Walmart Is Wasting State Lawmakers’ Time with Anti-Amazon Bills that Will Hurt Small Sellers
eBay entrepreneurs, Etsy artisans, and Nextdoor sellers could be collateral damage
January is when many state legislatures start their work for the year. Though the month is young, we’re already seeing a 2022 revival of a 2021 play that wasn’t very good in the first place: Walmart’s state lobbying campaign to put restrictions on its biggest competitor, Amazon.
I wrote last year about how Walmart’s desire to regain its status as the world’s top retailer has driven it to propose new laws that would hobble its chief competitor, Amazon.
Using the pretext that a small number of bad people sell counterfeit and stolen goods online, Walmart has recruited state legislators around the country to introduce bills that would make it harder for small online merchants to sell their goods online.
The bills 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.
As 2022 state legislative sessions get underway, there are a few important things that policymakers should keep in mind about these bills.
First, most state legislatures rejected these bills last year because they would hurt small sellers.
In 2021, 15 states rejected Walmart’s online marketplace bills. The only state to pass this legislation is Walmart’s home state, Arkansas:
There was one overarching reason why legislators rejected the bills: they felt that they placed excessive burdens on small eBay entrepreneurs, Etsy artisans, and Nextdoor sellers who make their living online.
More than 2.5 million artisans sell their products through Etsy, more than 80% of whom are women. eBay found that its marketplace helped its sellers actually grow their businesses during the coronavirus pandemic.
These marketplaces are popular precisely because they are easy to use, and because they’re connected to existing communities of trust. Raising the requirements 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.
That’s probably why you saw both Republican and Democratic legislators voice concern about these bills in state hearings last year:
West Virginia Senator Mike Romano (D):
“Is there any evidence that this [online retail crime] is going on in West Virginia? There’s a lot of shoplifting going on…but I don’t think any drug addicts are running online businesses. I’ve not heard anybody say there was an active black market in stolen property in my area… certainly nobody’s come to me and said that. If you’re buying from someone who is not reputable, that will take care of itself.”
Georgia Rep. Bert Reeves (R):
“We all can agree that there are bad players, that we need to be able to have better tools to be able to stop what they’re doing…but perhaps this proposal…it’s a net that brings in way too many fish that we don’t mean to bring in. […]
Georgia Rep. Zulma Lopez (D):
“Not everyone that is selling [online] is going to be doing anything illegal. I’m thinking about the small business owner that is growing their business. As soon as they meet that [sales] threshold they have 24 hours to comply. That is pretty cumbersome.”
West Virginia Senator Amy Grady (R):
“I’m just thinking about the sellers on Etsy that sell handmade things or one-of-a-kind items, I wouldn’t think they’d fall under the same category of trying to resale things that were stolen from a department store.”
Despite the fact that only Walmart’s home state passed such a bill, Walmart is trying again to get more states to pass this bill in 2022. That poses a conflict that Walmart hopes state legislators won’t notice…
Second, both retailers and online marketplaces have endorsed a federal compromise version of this legislation, making state legislation unnecessary.
What Walmart isn’t telling state legislators is that the stalemate between leading retailers and online marketplaces on this issue was broken last October, when U.S. Reps. Jan Schakowsky (D) and Gus Bilirakis (R) introduced the federal Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM) Act, aiming to combat the online sale of stolen, counterfeit, and dangerous consumer products.
Thanks to changes that the bill’s sponsors made to address the concerns of small online sellers and marketplaces, the new legislation is now supported by the Walmart-backed Retail Industry Leaders Association and Buy Safe America Coalition; by a coalition including Etsy and eBay; and by Amazon. The consensus approach reflected in this new version of the legislation represents the best model for tackling this issue without harming small online sellers.
Even U.S. Senators Dick Durbin (D-IL) and Bill Cassidy (R-LA) — who had introduced similar legislation without the new protections for small sellers — acknowledged in November that the new amended House legislation was the best bipartisan path forward for this issue.
To the extent something should be done on this issue, the borderless nature of online marketplaces demands a federal approach. The pending state bills would only exacerbate a state-by-state patchwork of compliance requirements for small sellers and marketplaces.
In short, a sensible federal compromise is on the table and all parties can live with it. So why is Walmart wasting the time of state legislators continuing to push the older, more extreme version of its bill?
Here’s my colleague Montana Williams making this point in recent testimony before the Wisconsin legislature:
Finally, there is little evidence for an increase in retail crime or a link to online marketplaces.
Walmart and its allies have successfully pitched stories that high-profile retail thefts are “caused” by thieves being able to resell their goods on online marketplaces. Look carefully and you’ll notice that these stories are driven by anecdote and “expert” analysis from Big Retail’s own anti-theft officials, who are the ones promoting these bills in the first place.
The Atlantic’s Amanda Mull recently dived deep into this issue, and found that retail theft rates are generally no higher than pre-pandemic levels, “which themselves had been dropping for decades.” And “so far, this dynamic holds true for much of the country, according to FBI statistics.”
Mull went on to say that “when I asked retailers how they squared falling property-crime rates with their own assertions that theft has skyrocketed, they weren’t exactly forthcoming.” She also describes how the retail industry’s lobbying for anti-Amazon bills may also color its analysis:
For example, a survey conducted in early 2020 by the National Retail Federation (NRF), a trade association and advocacy group, found that of surveyed retailers that reported being victims of organized retail crime, three-quarters said that the crime had increased in their stores at least slightly in the previous 12 months. But according to Anita Lavorgna, a criminologist at the University of Southampton, in England, who specializes in organized crime, those numbers are not especially meaningful if we do not know what data are being compared or the methodology that produced them. Without more transparency, accounting for all of the variables that could have affected the results is hard. If store managers receive the message from corporate that documenting theft is of the utmost importance, for instance, one could easily imagine a spike in reported incidents of theft much more significant than any actual spike in theft itself.
And Mull points out the absence of evidence that marketplaces are to blame:
Another common problem is one of semantics: [Criminologist Anita Lavorga is] not convinced that, from a criminological perspective, the “organized” label fits much of the theft that these retailers are describing. There’s just not much empirical evidence that flipping stolen makeup or baby formula or designer handbags online is primarily the province of huge, violent criminal-conspiracy organizations, she said.
Mull notes that “Inform consumers” will ultimately help Walmart by
“weaken[ing] the competitive advantage of large-scale online-shopping platforms, whose success is a much larger existential threat to their bottom line than thieves could ever be.”
In their rush to persuade policymakers to pass laws hurting their biggest competitors, retailers haven’t clearly established that retail theft has increased — or that online marketplaces are to blame if it is.
Here’s what states should do instead.
Instead of passing these bills, there are a few things that states could do instead:
- First, gather better data about organized retail theft. Last year, several states including Arizona, Georgia, North Carolina, and Texas rejected “inform” bills but instead initiated studies to better understand the problem.
- Second, give police and retailers more tools. California Gov. Gavin Newsom recently released a plan to help local police fight organized crime, including $255M in grants for local police departments, $48 million to bulk up prosecution of retail theft; and $20 million in grants to help small businesses. These are steps other states can adopt too.
- And finally, states can encourage Congress to pass the modified compromise House version of the INFORM Consumers Act, by Reps. Schakowsky and Bilirakis — which represents the best compromise effort to address this issue at a federal level.
Here’s hoping that state lawmakers see these steps as the right way forward.
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