Should online marketplaces be required to verify third-party sellers for safety’s sake?
Source: ebay.com

Home Depot, Walgreens and many of the largest retailers in the U.S. are throwing their support behind proposed legislation that would require online marketplace operators such as Amazon.com to verify third-party seller information and provide direct contact information to consumers.

The proposed legislation, known as the INFORM Consumers Act, is intended to provide greater transparency to consumers and assist law enforcement authorities to identify sellers suspected of trafficking in counterfeit, stolen and sometimes dangerous products.

“The continued anonymity and unregulated environment in which these platforms operate have made them a stage to sell products that would never be allowed on a store shelf,” said Michael Hanson, senior executive vice president of public affairs for the Retail Industry Leaders Association (RILA). “Stolen goods, expired and defective products, products made with unsafe levels of chemical substances, and products that do not meet U.S. quality and safety standards are often deceptively marketed and sold through these platforms.”

Mr. Hanson said that large online marketplaces have the technology and human expertise to “shut down criminal elements and fraudsters” if they direct resources to doing so.

Alex Gourlay, president of Walgreens, echoed Mr. Hanson’s comments adding in a statement, “Now, more than ever, consumers deserve to know who they are buying products from online, in order to make safe and informed purchasing decisions for themselves and their families.”

Amazon has been the most frequent target of critics who say that online marketplaces are not doing enough to put an end to illegal and unsafe activity.

Earlier this year, Amazon introduced a program that involved in-person verification of third-party marketplace sellers. That program was adapted to handle seller verification via video calls once the coronavirus pandemic began spreading across the U.S. Amazon has representatives make calls using a videoconferencing app to check the identification of third-party sellers and confirm they match their applications.

Legislation crafted by Democratic and Republic Party congressional members known as the Shop Safe Act was introduced in March to amend the Trademark Act of 1946. The legislation, which has not been voted on by the full House, would make online platforms liable if products sold by third parties posed a health risk to consumers and had not been verified by the marketplace.

Rep. Doug Collins (R-GA), ranking member of the Judiciary Committee, and one of the authors said, “Consumer lives are at risk because of dangerous counterfeit products that are flooding the online marketplace. Congress must create accountability to prevent these hazardous items from infiltrating the homes of millions of Americans. The Shop Safe Act would make families safer by requiring online sellers to help prevent the sale of counterfeit products to consumers.”

BrainTrust

“This is no different than a bar being held liable for over-serving someone who then gets behind the wheel and crashes.”

David Weinand

Chief Customer Officer, Incisiv


“If you ask someone who bought an item from a third-party on Amazon where they got it, the answer will be Amazon.”

Steve Montgomery

President, b2b Solutions, LLC


“If a platform accepts that third party, they have accepted all the responsibility for what they sell.”

Gene Detroyer

Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.

Discussion Questions

DISCUSSION QUESTIONS: Should online marketplaces be required to verify third-party sellers? Should these marketplaces be legally liable for dangerous products sold to customers by third parties?

Poll

Do you agree that online marketplace should be held legally liable for dangerous products sold by third parties if the platform fails to vet the sellers?

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10 responses to “Should online marketplaces be required to verify third-party sellers for safety’s sake?”

  1. Neil Saunders Avatar
    Neil Saunders

    A lot of work already goes into protecting shoppers on marketplaces. The number of products and sellers Amazon prevents from reaching shoppers is huge. Moreover, Amazon recently announced a big expansion of its division that takes legal action against serious counterfeiters and fraudsters. Other marketplace platforms have similar arrangements. The bottom line is that most responsible marketplaces have already taken steps to protect consumers and those efforts should be recognized.

  2. David Weinand Avatar
    David Weinand

    These platforms are the customer-facing channel by which fraudulent products make it to market. If these platforms aren’t liable for ensuring their safety, who would be? This is no different than a bar being held liable for over-serving someone who then gets behind the wheel and crashes.

