What I am more 
worried about is how do people know whether it really works? 
And I think you have a lot of people ordering products that 
they think are coming, and then I was not the only one that had 
their order canceled in the last week, so I think people are 
counting on you on some of these things as well.
    Ms. Leavitt, I am already over my time so you are safe, but 
I am going to send a letter. Thank you.
    Ms. Schakowsky. Thank you. The gentlewoman yields back, and 
I recognize Congresswoman Kelly for 5 minutes.
    Ms. Kelly. Thank you, Madam Chair. Thank you for holding 
this hearing today. As more consumers migrate from buying 
products in stores to buying them online, new challenges have 
emerged, as we talked about. One area that has been 
particularly frustrating for me is the sale of firearms online. 
While many platforms have said they do not allow the sale of 
firearms or bump stocks, simple code words and private groups 
are used to get around algorithms designed to detect illegal 
activity. While one of the most egregious offenders is not 
testifying today, I believe that companies need to do more than 
lower illegal activity to an acceptable level, as one company 
representative put it.
    Ms. Leavitt, eBay is a third-party platform that connects 
sellers with buyers. I know that in 1999, eBay decided to 
prohibit sales of firearms and ammunition. What does eBay do 
besides just using machine learning algorithms to crack down on 
firearm sales and how do you ensure that bad actors are not 
able to continue posting using code words?
    Ms. Leavitt. Thank you for your question, Congresswoman. So 
I think we approach the problem twofold, right. There is one 
problem with the listing and the items itself, and then the 
second problem is with these bad actors who are listing the 
items. So with respect to the listings themselves, we do have a 
prohibition on those items on our site. We have a number of 
blocking and detection technologies in place. Those are coupled 
with manual reviews. We actually have pretty substantial 
physical teams who are scrubbing and reviewing the site looking 
for those types of listings. As part of that process, we are 
constantly going back and revising and refining those blocks, 
because as you mentioned, these individuals are using different 
terminology to try to circumvent our measures.
    And with respect to bad actors, we have again in place an 
algorithm in the background that is trying to search for 
fraudulent and problematic behavior and then those accounts are 
suspended from using our services. And then again, we have a 
number of measures in place that are attempting to prevent 
those sellers from re-registering with our site.
    Ms. Kelly. Do you have any idea how often it happens, 
like----
    Ms. Leavitt. Probably more often than any of us would like. 
I don't have the exact numbers, but we can get back to you with 
that.
    Ms. Kelly. OK, thank you.
    Mr. Mehta, I know Amazon has a similar policy. What actions 
has Amazon taken to crack down on direct gun sales on your 
platform?
    Mr. Mehta. Thank you, Congresswoman, for the question. We 
do have a policy and like a number of our prohibited products 
policies, we are constantly scanning every listing as it goes 
up in our store to look for a potentially prohibited product 
and stop that before it ever is available for sale. In 
addition, we know that bad actors try to game our systems.
    And so, we work both with regulators and different 
organizations that help us identify new products that are 
coming on the market that may be legal to sell in other places 
but are prohibited on Amazon, to understand what those products 
are and understand the different ways that folks may advertise 
or communicate those products.
    In addition, when we find bad actors that are violating our 
policies, we block their accounts. We stop them from being able 
to sell more products. We hold the funds in their account to 
make this a crime that does not pay. And there are multiple 
cases where we are working with law enforcement currently to go 
after bad actors that have violated our prohibited products 
policies.
    Ms. Kelly. OK. Increasingly, we are seeing social media 
companies play a social role in directing consumers directly to 
companies. Last summer, British regulators found ``troubling 
evidence'' of a thriving marketplace for fake online reviews on 
eBay and Facebook. On eBay they found more than 100 listings 
offering fake reviews in exchange for payment. On Facebook they 
found over two dozen groups recruiting writers for fake or 
incentivized reviews.
    Consumers depend on online reviews before making new 
purchases. One survey found that ninety-seven percent of 
consumers depend on reviews for purchasing decisions. Ms. 
Leavitt, can you tell me how eBay has responded to concerns 
raised by British regulators?
    Ms. Leavitt. Yes, thank you for your question.
    Ms. Kelly. And as quickly as possible.
    Ms. Leavitt. Yes, so we worked with the Competition Markets 
Authority in the U.K. We immediately took down the listings 
that they had identified and then we performed our own separate 
searches to take down additional listings that were 
problematic. We took appropriate action by suspending those 
sellers and in addition to other sellers that we found. We went 
back and revisited our policies to make sure that they were 
clear that those types of services were prohibited from being 
offered on our site, and again we have that formula of looking 
at listings and sellers to try to prevent problems.
