Etsy Artisans, eBay Entrepreneurs, and Nextdoor Sellers Could Be Collateral Damage in Walmart’s War on Amazon

The INFORM Consumers Act could hurt consumers and small online sellers

Adam Kovacevich
Mar 15 · 5 min read
Photo by Rebecca Grant on Unsplash

There’s a cynical political lobbying strategy that companies use time and time again: proposing new laws to hobble their biggest competitors — while dressing up their cause in high-minded pretext like safety, consumer protection, or privacy.

Unfortunately, we’re now seeing yet another move like this, from Walmart and other leading retailers: an effort to hurt their biggest competitor Amazon, using the pretext that a small number of bad people sell counterfeit and stolen goods online.

This battle is actually driven by Walmart’s competitive effort to regain its status as the world’s top retailer. Shoppers visit Amazon precisely because of its breadth of products — some sold by Amazon directly, others sold by small sellers through Amazon’s marketplace. If big retailers like Walmart can erect regulatory hurdles to Amazon’s marketplace business, it would give shoppers fewer options. And that would be fine with big box retail.

But Walmart can’t say any of that out loud, so they’ve predictably made it about “safety” — creating a group of other Amazon rivals called the “Buy Safe America” coalition.

According to Walmart, the problem of resold stolen goods is an epidemic on the level of homelessness or income inequality. Never mind that most retail theft is either petty shoplifting or thefts by employees — and that all online marketplaces have an incentive to facilitate trustworthy shopping. I’ve never had a problem getting a refund or return when something I purchased through a marketplace wasn’t what I expected.

The INFORM Consumers Act — Now Spreading to States

Walmart and its allies persuaded several Members of Congress to do its anti-Amazon bidding and introduce the INFORM Consumers Act, which would require non-retailer online sellers to provide a driver’s license, tax ID, bank account, and contact information before being able to sell online. It would apply to any seller with more than 200 sales over two years amounting to $5,000 or more in revenue (which translates to millions of entrepreneurs), and make them get re-verified every year.

But the federal bill isn’t enough for the retailers, who have spent the last few months shopping “model legislation” to state legislatures.

Thanks to their efforts, there are now dozens of pending copycat bills in state legislatures, and Walmart is spinning a tale of rampant counterfeiting — without disclosing that their bill would give traditional retailers an advantage over Amazon and any small online sellers.

Just a few of the state bills that Walmart and retailers are promoting

Walmart’s Attack on Amazon Will Have Collateral Impact on Artisans, Entrepreneurs…even Neighborhood Sales

This bill probably won’t stop counterfeiters, who won’t be stopped by an ID requirement. But in aiming at Amazon, these bills would also end up hurting a whole community of artisans, creators and entrepreneurs who make a living by selling goods online.

More than 2.5 million artisans sell their products through Etsy, more than 80% of whom are women. Their success stories are inspiring, with numerous sellers turning their hobby into a full-time business.

eBay found that its marketplace helped its sellers actually grow their businesses during the coronavirus pandemic — which also helped local small businesses grow in rural and disadvantaged communities.

The Walmart-backed bills would require the sellers that use these marketplaces — plus lesser-known ones like Poshmark, OfferUp, RedBubble, and Society6 — to jump through more hoops just to operate. It would also hurt anyone who frequently sells used stuff through Facebook’s Marketplace or Nextdoor.

These marketplaces are popular precisely because they are easy to use, and because they’re connected to existing communities of trust. Requiring a seller to get verified in order to sell a needlepoint pillow online would not only make it harder for sellers — at a time when many are struggling economically — it would also make it harder for consumers to buy affordable used goods.

The INFORM Consumers Act & state copycats would also hurt marketplaces like OfferUp

Why Should Policymakers Intervene in Battle Between Titans During Pandemic Recovery?

The coronavirus pandemic has blown a huge hole in every state’s budget. With people stuck at home and the economy disrupted, total state sales tax revenue dropped $46.4 billion year over year.

With states facing a huge tax shortfall, state legislatures are rightly focused this year on making difficult budget decisions. Marketplace sellers on sites like eBay and Etsy pay state income tax on their revenue, so if states make it harder for people to sell online they should logically expect less tax revenue from online entrepreneurs in their state.

This would make the current state budget crunches even more dire. It’s the wrong time for states to make tax-generating commerce more difficult.

On top of that, why should any politician intercede in what is basically a competitive war between Amazon and traditional retailers? There are bigger policy problems to solve. And there’s room enough in our economy for both Amazon and traditional retail to thrive, without policymakers picking sides.

Proposed ID Requirements Run Contrary to Opportunity and Equality Concerns

It’s also remarkable how these bills conflict with principles important to each political party.

Republicans traditionally criticize “red tape” and “business killing regulation,” arguing that it should be easier for people to start their own small business. This bill does the opposite, by adding more red tape for the small entrepreneur who wants to sell things online.

Democrats, meanwhile, criticize Republican efforts (and more than 40 state bills) to increase stricter ID requirements for voting. By some estimates 11% of US citizens — more than 21 million Americans — lack government-issued ID. That’s especially true for African-Americans, among which up to 25% lack ID. These bills would make it impossible for ID-lacking entrepreneurs to sell their goods online.

Both Republicans and Democrats should recognize that erecting more barriers to online sales is inconsistent with their goals of greater free enterprise and greater economic opportunity.

A Better Path To Fighting Counterfeits

The federal INFORM Consumers Act, along with its state counterparts, would hurt small sellers, decrease opportunity, decrease state tax revenue, increase government red tape, and hinder consumers in search of a deal — all in order for Walmart to score a few cheap points against Amazon. And it won’t stop the bad guys, who will surely adapt to the new rules.

It’s an overreaction to an exaggerated problem, with lots of collateral damage.

That’s not to say policymakers should ignore online counterfeiting. Instead of this approach, they should incentivize marketplaces to proactively police sellers; direct platforms to work with law enforcement and consumer protection officials in bringing bad actors to justice; and encourage marketplaces to collaborate so that bad actors can’t move from one marketplace to another.

In other words, legislators should use a scalpel to address this problem, not a sledgehammer. Especially a Walmart-furnished sledgehammer, aimed at its biggest competitor.

Chamber of Progress

Technology’s Progressive Future. Making sure all Americans benefit from technological leaps.

Adam Kovacevich

Written by

Democratic tech industry policy executive. Formerly Google, Lime, Capitol Hill, Democratic campaigns

Chamber of Progress

Technology’s Progressive Future. Making sure all Americans benefit from technological leaps. Not just another business group.

Adam Kovacevich

Written by

Democratic tech industry policy executive. Formerly Google, Lime, Capitol Hill, Democratic campaigns

Chamber of Progress

Technology’s Progressive Future. Making sure all Americans benefit from technological leaps. Not just another business group.

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