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U.S. Tags Amazon as 'Notorious' -- WSJ
April 30 2020 - 03:02AM
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By William Mauldin and Alex Leary
This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (April 30, 2020).

WASHINGTON -- The Trump administration accused Amazon.com Inc. of tolerating counterfeit sales on its online platforms in foreign countries, prompting the e-commerce giant to respond that the hit was politically motivated.

The U.S. trade representative's office on Wednesday put Amazon's web domains in Canada, France, Germany, India, and the U.K. on its "notorious markets" list of platforms that are believed to facilitate intellectual-property violations.

The action, which doesn't target Amazon's U.S. platform, was based in part on complaints by U.S. apparel and footwear manufacturers that the company doesn't do an adequate job of vetting sellers on the foreign sites and is slow to respond when complaints of counterfeits are made.

Amazon disputed the findings, linking the action to long-running tensions between President Trump and Amazon's founder and Chief Executive Jeff Bezos.

"This purely political act is another example of the administration using the U.S. government to advance a personal vendetta against Amazon, " an Amazon spokeswoman said in a statement. "Amazon makes significant investments in proactive technologies and processes to detect and stop bad actors and potentially counterfeit products from being sold in our stores."

President Trump has criticized Mr. Bezos for unfavorable coverage in the Washington Post, which Mr. Bezos bought in 2013. The Post says its editorial decisions are independent. Amazon also has contended that it lost out on a Pentagon cloud-computing contract worth up to $10 billion because of improper pressure from Mr. Trump.

White House trade and economic adviser Peter Navarro defended the decision to add the Amazon sites to the notorious-markets list.

"This is an action clearly justified by the behavior of the worst counterfeit-enabler in the world, Amazon," Mr. Navarro said. "The Amazon brain trust would rather fight this out in the media through their swamp-creature spin doctors than clean up their marketplace in the urgent ways necessary to protect and defend the American people from fraud and often physical harm from dangerous counterfeit products."

The Wall Street Journal previously reported that the trade representative was considering taking the action, a highly unusual step.

A version of the report circulating in the administration last week didn't include Amazon, according to people familiar with the matter.

The U.S. trade representative's office added Amazon into a version sent Monday to dozens of people in the administration in a request for a final review of the document, according to one of the people.

Officials involved had to weigh taking the unusual step of targeting the foreign subsidiaries of a U.S. firm, another of the people said.

"It's crossing a line that's never been crossed before," said Claire Reade, senior counsel at Arnold Porter and former assistant U.S. trade representative for China affairs. "It's a departure and it raises the question of whether this is going to end up highlighting tensions the U.S. has with Amazon as a company, or whether it's going to highlight the problem of notorious pirating markets."

The notorious-markets list has been used for years to encourage foreign companies and countries to crack down on piracy and counterfeiting. The targeting of foreign platforms of a prominent American company is likely the first time an U.S.-headquartered company has been targeted by a law aimed at foreign marketplaces. A spokesman for the trade representative's office said he couldn't say whether Wednesday marked the first time a U.S.-headquartered firm was targeted.

The listing doesn't result in any specific penalties but comes as the Trump administration tightens pressure on electronic commerce, including international trade in relatively inexpensive consumer items that avoid tariffs and customs scrutiny.

On a call with reporters, a senior U.S. trade official said companies have complained that seller information is misleading on the Amazon platforms, making it hard to determine who is selling the good, and that the process for removing listings can be "lengthy and burdensome."

Amazon said it had launched a pilot program to help confirm the identity of its sellers through video calls, and prospective sellers are vetted in several ways, the company said.

"In 2019 alone, we invested over $500 million and have more than 8,000 employees protecting our store from fraud and abuse," a company spokeswoman said.

The American Apparel and Footwear Association had formally requested that the U.S. add the Amazon sales platforms in those five countries to the list. The association said its members flagged those sites as the biggest source of problems among Amazon's platforms, with thousands of counterfeit items and listings.

The clothing-and-shoe group is "pleased the USTR provides a regular forum for us to share and air our perspectives on foreign country practices as well as those of physical and online marketplaces," said Stephen Lamar, the association's president. Mr. Lamar highlighted the "counterfeits that too often plague foreign and domestic third-party marketplaces."

Besides Amazon, the annual notorious-markets list once again included the Taobao.com website owned by Chinese e-commerce company Alibaba Group Holding Ltd.

"Taobao remains one of the largest sources of counterfeit sales in China, " the report said. While the report noted improved response times and policies, it said Taobao is still known for its number of counterfeits offered for sale and the "lack of transparency regarding filters and other proactive anticounterfeiting measures."

An Alibaba spokesman said the company "will continue to expand and enhance its robust enforcement programs, engage in meaningful dialogue, and promote advanced collaboration."

Social-media platforms that allow users to buy and sell goods also are drawing scrutiny in Washington. "Right holders have expressed increasing concerns with a growing trend of counterfeit products being offered for sale on e-commerce features related to large platforms, such as WeChat," Tencent Holdings Ltd.'s giant social platform in China, according to the report.

More broadly, the Trump administration has sought to boost intellectual-property protection for drugmakers, Hollywood, the music industry and consumer-products firms in trade agreements, including a recent "phase one" trade pact with China.

In recent years, lobbyists and lawmakers have wrangled over how to address the degree of liability that online platforms should face for identifying and removing pirated electronic content or goods. In some areas, consumer watchdogs warn that officials can go too far in guaranteeing companies' rights and that big drugmakers and other firms may benefit too much from long-term patent and market protections.

Besides the notorious-markets list, the trade representative's office on Wednesday also released its new list of countries that don't take sufficient steps to protect intellectual property rights. The "priority watch list" includes Algeria, Argentina, Chile, China, India, Indonesia, Russia, Saudi Arabia, Ukraine and Venezuela.

China recently submitted a road map for addressing intellectual-property rights as a part of the "phase one" trade agreement, and the U.S. trade official said Wednesday that Washington is reviewing the blueprint and continuing to work with Beijing on the issue.

--Timothy Puko contributed to this article.

Write to William Mauldin at [e-mail] and Alex Leary at [e-mail]