    Ms. Kelly. And, Mr. Friedman, do you think companies like 
eBay and Facebook have responded adequately?
    Mr. Friedman. No. They definitely haven't. I mean you even 
heard here in response to a tragedy associated with a 
counterfeit airbag, it was referred to as unfortunate. It is 
not unfortunate, it is tragic. It is unacceptable and so much 
more needs to be done. That bike helmet, that is the one 
percent. That is the 0.1 percent that shows up. People's lives 
are at risk. We need to stop quoting numbers. We need to stop 
using platitudes. We need to invest in the innovation at these 
companies and in Congress to block the counterfeits, the 
dangerous products, and the fake reviews.
    Ms. Kelly. My time is up. Thank you, Madam Chair.
    Ms. Schakowsky. The gentlewoman yields back, and now I 
recognize Mr. Soto for 5 minutes.
    Mr. Soto. Thank you so much, Madam Chair. What a 
fascinating area to be able to work on. When I look at even in 
my own household the evolution of how we purchase goods and 
services is just going almost as fast as I could keep track of. 
In our own household, my wife orders groceries online and they 
arrive at our doorstep, because she works very hard as a 
schoolteacher, a math/science coach to be exact, and doesn't 
feel like going to the grocery store anymore, and I don't blame 
her. Boxes show up on our doorstep.
    We even have a doorbell that can video people to know who 
it is and have an idea whether people are going to be trying to 
be porch pirates and steal our boxes or not. And yet we also go 
to the mall when my wife has an important purchase she wants to 
make and wants to try on things or even get quick purchases. So 
we have to obviously look at continuing regulations in this 
area because it has become such a major part.
    Seventy-nine percent of Americans have made online 
purchases, a staggering number. Twenty-six have purchased 
counterfeit products. In 2016, sixteen items were seized at the 
border that posed a direct and obvious threat to human safety. 
So we want to make sure that people have, and consumers have 
various options and we can keep up with technology and a busy 
lifestyle. But we also want to make sure that people are 
getting the goods that they purchase.
     Mr. Love and Mr. Friedman, some counterfeit products pose 
a greater threat than others because they are used for things 
tied to human health and safety. Should these products face 
greater scrutiny and, if so, what should that scrutiny be?
    Mr. Love. I would absolutely encourage greater scrutiny and 
not just for the branded counterfeits but also for the 
generics. The helmet that Mr. Lujan jumped on, actually it was 
a copy of one of our products, but it didn't have our logo on 
it. I mean it is--any cyclist would look at that and know that 
is a Specialized helmet and that is why they sell. But our 
logos were removed. And I had him jumping on that to make the 
point, because I legally can't take those down.
    And so, something that should be addressed, and this is a 
matter for CPSC and engagement with all the parties at these 
tables, is how to deal with the generic products that are 
dangerous. Not just the current one here. This has our 
Specialized logos on it. When this appears on e-commerce, I can 
knock this down. But if I just peel off the sticker, I can sell 
hundreds of them all day long and no one has any legal 
recourse.
    Mr. Soto. Thank you, Mr. Love.
    And, Mr. Friedman?
    Mr. Friedman. Absolutely, these products, anytime a product 
is involved with health and safety, it requires double, triple, 
or quadruple the effort because people trust those products. 
They depend on those products to save their lives and to 
protect them. Part of the challenge here is every single one of 
these products should include in many cases, specific 
certifications. I expect every platform to be screening those 
products for those certifications.
    I expect more resources and more efforts at the border to 
block those products from being able to come in, and I expect 
the platforms not just to certify companies up front, but to 
regularly audit and follow back with them and when they find 
illegal practices always report them to the authorities. Don't 
just ban them.
    Mr. Soto. Thank you. Thank you, Mr. Friedman.
    Mr. Mehta and Ms. Leavitt, it would be great to understand 
what you all think should be the rules of the road with regard 
to fraudulent sellers and how we could use things like 
artificial intelligence and block chain to be able to keep 
integrity in the system of online sales.
    Mr. Mehta. Thank you, Congressman, for the question. We 
absolutely agree that artificial intelligence and machine 
learning are critical to how we stop these bad actors. While 
there is a number of criminals and bad actors that operate in a 
kind of old school fashion, increasingly, we see bad actors 
that are using sophisticated technology themselves to try and 
game our systems to try and attack American customers.
    And so we have to use machine learning to detect patterns, 
detect behaviors not just from when someone registers, but on 
an ongoing basis when they are selling in our stores. We think 
things like block chain or solutions like our Transparency 
program that uniquely identify every product that is 
manufactured, are technology solutions that can scale 
throughout the entire supply chain much more effectively and 
proactively.
