Last fall a trio of bills were introduced in Congress that ostensibly combated “fencing” stolen goods online. While the act of fencing stolen goods is illegal no matter how you do it, these bills were designed to make fencing stolen goods online especially illegal. To that end, the bills attempted to force online retailers to create and pay for a private enforcement system controlled by competing traditional retailers. Fortunately, the bills did not go anywhere in the last Congress.
Recently, the exact same bills were reintroduced in this Congress. While time has done nothing to make last year's bad ideas any better, it is worth taking the opportunity of their reintroduction to consider some additional problems with the bills.
These Bills Punish Online Retailers for Beating Their Brick and Mortar Competitors
This is probably the most practical point. The “real” reason that these bills keep popping up is that they punish online marketplaces and put them at the mercy of the traditional retailers they compete against. The reality is that traditional retailers are being beaten by online retailers. This bill is an attempt by allies of traditional retailers to impose costs on online retailers and make their services less attractive to users.
By forcing users of online marketplaces to jump through special hoops, traditional retailers are hoping that users will abandon online shopping and return to their stores. If these bills were to pass, traditional retailers would be able to conscript online retailers as their private, unpaid investigative force. Instead of focusing on making online retailing more attractive and inviting, online marketplaces would be forced to devote resources to investigating anyone who annoyed traditional retailers.
This means that online marketplaces could not beat their competitors merely by being superior online marketplaces. In order to compete with traditional retailers, online marketplaces would also have to become top quality investigators. Instead of addressing problems of theft from their stores by investing in better security or higher employee wages, traditional retailers would prefer to shift the financial burden onto their competitors. These bills give traditional retailers the dual benefits of getting free security while at the same time imposing costs and liabilities on competitors. In a story that has been repeated in so many sectors being transformed by the internet, these bills are an attempt by entrenched players to find another way to cripple competitors who are beating them in the marketplace.
These Bills Erode Safe Harbors for Service Providers
Safe harbors for internet service providers have been key to the growth of the useful internet. Essentially, safe harbors allow service providers to create a space where third parties can operate. By sticking to the safe harbors, service providers do not have to worry about being sued for every thing that a third party does or says on their site. While safe harbors serve a number of purposes, these bills highlight two by trying to eliminate them.
First, safe harbors recognize the impossibility of screening all of the information that is posted to online services. Just as YouTube cannot be expected to examine the hours of footage that is uploaded to its site every minute, and Facebook cannot be expected to examine every comment that is posted, online marketplaces cannot be expected to inspect every item that is being offered for sale. These service providers all provide a forum. If we forced them to be liable for every video, every comment, and every item that was posted by users, they would have to shut down. These services would have to pay armies of lawyers to examine every post, increasing costs and decreasing the number of posts that actually make it online.
Second, even if these online service providers were somehow capable of inspecting every video or post or item that a third party uploaded to the site, we do not want them to be making decisions about their legality. We have courts set up to decide what qualifies as copyright infringement, or libelous statements, or stolen goods. To ask service providers to develop this level of expertise is both unwise and unnecessary. We want service providers to focus on providing their service, not on creating rules for evidence and the protection of due process.
These bills would erode the safe harbors that make the internet function. Once service providers are forced to inspect every item that a third party posts on their site, they will be unable to function.
These Bills Do Nothing to Address the Problem
These bills are held out as bills to prevent retail theft. The theory is that people are stealing from their local mall and then turning around and selling the goods on eBay. This act of selling stolen goods is called fencing, and it is already illegal at both the state and federal level no matter where you sell the stuff. As a result, the bad guys who sell stolen stuff on eBay are already breaking the law.
Furthermore, as places to sell stolen stuff go, eBay has a number of disadvantages. Sure, it is a larger market than a neighborhood pawn shop. However, every transaction is automatically recorded and saved. This creates a problematic paper trail for thieves when they get caught. More importantly, online retailers are searchable. If someone steals your GPS or guitar and is dumb enough to try and sell it online, just look for it. You may find it along with some helpful contact information to forward onto the police.
There is no doubt that criminals sell stolen goods online. There is also no doubt that criminals sell stolen goods offline, in flea markets, at pawn shops, and out of the backs of trucks. All of these offline transactions have the advantage of being cash-based and requiring a minimum of incriminating paperwork. There is not one law against selling stolen goods at a flea market, a second law against selling stolen goods at pawn shops, and yet a third law against selling stolen goods out of the backs of trucks. Instead, there is a single law against selling stolen goods. The part that causes the problem is not where you are selling your stolen goods, but rather that you are selling stolen goods in the first place. This is why selling stolen goods is already illegal no matter where it is happening.
It is unfortunate that we have to spend time on this bill again. After all, there were some pretty compelling arguments against these bills last fall. However, this is the way Congress works: just because you stop a bad bill once does not mean that you have stopped it forever.