Big brands bring the fight to Big Tech

Big brands bring the fight to Big Tech

Brands such as Louis Vuitton and Canon see Brussels’ future rules on online platforms as their long-awaited chance to crack down on counterfeit.

By LAURA KAYALI AND MELISSA HEIKKILÄ 6/8/20, 6:00 AM CET Updated 6/9/20, 4:37 AM CET

https://www.politico.eu/article/how-big-brands-chanel-canon-louis-vuitton-nike-are-taking-on-big-tech-silicon-valley-at-last/

Brands like Chanel have long pressed tech firms to fight harder against counterfeit products sold online

For years, powerhouses like LVMH, Chanel and Nike have tried to force Silicon Valley giants to stamp out counterfeit products online.

Now their luck may be about to turn.

With the European Commission preparing new rules for platforms, brands ranging from fashion giants to tech companies are ramping up efforts to make rivals like Amazon and Facebook more accountable for checking products online.

The standoff is playing out in lobby groups across Europe and the United States, as the EU's executive arm prepares to unveil its package of measures on platform liability, known as the Digital Services Act, by the end of this year, and the Trump administration pushes for tougher action against counterfeit goods.

In the European Union, platforms are not legally responsible for the content they host, but do have to take posts down once flagged. Tech companies enjoy similar legal protections in the U.S. under Section 230 of the Communications Decency Act.

“Platforms have shown through the coronavirus crisis that they can address illegal content and goods online. Why not continue?" — Michelle Gibbons, the director general of the European brands association AIM

But over the past few months, as the coronavirus crisis has put a spotlight on scams and fake products being sold online, the European Commission has become ready to propose stricter rules.

“Platforms have shown through the coronavirus crisis that they can address illegal content and goods online. Why not continue? There shouldn’t be anything controversial about removing illegal goods and it’s in everyone’s interest to address this issue,” said Michelle Gibbons, the director general of the European brands association AIM, which represents household names such as Louis Vuitton, Chanel, Lego and Nike.

Boiling over

Tension between brands and platforms has been brewing for years.

In January, French luxury conglomerate LVMH’s CEO Bernard Arnault slammed Amazon in an earnings conference call, arguing the e-commerce giant was making money from counterfeit goods.

As the Commission seeks input from industry on its Digital Services Act, both sides are wary of a public dustup following a vicious battle over online copyright rules. But behind closed doors, tensions do emerge.

In lobby groups that bring together brands and platforms, the two sides sometimes have trouble forging common positions on future rules for tech companies, according to two industry players who spoke on condition of anonymity because they were not allowed to talk about internal discussions.

At least one lobbying group, BASCAP, the anti-counterfeiting arm of the International Chamber of Commerce, has seen brands depart after what people at several companies said on the condition of anonymity were disagreements over pushing legislation instead of voluntary measures on counterfeit. BASCAP did not comment.

Push for binding rules

Under the previous Commission, music labels, press publishers and the audiovisual industry won more tools to deal with Silicon Valley giants via the controversial copyright reform.

But brands felt that their concerns were not sufficiently taken into consideration.

In 2017, a group formed the Together Against Counterfeiting Alliance (TACA), gathering high-end fashion companies such as Chanel and LVMH, but also tech brands such as Apple. The group argues that voluntary measures — such as the Commission’s Memorandum of Understanding in which platforms and brands pledge to fight against counterfeit — are not enough to tackle the full scale of the problem. LVMH declined to comment for this story.

The current voluntary measures lack transparency, argued Måns Sjöstrand, head of intellectual property and brand protection at Swedish watch brand Daniel Wellington, which belongs to TACA. “Platforms claim they are doing a lot, but it's impossible to verify that,” he said.

A similar argument has been playing out in the United States, where brands including Birkenstock and PopSockets, a smartphone accessories company, have ended their direct sales relationship with Amazon over concerns about counterfeiting.

The issue has not eluded Washington power players either. Congress has called hearings to specifically discuss the proliferation of counterfeit products online, and the Trump administration released a plan in January that outlined steps for the government and private sector to work in tandem to address counterfeit products.

In April, the Trump administration released a list of so-called notorious markets that for the first time included the foreign operations of a U.S. company: Amazon’s websites in Canada, the U.K., Germany, France and India — granting brands fresh ammunition. (Amazon called Washington's move "purely political.")

‘Know your customer’

Platforms have ramped up efforts to fight counterfeiting in recent years. A spokesperson for Amazon said the company invested “over $500 million in 2019 and has more than 8,000 employees protecting [their] store from fraud and abuse.”

Even platforms struggle to approach the problem as a united front.

A spokesperson for Facebook said that in the second half of 2019, the company removed 490,000 pieces of content in response to about 50,000 counterfeit reports submitted.

In addition to taking down flagged items and proactive monitoring, Chinese giant Alibaba said it collaborates with brands to share knowledge on best practices, and has taken an aggressive litigation strategy, and illegal actors “will face criminal and civil litigation,” said Matthew Bassiur, the head of global IP enforcement at Alibaba Group.

Despite these efforts, “it’s still like comparing Chernobyl with [the Three Mile Island nuclear accident in] Harrisburg,” Pennsylvania, Daniel Wellington's Sjöstrand said.

One of the likely future bones of contention with platforms in the Digital Services Act will be the so-called know your business customer principle, which would require platforms, including online marketplaces, to vet their traders.

“The middlemen should verify the identity of the sellers. They don’t at the moment, there is no way to trace liability in case of consumer or business harm,” AIM’s Gibbons said.

Brands also want platforms to do more to track down illegal products proactively and ensure they don’t reappear online.

Brands vs. Tech vs. Tech

The counterfeit debate also pits tech companies against tech companies, as hardware heavyweights such as Apple, HP and Canon want platforms to do more against fake products online.

Apple, HP, Amazon, Google and others have to work together on common Digital Services Act positions in tech-focused trade associations such as DigitalEurope and ITI.

In DigitalEurope's paper on the Digital Services Act, the know your business customer principle is briefly mentioned — acknowledging that some hardware brands want to introduce it, yet urging caution.

Asked whether Apple was satisfied with the way online marketplaces deal with counterfeit, a spokesperson redirected POLITICO to a statement made by the company's senior director for intellectual property in the U.S. House of Representatives in March, which calls for more vetting of sellers and more cooperation with brands. The iPhone maker is among the most counterfeited brands.

But Apple's app store is also a platform, meaning the tech giant will not push for too radical an overhaul of the digital intermediary's liability regime.

And even platforms struggle to approach the problem as a united front.

“I would say that social media and chat apps are now the wild west of counterfeit and IP infringement activity, and these social media and chat apps are being used to circumvent our proactive measures,” Alibaba’s Bassiur said.

Steven Overly in Washington contributed reporting.