    Mr. Soto. Ms. Leavitt?
    Ms. Leavitt. I would just add to that again as I testified 
earlier. I think another important component to that is the 
cooperation, because our systems and technology can only detect 
so much and I feel like a lot of what we have seen in our 
experience is sometimes brands or consumer groups see 
activities or behaviors that sellers are engaging in that we 
don't have visibility to. And that may be off-platform or on 
other platforms, and once that information is shared that helps 
us to perform a more comprehensive investigation and improve 
our own detection methodologies.
    Mr. Soto. Thanks, and I yield back.
    Ms. Schakowsky. The gentleman yields back. I am so happy to 
yield to Congresswoman Eshoo, who is always so kind to me when 
I waive on to her Health Subcommittee, and I am very happy to 
yield to you right now for 5 minutes.
    Ms. Eshoo. Thank you, Madam Chairwoman, for your kind 
remarks and for your leadership here and at the Health 
Subcommittee. That never stops with Congresswoman Schakowsky.
    So I guess it is afternoon now. Good afternoon, everyone. 
Welcome to the big hearing room of the Energy and Commerce 
Committee, and a special welcome to Ms. Leavitt from eBay. I am 
proud to have eBay in my congressional district and have 
watched just that very, very tiny idea just grow and grow and 
grow and there are a lot of people that have benefited from it. 
So thank you for coming across the country to testify today.
    I don't think everyone understands the difference between 
eBay, Amazon, and other e-commerce platforms. I think to 
understand a business you have to understand how it makes 
money. So, Ms. Leavitt, would you just take a minute and tell 
us how eBay makes money? What is your business model? And tell 
us what business practices eBay avoids relative to your peers 
so that people that are tuned in and listening to this 
understand the differences.
    Ms. Leavitt. Yes, thank you for your question. I think the 
biggest difference is that eBay is a peer marketplace, so we 
provide a platform for independent sellers and buyers to 
connect to transact a sale, essentially. I think another big 
difference that exists between us and our competitors is that 
we don't compete against our sellers on the site. So eBay does 
not sell. We don't otherwise touch or disturb you or retail the 
products that are sold on our site, and so our success as a 
business really does depend on the success of our individual 
sellers.
    Ms. Eshoo. How do you know they are safe?
    Ms. Leavitt. I am sorry. What was that?
    Ms. Eshoo. How do you know they are safe products?
    Ms. Leavitt. So we have--the products? So we have----
    Ms. Eshoo. Or the item, whatever you want to call it, but.
    Ms. Leavitt. Yes. Yes, so we have a number of different 
measures in place in addition to partnerships. So, we have 
talked a lot today about the different technologies that we 
have both to look at the listing and the seller level to ensure 
that there are no violations going on there, but then we also 
rely heavily on partnerships with third parties, including 
government agencies such as the CPSC to keep us informed about 
not only recalls, but also issues that can pose a pose a 
serious safety risk to consumers. So we kind of couple those 
two things together, in addition to efforts with law 
enforcement.
    Ms. Eshoo. Thank you.
    To Mr. Mehta, good afternoon to you. Knowing who is selling 
a product, and this has been taken up by different members 
since I came in and was absorbing what the questions and the 
answers were, but knowing who is selling a product is really 
important for buyers, obviously. Now on a product page in the 
Amazon app, a user has to scroll past the buy now button to see 
who is selling the product. Now I think that this seems like 
information I certainly would want to know and I think others 
would like to know before, not after, or ever, but before they 
are buying, especially if the seller isn't Amazon.
    Now I had in my wonderful opening statement that I am going 
to submit for the record, I use the example of helmets, and we 
saw today how calamitous a faulty product can be. So it is one 
thing to buy a knockoff designer handbag, but it is an entirely 
different issue when, as we saw when helmets don't meet 
required standards, fake iPhone chargers cause fires, 
counterfeit toys, you know, can injure children.
    So why is the seller information listed after the buy now 
button? And, well, is Amazon willing to change that? Seems to 
me you have a real headache on your hands.
    Ms. Leavitt. Congresswoman, thank you for the question. We 
also consider----
    Ms. Eshoo. Do you really mean that? Thank you for the 
question.
    Mr. Mehta. No, I really do mean that because----
    Ms. Eshoo. Good, OK.
