Tech, retail giants unite around bills to combat organized theft

What started as a fight in the states between e-commerce and brick-and-mortar retailers over how to address the epidemic of organized retail theft has become a joint lobbying campaign aimed at spurring Congress to action in the lame-duck session. 

More than 70 companies and organizations – including many that frequently find themselves on opposing sides, like Amazon and Walmart – signed a letter to congressional leaders on Oct. 4 urging passage of a measure to require more disclosure from high-volume, third-party sellers of new or unused goods on online marketplaces.

The bill, dubbed the INFORM Act, is meant to combat the sales of stolen goods, many of which are pilfered at brick-and-mortar outlets, and the sale of counterfeit goods. Supporters of the bill want to see it attached to the annual National Defense Authorization Act which must pass by the end of the year.

The coalition around a federal bill emerged after a frenzy of lobbying on similar legislation at the state level that highlighted simmering tensions between online and big box retailers.  

More than a dozen states have passed laws in the last year and a half to require hosts of online marketplaces like Amazon, Facebook and eBay to collect and verify identifying information from sellers on their sites. Legislators in 17 other states have considered their own versions.

The legislation is an updated attempt to regulate the equivalent of the modern-day pawn shop.

But targeting the black market stirred up long-simmering feuds between brick-and-mortar and e-commerce retailers as they jockey for marketplace supremacy and a competitive advantage.

In April 2021, Amazon’s vice president of public policy, Brian Huseman, wrote a blog post suggesting the bills were little more than a smokescreen. “[L]egislation favors large brick-and-mortar retailers, at the expense of small businesses that sell online, while doing nothing to prevent fraud and abuse or hold bad actors accountable.”

A coalition aligned with the Retail Industry Leaders Association accused the online giants of failing to adequately police third-party sellers on their platforms.  

“Big Tech has largely ignored this growing problem and the concerns of legitimate sellers and consumers who have been targeted by these criminal elements,” the coalition’s website says. “Big Tech cannot be left to solve a problem from which they currently generate immense and growing profits.”

In the states, legislation that has advanced so far requires online marketplaces to collect personal and banking information from high-volume sellers. Typically, the reporting requirements kick in for sellers who gross $5,000 or more a year in revenue. Sellers who top $20,000 in revenue are subject to additional disclosures.

“The basic premise is you can’t hide behind a fake screen name anymore and set up a business selling stolen or counterfeit products,” said Jason Brewer, a spokesperson for the retailers association.

The first version of the law passed in Arkansas, home to Walmart, in April 2021. This year, 12 more states passed INFORM laws, including Colorado, Michigan, and Alabama, according to retail industry tracking. California – where organized retail theft has become an epidemic – implemented a version last month.

The California bill “will protect consumers and retailers by helping prevent organized retail theft from using web marketplaces to sell stolen products,” state Sen. Nancy Skinner (D), the bill’s chief sponsor, said in a statement.

The Buy Safe America coalition, whose members include 3M and Walgreens, estimates that nearly $70 billion in products were stolen from retailers in 2019. After the COVID pandemic struck in 2020, organized retail thefts appeared to spike. Dramatic surveillance video showing gangs of thieves sweeping into stores and walking out with arms full of stolen merchandise became a regular staple on local newscasts and cable television. 

The brazenness of the thefts combined with reports of criminals fencing stolen goods online spurred state lawmakers to act.

“We had had several very public, organized crime kind of smash-and-grab retail theft events,” recalled Washington State Sen. Karen Keiser (D), who introduced an online marketplace bill in December at the request of her state’s retail association.

Keiser’s bill received a public hearing, but it did not advance. Among those opposing the measure was TechNet, a tech industry association whose members include Seattle-based Amazon.

TechNet said it opposed state-level bills in hopes of avoiding a patchwork varying between the states that would make compliance difficult for both online retailers and their independent sellers. Once several versions passed, TechNet dropped its opposition and focused on aligning the bills across state lines.

“I think as we saw an increasing number of states move these [bills] along, it became a matter of ensuring that if a bill is going to move that there’s alignment with existing legislation that’s out there to avoid that patchwork,” said David Edmonson, TechNet’s vice president for state policy.

In August, California’s version sailed through the General Assembly without opposition, according to Rachel Michelin, president and CEO of the California Retailers Association whose group represents both brick-and-mortar and online retailers.

“This isn’t an us vs. them — it’s really about public safety,” Michelin said.

Edmonson said his group didn’t take a position on the California bill because it aligned with the federal legislation his association has endorsed. Amazon endorsed an updated version of the  federal bill. The online auction site eBay said the updated federal version no longer requires sellers’ driver’s licenses as a form of verification, or that sellers post information that might compromise their privacy. 

An Amazon spokesperson told Pluribus News the federal legislation as currently written “will help protect consumers, while not punishing the honest small businesses that sell online.” The company says it spent more than $900 million overall in 2021 to prevent fraud and abuse on its platform. That includes machine-learning models that analyze transactions and an in-person verification program that requires prospective sellers to verify their identity, physical location and methods of payment.

Keiser said she would introduce her bill again in 2023. But rather than focus exclusively on online sellers, Keiser said she intends to broaden the legislation to include worker safety provisions aimed at brick-and-mortar stores.  

“We have to have a responsibility on all levels,” Keiser said. “I think we can get [there] and that means it has to be a broader bill that doesn’t only look like it’s the big box stores versus Amazon.” 

But if Congress acts before then, the push for additional state laws would evaporate. The federal bill preempts state versions that do not fall into line.

“Our preference is for Congress to pass the federal bill,” said Brewer, of the retailers association. “But if we’re unsuccessful, then you will likely see more states take up state versions of the bill in 2023.”