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Legislation Proposed To Combat Rising Organized Retail Theft

By Misha Lee, MHA Wisconsin Lobbyist

In an effort to try and combat the rise of stolen and counterfeit goods being sold online, Wisconsin Senator Roger Roth (R-Appleton) and Representative Alex Dallman (R-Green Lake) are introducing legislation to require online marketplaces verify that their high-volume third party sellers are legitimate businesses. The bill is aimed at increasing transparency and accountability for online marketplaces amid the rapidly growing problem of illicit goods sold online.

The legislation has support from a large swath of Wisconsin’s business community mostly from big box, brick-and-mortar retail stores, while strong opposition comes from online marketplaces that include Amazon, eBay and others. Similar legislative proposals are being considered by the current Congress and in other state legislatures. To date, only the state of Arkansas has passed legislation into law while 14 other states, including Wisconsin, are considering similar proposals.

The bill otherwise known as the “Integrity, Notification, and Fairness in Online Retail Marketplaces” Act or the “INFORM Act” establishes more stringent identification and verification requirements for anyone who is considered a “high-volume” seller on online platforms to ensure they are legitimate sellers. The bill includes an exemption for occasional sellers from the requirements of the bill to avoid placing a burden on smaller businesses and individuals who occasionally sell merchandise online. A high-volume third party seller is defined under the bill as “a third party seller who in any continuous 12-month period during the immediately preceding 24 months has engaged in at least 200 discrete sales or transactions of new or unused consumer products that have resulted in a total of at least $20,000 in gross revenues.”

Advocates for the bill highlight that the sale of counterfeit and stolen merchandise is a growing problem for traditional storefront retailers. Organized retail crime syndicates are more frequently using online marketplaces to sell their stolen merchandise. The Coalition of Law Enforcement and Retail estimates that retailers nationwide lose more than $45 billion annually due to organized retail theft. The sale of counterfeit merchandise can also lead to sub-standard and sometimes harmful products to consumers, particularly in the area of healthcare products and toys. Opponents of the proposed legislation argue that big box storefront retailers are trying to add onerous, unwieldy regulations on online platform competitors and seeking to drive a wedge into their current business model. These online retailers suggest better enforcement by storefront retailers and tougher penalties of retail theft laws as the better approach to curbing the problem of retail theft and fraud. Increasing penalties for retail theft is unlikely to happen in Wisconsin due to the current political environment and lack of urgency by lawmakers to do something about rising retail crime.

Retail is a $4.4 trillion business in the U.S. and organized retail theft is a growing issue facing Wisconsin’s retailers and manufacturers. The emergence and growing popularity of online retail shopping has no doubt created new challenges for the entire retail sector that need to be more carefully scrutinized. The INFORM Act seeks to institute some regulatory safeguards at the state level in order to curb stolen and counterfeit goods being sold in the state.

Because of the limited amount of time remaining in the current 2021-22 legislative session, the bill’s prospects are uncertain. However, it is likely that the legislature will hold public hearings on the bill before the session adjourns in March of 2022. In the meantime, MHA will continue to remain engaged with both sides of the issue and monitor the bill’s progress.

Read a copy of the bill draft here and any member feedback is encouraged.

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