    Mr. Mehta [continue]. I completely agree that it is 
completely unacceptable for unsafe products to be sold in our 
stores, and it is the reason we invest so much in proactive 
efforts to stop that. On every product----
    Ms. Eshoo. But, you know, and Ms.--excuse me. Ms. Wallach 
kind of took that apart. You are making an investment, but the 
investment made on that side relative to safe products and 
people knowing who is selling it versus the other dollars that 
you are spending, that just didn't--I mean it is like this. So 
I think you need to address that.
    Mr. Mehta. Yes. So if I go to your question around the 
product detail page, and every time a customer views a product 
detail page, we try to make it very transparent. It is the 
reason it is right next to that buy now button that we say 
ships from----
    Ms. Eshoo. Why don't you reverse it? Why do you make it 
afterward? Why not just state it up front? Wouldn't that be 
better for you as a business model and confidence in terms of 
consumers? It seems to me that it is an easy thing to do unless 
you don't want to for whatever reasons.
    Mr. Mehta. We try to put it right next to that and we want 
it to be easy for customers, you know, to be----
    Ms. Eshoo. Why don't you say, ``Before you buy you should 
know the following?''
    Mr. Mehta. To be honest, I have not heard this feedback 
from customers. I would be happy to follow up and look at 
whether customers believe this would be helpful. We have had it 
in that location, and in general customers are very clear. We 
say it ships from and sold by, and so it is very clear which of 
those are, and you click on that name and get more information 
about that seller.
    Ms. Eshoo. Well, my time has expired. But I have to tell 
you if it was my business model, I would go with consumers 
because they are your customers. Thank you very much, Madam 
Chairwoman. I yield back.
    Ms. Schakowsky. I thank the gentlewoman.
    Normally, this would complete our questions, but I had 
asked the ranking member, Ms. Rodgers, if I could ask a few 
more. And if you want to ask any questions, Mr. Shimkus is 
taking her place. But if you don't mind, I am going to go 
through just a couple more questions.
    In October, the Federal Trade Commission reached a 
settlement with the skin care brand Sunday Riley for directing 
employees to post false reviews and to down vote negative 
reviews. But the Federal Trade Commission settled with the 
company as I had mentioned in my opening statement, but it did 
not include any money, compensation for consumers, or penalties 
on the company.
    So I wanted to ask you, Mr. Friedman, first, what kind of 
message is that that the FTC is sending to a business who might 
be thinking about falsifying reviews and ratings?
    Mr. Friedman. It sends a terrible message, Madam 
Chairwoman, very much in contrast to all the work that you have 
done throughout your career to protect consumers. What this 
says instead is business as usual is fine. This is exactly what 
I am talking about in terms of how the incentives are not there 
for the companies to do the right thing even when they are 
clearly violating the law.
    Obviously that FTC settlement completely missed an 
opportunity for them to lead, for consumers to put----
    Ms. Schakowsky. I think most normal people wouldn't 
consider that a settlement at all. No money and no punishment.
    Mr. Friedman. Yes.
    Ms. Schakowsky. Remarkable.
    Mr. Friedman. It is not even a slap on the wrist.
    Ms. Schakowsky. Mr. Myers and Mr. Love, do you think that 
this settlement establishes a sufficient deterrent in any way 
to a seller thinking about engaging in fake reviews?
    Mr. Myers. Yes, anytime that a customer is deceived it is 
not a good situation. It is concerning. I think relative to how 
we look at the issue of just counterfeit products overall, you 
know, one counterfeit is too many and wherever that is 
happening, it is something that should be addressed. Ideally, 
jointly has been discussed today with marketplaces as well as 
with government agencies.
    Mr. Love. Exactly what he said.
    And I do want to quickly follow up on something that 
Congresswoman Eshoo brought up in the last discussion about 
putting customer information on stores. Speaking as an 
investigator, when you go to an Amazon.uk store or an eBay.uk 
store that information is all there because it is required by 
law. I love it when I find a bad actor on Amazon that they also 
have a UK store because then I can research them. I am 
completely incapable of doing that on .com today.
    So that is an aspect for legislation in terms of disclosing 
who you are actually doing business with, which it must be 
mandated by law in the UK, it could be something that could be 
looked into.
    Ms. Schakowsky. I assure you, Ms. Eshoo and our 
subcommittee will be interested in following up on that as 
well.
    Mr. Friedman, so what do you think is an appropriate 
punishment for businesses that seek out fake reviews?
    Mr. Friedman. From my----
    Ms. Schakowsky. I am not really asking for a dollar figure, 
but I am assuming you think there ought to be some compensation 
to the consumers and also some sort of punishment?
