Chairman Stephen Shurtleff, Chairman
House Criminal Justice and Public Safety Committee
Concord, New Hampshire
 
Subject: Hearing on HB 471-FN
 
Dear Chairman Shurtleff and members of the Committee:
 
NetChoice works to improve consumer trust and confidence in e-commerce, so we naturally support efforts to pursue and punish criminals who pollute online marketplaces by selling stolen goods.  But HB 471 goes too far, by imposing unprecedented liability and unworkable burdens upon online marketplaces. 
 
HB 471 would give retailers a blunt instrument to harass online marketplaces they compete with.   It would impose criminal liability for failing to halt any sale based upon information that “provides a reasonable basis for believing that the property is stolen” [Section IV].  This gives a retailer the power to shutdown competing sales – without any involvement of law enforcement.  For example, a retailer could claim a listed item was stolen simply because it was listed below its wholesale cost.
 
A stereo retailer, for instance, could tell Amazon or eBay, “Those speakers are listed so cheap that I just KNOW they are stolen.”  This bill threatens online marketplaces with criminal penalties and even forfeiture of assets if they fail to interrogate people about how they acquired an item they want to list for sale.
 
This bill would force online marketplaces to presume that sellers are listing stolen items – unless they can prove their ownership. Faced with the threat of jail time, e-commerce markets would be forced to require and retaining proof-of-purchase documentation for every item sold on the site. How would this system account for items received as a gift, in a trade, or just by cleaning out grandma’s attic?  What about cash transactions, or purchases where original receipts were lost long ago? 
 
But in reality, the vast majority of online sellers are honest people trying to find the best price for something they have legitimately acquired.  Honest citizens and businesses will naturally resent the presumption that they acquired their goods through organized criminal activity.
 
Legislation imposing these kinds of obligations on online marketplaces has been introduced before in several state legislatures and in Congress. In spite of intense lobbying by big-box chains, neither states nor Congress has passed any version of the retailers’ preferred legislation.

In addition, the bi-partisan National Conference of State Legislatures (NCSL) has soundly rejected this approach.  At its annual meeting in August 2007, the National Retail Federation attempted to modify NCSL policy by adding language that effectively blamed online markets for theft by suppliers, employees, and shoplifters: “the Internet also has become a tool of Organized Retail Crime gangs that may sell stolen merchandise and gift cards online.”  The retailers’ attempt to blame e-commerce for their theft problems was overwhelmingly rejected by state legislators at NCSL, by a vote of 45 – 0.

The National Retail Federation’s own commissioned surveys, conducted annually by the University of Florida, consistently show that two-thirds of retailer inventory losses are directly attributable to internal causes, including theft by their own employees and suppliers.  Year after year, about half of all retail inventory losses are the result of employee theft.    To put this in a national context, the retailers’ own study concluded that “…there is no other form of larceny that annually costs American citizens more money than employee theft.” 
 
These are the retailers’ own employees, people who are hired, managed, and paid by the retailers. With that kind of direct control, retailers are in the position to stop employee theft where it starts.   Rather than shifting blame and burdens to online marketplaces, retailers should improve their employee screening, inventory control measures, and store security systems.  
 
The bill attempts to address retail theft, and the sale of stolen goods online. But this bill isn’t about fighting crime or consumer protection, it’s really about competition prevention—namely, preventing e-commerce sites from competing with retailers.
 
Finally, we have questions about legal aspects of HB 471.  First, any law that creates legal liability for online marketplaces for the wrongdoings of others would violate the intent—if not the letter—of an existing federal law, Section 230 of the Communications Decency Act. Section 230(c) explicitly protects interactive computer services from liability for content provided by third parties.   And the proposed liability threshold in HB 471 is unprecedented in that it imposes criminal penalties based only on a reason to believe, instead of actual knowledge.
 
If enacted into law, HB 471 would impose extraordinary and discriminatory restrictions on Internet marketplaces and the thousands of New Hampshire consumers that use them every day. We ask that you oppose HB 471.
 
Thank you for considering our views, and please let me know if I can provide further information for your deliberations on this important issue.
 
Sincerely,
Steve DelBianco
Executive Director, NetChoice
 
cc: Committee Members