  3. Liz Adamson Avatar
    Liz Adamson

    Amazon and other marketplaces do have a responsibility to ensure products sold on their platforms are legitimate and safe. It’s not only ethical, but will ensure they keep customer trust. In addition to launching in-person verification, Amazon recently announced that seller contact information will be made available to customers starting September 1. This is likely a move to get ahead of this new legislation and to show willingness to be more transparent with customers. This will also allow brands to better monitor who is selling their products and track down counterfeiters.

  4. Jeff Weidauer Avatar
    Jeff Weidauer

    So far the world of ecommerce has been the Wild Wild West, and that’s gotten worse as the pandemic has taken hold. Sellers should absolutely be held accountable for the wares they offer — but that’s only a start. The retail industry needs to do better than “caveat emptor” for online shoppers.

  5. Suresh Chaganti Avatar
    Suresh Chaganti

    Marketplaces have vested interest in ensuring the sellers are authentic and do not sell fakes. We only have to see eBay to see how an overly greedy marketplace operator can lose both consumers and sellers. Unfortunately, Amazon, the biggest one now, is doing the minimally required checks on this.

  6. Steve Montgomery Avatar
    Steve Montgomery

    Online marketplaces deal with a tremendous number of third-party sellers which makes the verification process difficult. However, that does not negate their responsibility to do so.

    If you ask someone who bought an item from a third-party on Amazon where they got it, the answer will be Amazon. Consumers expect the marketplaces to ensure that what they buy is safe and is what it claims to be. To do less is to not fulfill their obligations to their customers.

  7. Gene Detroyer Avatar
    Gene Detroyer

    I don’t know why this is a question. Let’s assume the worst and any third party will try to get away with what they can. If a platform accepts that third party, they have accepted all the responsibility for what they sell.

    The answer is quite simple … YES!

  8. Craig Sundstrom Avatar
    Craig Sundstrom

    I would separate this issue into two components: processes and results (which of course is reflected in there being several questions being asked).

    So: yes, there should be some basic, minimal steps sellers are required to take, but no, they should not be liable (assuming they’ve properly followed the foregoing procedure[s]).

    Ultimately though, these are issues of cost and market power: manufacturers and resellers are both motivated to make sure compliance costs don’t fall on them — which implies an expanded governmental/regulatory presence (and makes Republican sponsorship of the bill rather ironic) — while large resellers are motivated to have review requirements favor them (by either requiring proprietary technology, or just simply cost burdens too large for smaller competitors to afford).

  9. Ralph Jacobson Avatar
    Ralph Jacobson

    Although I’m no fan of increased regulation by the Feds, I can say that having seen counterfeit goods on sites sold by third party merchants, it’s definitely an issue where responsibility should at least be shared by the online marketplace.

  10. Xavier Lederer Avatar
    Xavier Lederer

    How badly will this impact small US manufacturers? I have gone through some of these “verifications” when we started selling on Alibaba. The amount of paperwork and obscure processes involved was astonishing, especially for a small manufacturing business without an army of lawyers. Even proving that we owned our own brand (which was the company name!) was a nightmare.

    This move has the potential to alienate small US manufacturers from online platforms. Where will they sell? They can’t sell to big box retailers, because they can’t meet payment terms or lengthy (and expensive) supplier approval processes. Online platforms like Amazon have become powerful not just because they are convenient to consumers, but also because they are often one of the few remaining outlets for small US manufacturers.

    One way for big box retailers like Walgreens and Home Depot to counter Amazon is to push for more red tape. Another, smarter and more valuable way, would be to become more attractive to the many legit small businesses that sell Amazon.

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Neil Saunders
Neil Saunders
Noble Member
3 years ago

A lot of work already goes into protecting shoppers on marketplaces. The number of products and sellers Amazon prevents from reaching shoppers is huge. Moreover, Amazon recently announced a big expansion of its division that takes legal action against serious counterfeiters and fraudsters. Other marketplace platforms have similar arrangements. The bottom line is that most responsible marketplaces have already taken steps to protect consumers and those efforts should be recognized.