    Mr. Friedman. Yes. I mean A, they should be prosecuted to 
the full extent of the law. They should certainly be charged 
not only a penalty associated with the harm that they caused, 
but an additional penalty maybe even relative to the size of 
the company so that they actually feel it, that it means 
something to truly deter the actions. Many of these companies 
out here, we are talking hundreds of billions of market 
capitalization in some cases. A few million, a few hundred 
million here and there isn't going to make a difference to the 
decisions they make every single day.
    Ms. Schakowsky. Thank you. I wanted to clarify something as 
well. I want to make sure that the ordinary consumers 
understand what we mean. I was thinking back on the question 
about de minimis. So I ordered something, I ordered a bike 
online and it is six hundred and something dollars, you said. 
So it could be sent with a lot of other bikes that have been 
ordered, but it is sent to me as a way to get under the 
threshold; is that right? I mean things, for example, that are 
boxed that could be in a container are then sent individually 
to get away from inspections. Is that how that works that you 
can avoid inspections?
    Ms. Wallach. Thank you for the question, Madam Chairwoman. 
Yes, the combination of the de minimis being higher and the 
lack of information and combined with the platform's contention 
that they are not the seller, creates basically a perfect chain 
of uninspected goods getting delivered in huge amounts to 
individual consumers.
    As a practical matter, and this is detailed in my written 
testimony, there are several different ways you can game the 
system if you pick and pack things in the fulfillment center 
overseas into particular boxes addressed to a U.S. ultimate 
consumer and the value of what goes into the boxes is less than 
eight hundred dollars you are into de minimis.
    A new scam that there was a recent ProPublica story about 
is to have big containers, because those individual shipments 
are typically done by air freight, which is expensive. But to 
make it cheaper to go by ocean shipping now, companies have 
designed a system where they basically have big containers full 
of many counterfeit bikes shipped to Mexico or Canada. They are 
landed there as goods in transit, so they are not entered into 
Mexican or Canadian customs. They are picked and packed out of 
the ocean container into the individual, then they are trucked 
over the border to a U.S. Post Office or to an express 
consignment, a FedEx or whatever, and sent to the U.S. 
consumer, at which point they don't get inspected because they 
are de minimis. It is a serious problem.
    Ms. Schakowsky. Thank you. I wanted to just make sure 
everybody understood what is going on.
    Ms. Wallach. One individual, one thing to add, which is 
perhaps the most alarming and with respect to the 
administration's investing----
    Ms. Schakowsky. You know what, I am going to have to skip 
that because I am out of time.
    Ms. Wallach. OK. Customs considers these mass shipments to 
actually be individual shipments as the added thing, so Customs 
can change the rule as well.
    Ms. Schakowsky. Oh, OK. Thank you for that.
    Mr. Shimkus. Madam Chairman?
    Ms. Schakowsky. Yes. I have completed my questions and I 
yield to Mr. Shimkus.
    Mr. Shimkus. Thank you. I won't be long. This is not my 
subcommittee. Members of Congress have to be extra generalist, 
and you are getting lesson 101 on being an expert generalist. 
So I am just going to finish and make sure that, you know, a 
statement from our side would be that from my understanding we 
have rights holders, online marketplace, and consumer advocates 
at the panel. And I think we would argue that if you want a 
better, quicker, faster solution to this problem, it is 
probably best to be working together before we let the, you 
know, the political legislative process try to solve this. And 
I think from what I have been told of the opening statements 
and the testimony that people understand the challenges and the 
problems, and I would just encourage you to do that. With that 
I yield back my time. Thank you, Madam Chairman.
    Ms. Schakowsky. I thank the gentleman for helping us to 
finish this hearing. Thank you so very much and for your 
remarks.
    OK, I now ask unanimous consent to insert into the record 
letters--oh, I see. Here we go. And they are a letter from 
PreClear; a statement from the International Precious Metal 
Institute; a letter from The Toy Association; a letter from The 
Internet Association; a letter from the National Association of 
Attorneys General; a letter from the former Acting NHTSA 
Administrator Heidi King, offered by Representative Burgess; a 
letter from the National Association of Manufacturers. 
Unanimous consent?
    Mr. Shimkus. Without objection.
    Ms. Schakowsky. Without objection, so ordered. And with 
that the--oh yes. I need to remind our witnesses. And, first of 
all, thank you for being here. But I wanted to remind members 
that pursuant to committee rules, they have ten business days 
to submit additional questions for the record to be answered by 
the witnesses who have appeared. I ask each of the witnesses to 
respond promptly to any question that you may receive. And now, 
at this time, the subcommittee is adjourned.
    [Whereupon, at 12:43 p.m., the subcommittee was adjourned.]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

                                 [all]