Retail-Theft Bills Target Price Competition Online, Critics Say

The Organized Retail Crime Act, HR-6491, aims in part to combat “e-fencing” -- online sale of stolen goods. It would require an “online marketplace” -- in which people can buy and sell goods and the site owner has a financial interest in those sales -- to “expeditiously investigate” when it learns of “credible evidence” that goods acquired through organized retail crime are being sold through the site. Now the law bars only transport, sale or receipt of stolen goods valued at $5,000 or more. The marketplace would have to remove or block items for sale when an investigation turns up “knowledge or reasonable cause to know” that goods came from organized retail crime, and it would have to hold onto investigative records for three years.

Sellers of items from “a particular or exclusive retail source” must include that identifying information “conspicuously” in the online listing in HR-6491. The bill would require marketplaces to keep for three years full contact information and all transactions by every “high volume seller” - anyone who has “made or offered to make discrete transactions” of $12,000 or more the past 12 months. Those sellers would have to provide full contact information, including “legitimate physical address,” to any business with a “reasonable suspicion” that goods or services for sale came from organized retail theft. Most alarmingly to Web sites, businesses whose goods are stolen and sold through online marketplaces could sue the marketplaces in federal court.

The E-fencing Enforcement Act, HR-6713, substantively tracks HR-6491 but is much briefer. It diverges in defining high volume sellers as those with single transactions of at least $5,000. HR-6713 also requires marketplaces to determine -- in response to any “inquirer” who provides a police report of an unsolved theft from the past year for goods matching the description in the online offering -- whether goods and services were acquired lawfully. A marketplace would have to block the offering if it has “good reason to believe” items weren’t acquired lawfully.

NetChoice Executive Director Steve DelBianco said the bills were pushed by “big retail chains” like Wal-Mart that don’t like price competition from Web stores, and are in essence “blaming the back seat of cars for causing teenage sex.” High-markup retailers “can claim that a particular item just HAS to be stolen ‘because it’s selling for less than my cost!’, and marketplaces like eBay and Overstock would have to pull the listing,” DelBianco said on his blog: “A big-box chain could file a police report for theft of baby formula, then use this report to force online marketplaces to investigate every listing of baby formula.” The National Retail Federation said in 2005 that most retail theft is committed by store employees, DelBianco added.

EBay’s government-relations team called the bills “anti- eBay” and bad for small business, urging members in an e-mail to send a form letter condemning the bills to elected officials through eBay’s Main Street grassroots page. “Let’s remind Congress that big retailers may have high-priced lawyers and lobbyists, but real people like us rely on the values available online,” the e-mail said. Overstock.com, mentioned in DelBianco’s post, couldn’t be reached to say whether it’s pushing its users to complain to Congress.

NetChoice didn’t take up whether HR-6491 conflicts with section 230 of the Communications Decency Act, under which sites have claimed immunity under federal law for their users’ actions in recent lawsuits (WID May 19 p2). The bill “certainly violates the spirit of section 230,” which is to “promote and preserve” Internet and e-commerce growth, but it may not “technically be in conflict,” DelBianco told us. The group has a “stronger, bald-faced argument that this [bill] is about competition prevention,” but if HR-6491 progresses, NetChoice will raise the section 230 issue, he said.