Proposed Law Targets Stolen Goods on eBay, Amazon

It didn't take long for three lawmakers in the 111th Congress to reintroduce legislation that was widely ridiculed in 2008 as an attack by brick-and-mortar retailers on online marketplaces. Ostensibly targeting organized retail crime, the legislation would mean online retail Web sites would be subject to take-down notices if a retailer claims the goods are stolen, and individual sellers over a certain limit would be required to keep records for up to three years.

The three major bills introduced Feb. 25 are the Combating Organized Retail Crime Act of 2009, sponsored by Sen. Dick Durbin of Illinois, the Organized Retail Crime Act of 2009, sponsored by Rep. Brad Ellsworth of Indiana, and the E-fencing Enforcement Act of 2009, sponsored by Rep. Robert Scott of Virginia.

Together, the bills would mandate online and offline marketplaces to investigate suspicious sales, place disclosure requirements on online marketplaces, impose obligations upon online marketplaces known to be used by high-volume sellers of stolen merchandise and force online marketplaces to collect information that law enforcement can use to prosecute those who fence goods on those Web sites.

"In the midst of the deepening economic crisis, organized retail crime seems to be flourishing," Durbin said in introducing his legislation. "Organized theft affects struggling retailers' bottom lines at a time when they can afford it least and the resale of these stolen goods puts consumers at tremendous risk of buying tainted or outdated products. Our bill takes immediate steps to combat these crimes by making it easier to identify and prosecute offenders and strengthening the penalties for those engaging in such crimes."

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The NRF (National Retail Federation) immediately endorsed the legislation.

"Retailers already struggling to survive are seeing their inventory disappear in increasing amounts, and the goods end up at flea markets or on the Internet at prices that put temptation into the path of cash-strapped consumers trying to stretch every dollar," NRF Vice President for Loss Prevention Joseph LaRocca said in a statement. "Losses from these crimes ultimately drive up the price of legitimate merchandise at a time when consumers can least afford it and do serious damage to our nation's already weakened economy."

The retailers want to force eBay, Amazon.com, Overstock.com and other online retailers to remove items for sale on their sites based only on the word of retailers that the items are stolen. Failure to "expeditiously investigate" the complaint would result in criminal penalties.

To further tighten the noose on online marketplaces, retailers are seeking to impose reporting requirements on individual sellers that annually sell more than $12,000 worth of online goods. The records would have to be kept up to three years.

The CCIA (Computer & Communications Industry Association) was the first out of the box to criticize the proposed legislation.

"We are very concerned that these bills separate out e-commerce and online marketplaces for discriminatory treatment," CCIA President and CEO Ed Black said in a statement. "The bills undermine user privacy, and threaten to erode crucial ISP immunities that are critical to innovation and growth on the Internet. At a time of financial duress and economic contraction, the last thing we should be doing is attacking innovative e-commerce services that contribute to economic growth."

Similar legislation was introduced late in the 110th Congress, and at a September hearing, Edward Torpoco, eBay's senior regulatory counsel, said, "Big retailers like the Internet, but they don't like Internet-based competition from small sellers who drive down prices and give consumers more choices. One way to attack pesky secondary market competitors is to suggest that there is something shady about them."

Another eBay spokesperson added, "These bills are blatantly discriminatory against online business models. Selling stolen goods anywhere, online or on the street corner, is already illegal, so the point of the proposed legislation is more about limiting competition."

Steve DelBianco, executive director of NetChoice, a coalition of consumers, e-commerce merchants and tech trade associations, said blaming the online marketplace for stores' inability to control their inventories is "like blaming the back seat of cars for causing teenage sex."