Online marketplaces are crying foul and claiming big box retailers are attempting to cripple competition from the Internet through legislation aimed at curbing the sale of online fenced goods. Brick-and-mortar retailers counter they routinely find hot goods for sale on sites like eBay and Overstock.com.
Increasingly, big box retailers claim, the goods showing up online are part of efforts by organized retail crime groups to expand their black markets beyond pawnshops, flea markets, garage sales and classified advertising. "Clearly, these [online] products have been either stolen or fraudulently obtained," the Coalition Against Organized Retail Crime told the House Judiciary Committee last year.
To counter the threat of fenced goods, retailers such as Wal-Mart, Target, Safeway, Best Buy and Walgreens are pushing Congress to approve legislation that would effectively allow the retailers to skip the police and simply issue take-down notices to sites such as eBay.
The legislation, which is a package of three bills (H.R. 6713, 6491 and 3434) that will be debated at a Sept. 22 hearing of the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security, would also require online sellers who gross more than $12,000 a year to keep detailed records on those they do business with.
"Granted, most sellers utilizing Internet auction sites are honest individuals who are not trafficking in stolen or fraudulently obtained goods, but a significant number of sellers are clearly not reputable," maintains the Coalition Against Organized Retail Crime. "If just a very small percentage of sales from Internet auction sites involve stolen or fraudulently obtained merchandise, that's thousands of illicit transactions each and every day of the year, which illustrates the magnitude of this problem."
Blaming the online marketplace for brick-and-mortar businesses that can't control their inventories is "like blaming the back seat of cars for causing teenage sex," said Steve DelBianco, executive director of NetChoice, a coalition of consumers, e-commerce merchants and trade associations.
"All this blame-shifting has only one objective: taking law enforcement out of the loop," said DelBianco. "These bills would impose extraordinary and discriminatory restrictions on Internet marketplaces that help millions of people to legitimately buy and sell products every day at big discounts."
Currently, brick-and-mortar merchants must file a police report about suspected hot goods and law enforcement agencies do the follow-up. The proposed legislation would make it a crime if an online marketplace doesn't pull listings when a competing retailer claims it has evidence of theft. The bills would also require online merchants to conduct investigations if a brick-and-mortar merchant provides a police report dated any time within the past 12 months claiming theft.
The legislation would also target the "high-volume" sellers of online goods by requiring them to keep detailed records about where they obtained the goods. The proposed laws define a high-volume seller as anyone who in the past 12 months has made or offered to make transactions aggregating at least $12,000.
"These bills are blatantly discriminatory against online business models," said Catherine England, a spokesperson for eBay, noting the legislation would not apply to flea markets, classified advertising or pawnshops. "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."
As for the reporting requirements for high-volume sellers, England said a recent eBay survey of its members showed 750,000 people who are "making all or a significant portion" of their income through online selling.
"Small, independent sellers do compete with large retailers and they do put pricing pressure on them," she said. "They should be subject to harassment for doing that. In our view, organized retail crime can only thrive only to the extent they're allowed to walk out the front door."