Originally published in the Orange County Register on April 4, 2024.

Despite a federally preemptive law that went into effect last year to crack down on organized retail theft, California is now working to introduce its own version in a way that could harm the small business community this state has worked so hard to support.

The federal INFORM Consumers Act, which went into effect June of 2023, requires online marketplaces to “verify and share information on third-party sellers that handle a high volume of transactions on their platforms in an effort to deter bad actors from selling stolen or harmful goods.” Platforms that fail to comply with the INFORM Act’s compliance rules could subsequently face tens of thousands of dollars in fines if they violate the law’s rules. The key here is that platforms are held to a strict standard to deter illegal activities. Most importantly, legitimate businesses are not negatively impacted by INFORM or its standards.

However, this could change for California’s online sellers in the near future should lawmakers have their way. By introducing Senate Bill 1144, authored by Sen. Nancy Skinner, D-Berkeley, California is replicating something that is already the law of the land. Doing so is redundant; this bill is unnecessary, contradictory, and may actually undermine state law enforcement’s efforts to stop retail crime.

Councilman Jose Diaz

SB 1144 opens sellers up to a whole host of confusion. California’s bill introduces a new licensing requirement for those who sell online, with fees and additional verification requirements to go with it. The bill’s language is also overly broad, meaning that any law enforcement broadly interpreting it could charge any sellers who they find even remotely suspicious. This is likely to encourage anti-competitive behavior and leave many legitimate sellers questioning if it’s even worth opening an online store. Worse, the additional regulations will be an added burden on our already overwhelmed law enforcement who are already struggling to keep up with combating retail theft.

Real small businesses that have already worked to ensure they comply with the federal INFORM Consumers Act last summer will be left in limbo. What set of guidelines are they supposed to follow? How are they supposed to meet two sets of contradicting criteria? It’s a logistical and bookkeeping nightmare that ultimately means less time for businesses to meet the needs of customers and more potential liability that could cost them their livelihood.

We can all agree that retail crime and the resale of stolen goods is a problem, but, with federally preemptive solutions already in place, California’s SB 1144 is essentially a fool’s errand that could result in some pretty detrimental consequences for our virtual Main Street businesses. Our state’s small businesses are doing just fine, this would be a step in the wrong direction.

Online marketplaces and the small business sellers who use them are paving the way for the economy of the future. Let this be a reminder the legislature should make sure it focuses on only crafting policies that will allow them to thrive and stop, even if inadvertently, targeting the success of small businesses.

Anaheim Councilman Jose Diaz  represents District 1, in west Anaheim.