Don’t let big box retailers destroy e-commerce too

OPINION – In an effort to look tough on retail theft, the California Legislature is considering an action that could eliminate a form of commerce that has long been a lifeline for working-class consumers: the ability to buy and sell used goods through online classifieds.

Whether it has been through garage sales, newspaper classified ads, or in more recent times online classified marketplaces such as OfferUp or Craigslist, thrift-conscious consumers have always relied on this form of peer-to-peer commerce.

A worker might turn to these options, for instance, to find a low-cost used car in order to get to her job. A new parent might look for a crib being sold by a neighbor whose child has outgrown it. A young couple might turn to an online marketplace to purchase used furniture.

For those on a limited budget, access to these sorts of transactions enables them to get by. In fact, for low-income consumers who are unbanked and undocumented, these marketplaces can be their only access to goods.

Of course, there is concern – legitimate concern – that online marketplaces could be abused by thieves seeking to sell off stolen goods in bulk. It was precisely that concern that prompted the Legislature, followed shortly thereafter by Congress, to enact laws in 2022 to target such abuses.

The federal INFORM Consumers Act requires online marketplaces to collect personal and financial information from high-volume sellers who have entered 200 or more transactions during a 12-month period for which payment was processed by the online marketplace or through a third party. That requirement enables suspicious activity to be identified and investigated.

But now the Legislature is considering a bill – SB 1144, now before the Assembly – that purports to close “a loophole.” In fact, the federal law was enacted after years of negotiation among major retailers and classified marketplaces to protect against abuses while also enabling classified marketplaces to function. Preserving that balance was an intended feature of the law – not a loophole. A little more than a year after it has been in effect, there is no evidence that it is being exploited.

The new California proposal would blow up that balance. It would force classified online marketplaces to treat every customer as a “high-volume seller.” Because these marketplaces only facilitate sales rather than process them, they have no way of knowing when users meet up, how much they sell an item for, or whether they completed a transaction at all.  To ensure compliance with the law, they would have to collect sensitive personal information from every California customer – home addresses, Social Security numbers, bank account numbers, and more. The last thing California needs is even greater dissemination of such highly personal data, and the requirement could force online classified marketplaces to stop doing business in this state. After all, who would want to hand over their Social Security number just to place a listing for a used coffee table?  And unbanked Californians may lose access to the opportunity to sell through classifieds marketplaces altogether.

The real-world experience of OfferUp demonstrates the unreasonableness of the California proposal. In 2023, about 11.2 million Californians used OfferUp to buy and sell more than 50 million items that were posted on the classified marketplace. Most were for single items. On average, a California user posts fewer than five items a year.

At the same time, the company has been vigilant to identify rare abuses. The work of OfferUp’s investigations team has resulted in multi-million dollar recoveries and criminal prosecutions. It has assisted in multiple cases with all of the major retailers who are pushing this legislation.

Over the years, we have seen the consequences of laws enacted to address crime concerns with no thought given to collateral damages. As we seek to curtail retail theft, our lawmakers must not repeat those mistakes. There are thoughtful ways to curtail retail theft. Eliminating a lifeline for low-income consumers isn’t one of them.

Nathan Garnett is Legal Counsel of online marketplace OfferUp.