Bills Take Aim at Online Sale of Stolen Goods

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Three bills focusing on the sale of stolen goods online would impose new obligations on Web auction sites while not putting enough responsibility on brick-and-mortar stores to protect themselves against shoplifting, two e-commerce representatives said Monday.

The National Retail Federation (NRF), in pushing for the legislation, is trying to blame the Internet for shoplifting, when the problem existed before the Internet, said Steve DelBianco, executive director for NetChoice, an e-commerce trade group.

"That's like saying the back seats of cars cause teenage sex," DelBianco said at a hearing of the U.S. House of Representatives Judiciary Committee's Subcommittee on Crime, Terrorism, and Homeland Security.

But Joseph LaRocca, the NRF's vice president of loss prevention, told lawmakers that the Internet encourages shoplifting. Organized retail crime rings are able to steal products, such as prescription medicine and baby formula, from brick-and-mortar stores and anonymously sell them online, often without regard for the health and safety of consumers, he said.

Some estimates suggest that shoplifting costs U.S. retailers US$30 billion a year, and sales of stolen goods through online marketplaces is a growing problem, LaRocca said.

"People have quickly learned that the Internet presents a low-risk way to sell stolen goods," he added. "More disturbing, however, is that the Internet seems to be contributing to the creation of a brand-new retail thief -- people who have never stolen before but are lured by the convenience and anonymity of the Internet."

The subcommittee hearing Monday focused on three bills, the E-fencing Enforcement Act, the Organized Retail Crime Act and the Combating Organized Retail Crime Act.

DelBianco and eBay senior regulatory counsel Edward Torpoco focused much of their criticism on the E-fencing Enforcement Act, which would require e-commerce marketplace sites to keep records of high-volume sellers and take down listings for goods when given evidence by retailers that the goods are stolen.

They also raised concerns about the Organized Retail Crime Act, which focuses partly on creating penalties for organized retail crime by defining what it is. The bill would also require online marketplaces to "expeditiously investigate" reports of stolen goods and to maintain records of high-volume sellers. Both bills would allow retailers to file civil lawsuits against the operators of online marketplaces that offer stolen goods for sale.

The bills would force online sites to take down products when retailers demand it, without any involvement of law enforcement, DelBianco said. The bills would give retailers their own law enforcement arms, he said.

The three bills are unlikely to pass this year because Congress winds up its work for the year within weeks. However, the House hearing could help build momentum for similar legislation to be introduced in 2009.

EBay has about 2,000 employees who investigate reports of stolen goods, and it has offered to work more closely with retailers in shoplifting investigations, but several major retailers have declined that offer, Torpoco said.

Retailers are concerned about working with eBay on a shoplifting program designed by the online auction site, but would welcome cooperation on their terms, said Frank Muscato, a retail crime investigator with Walgreens. "By giving them the information, we're giving the case away," Muscato said. "We have no control in what they do with it. We're not going to reach out and give them that information without some kind of guarantee."

Torpoco said he's "stunned" that retailers would refuse to work with eBay. The online auction site will help retailers get reluctant law enforcement officials involved, he said.

"If you've got evidence, send it to eBay; we'll do the right thing," he said. "I'm certainly surprised to hear that a retailer would not join with eBay's efforts to prosecute an individual out of concern over losing control. This issue is serious enough that we ought to put aside such irrational fears."

One lawmaker questioned whether retailers were willing to spend money for theft controls on low-cost, often-shoplifted products such as razors and baby formula. There's no real way to track and identify the rightful owner of small items after they've been shoplifted, witnesses said.

"My question is, how do you say eBay ought to do more, when eBay turns around and says you guys ought to do more?" said Representative Daniel Lungren, a California Republican. "What I'm hearing is, 'It is an acceptable level of loss that we take because it would be too expensive for us to go further.'"

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