5
David Weinand
David Weinand
Member
3 years ago

These platforms are the customer-facing channel by which fraudulent products make it to market. If these platforms aren’t liable for ensuring their safety, who would be? This is no different than a bar being held liable for over-serving someone who then gets behind the wheel and crashes.

1
Liz Adamson
Liz Adamson
3 years ago

Amazon and other marketplaces do have a responsibility to ensure products sold on their platforms are legitimate and safe. It’s not only ethical, but will ensure they keep customer trust. In addition to launching in-person verification, Amazon recently announced that seller contact information will be made available to customers starting September 1. This is likely a move to get ahead of this new legislation and to show willingness to be more transparent with customers. This will also allow brands to better monitor who is selling their products and track down counterfeiters.

4
Jeff Weidauer
Jeff Weidauer
Member
3 years ago

So far the world of ecommerce has been the Wild Wild West, and that’s gotten worse as the pandemic has taken hold. Sellers should absolutely be held accountable for the wares they offer — but that’s only a start. The retail industry needs to do better than “caveat emptor” for online shoppers.

-1
Suresh Chaganti
Suresh Chaganti
Member
3 years ago

Marketplaces have vested interest in ensuring the sellers are authentic and do not sell fakes. We only have to see eBay to see how an overly greedy marketplace operator can lose both consumers and sellers. Unfortunately, Amazon, the biggest one now, is doing the minimally required checks on this.

1
Steve Montgomery
Steve Montgomery
Member
3 years ago

Online marketplaces deal with a tremendous number of third-party sellers which makes the verification process difficult. However, that does not negate their responsibility to do so.

If you ask someone who bought an item from a third-party on Amazon where they got it, the answer will be Amazon. Consumers expect the marketplaces to ensure that what they buy is safe and is what it claims to be. To do less is to not fulfill their obligations to their customers.

4
Gene Detroyer
Gene Detroyer
Trusted Member
3 years ago

I don’t know why this is a question. Let’s assume the worst and any third party will try to get away with what they can. If a platform accepts that third party, they have accepted all the responsibility for what they sell.

The answer is quite simple … YES!

-1
Craig Sundstrom
Craig Sundstrom
Active Member
3 years ago

I would separate this issue into two components: processes and results (which of course is reflected in there being several questions being asked).

So: yes, there should be some basic, minimal steps sellers are required to take, but no, they should not be liable (assuming they’ve properly followed the foregoing procedure[s]).

Ultimately though, these are issues of cost and market power: manufacturers and resellers are both motivated to make sure compliance costs don’t fall on them — which implies an expanded governmental/regulatory presence (and makes Republican sponsorship of the bill rather ironic) — while large resellers are motivated to have review requirements favor them (by either requiring proprietary technology, or just simply cost burdens too large for smaller competitors to afford).

1
Ralph Jacobson
Ralph Jacobson
Member
3 years ago

Although I’m no fan of increased regulation by the Feds, I can say that having seen counterfeit goods on sites sold by third party merchants, it’s definitely an issue where responsibility should at least be shared by the online marketplace.

0
Xavier Lederer
Xavier Lederer
3 years ago

How badly will this impact small US manufacturers? I have gone through some of these “verifications” when we started selling on Alibaba. The amount of paperwork and obscure processes involved was astonishing, especially for a small manufacturing business without an army of lawyers. Even proving that we owned our own brand (which was the company name!) was a nightmare.

This move has the potential to alienate small US manufacturers from online platforms. Where will they sell? They can’t sell to big box retailers, because they can’t meet payment terms or lengthy (and expensive) supplier approval processes. Online platforms like Amazon have become powerful not just because they are convenient to consumers, but also because they are often one of the few remaining outlets for small US manufacturers.

One way for big box retailers like Walgreens and Home Depot to counter Amazon is to push for more red tape. Another, smarter and more valuable way, would be to become more attractive to the many legit small businesses that sell Amazon.

0