Proponent Testimony for HB 272 - Ohio Council of Retail Merchants (Boehnke, Seibert and Sherman)

Summary

Proponent testimony for HB 272 to the House Commerce and Labor Committee by Alex Boehnke, Manager of Public Affairs at the Ohio Council of Retail Merchants, who is joined by Jack Seibert, owner of Jack Seibert Jewelers, and Adam Sherman of the Vorys law firm. The Council is described as representing over 7,000 businesses in the state of Ohio. The testimony says HB 272 extends brick-and-mortar consumer protections to e-commerce by having online marketplaces verify information from third-party sellers. It states that HB 272 is modeled after the INFORM Act, introduced in Congress in March 2021, and that similar legislation is pending in at least 14 other states.

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                        Jack Seibert, Alex Boehnke, & Adam Sherman
                            The Ohio Council of Retail Merchants
                              Proponent Testimony for HB 272



Good afternoon Chairman Stein, Vice Chair Johnson, Ranking Member Lepore-Hagan, and
members of the House Commerce and Labor Committee. My name is Alex Boehnke and I am
the Manager of Public Affairs at the Ohio Council of Retail Merchants. The Council represents
over 7,000 businesses in the state of Ohio, from the largest retailers in the country to family-
owned stores on Main St. Today, I am pleased to be joined by one of those members, Jack
Seibert, owner of Jack Seibert Jewelers located in Upper Arlington, Ohio. Jack is an outstanding
advocate for the small business and retail communities. We are proud to have him not only as a
member, but we are honored to have Jack serve on our board as well. Additionally, I am joined
by Adam Sherman of the Vorys law firm. Adam is a subject matter expert with extensive
experience investigating and litigating abuses by third-party sellers operating on online
marketplaces. Mr. Seibert, Mr. Sherman, and I greatly appreciate the opportunity to address the
Committee on House Bill 272.

Before I turn things over to Jack, I want to briefly discuss the Council’s reasons for supporting
the legislation. In many ways, HB 272 provides necessary updates to consumer protection
provisions which currently govern transactions made at brick-and-mortar locations. The
legislation simply extends those similar protections to e-commerce transactions. Think of online
marketplaces as virtual malls, which provide a platform for third-party sellers (tenants). When
you visit a mall, you understand the products you are purchasing are from those tenants or
sellers, not from the mall itself. You have a certain level of confidence that the product you are
purchasing is legitimate and you have some recourse if you are not happy with your purchase.
Unfortunately, such basic guarantees are not always extended to the consumers purchasing
products via online marketplaces. By simply verifying readily available information provided
by third-party sellers, online marketplaces can better guarantee those consumer protections are
in place. That is what HB 272 is all about. To be clear, there are online marketplaces which
already do the right thing by requiring that the information provided by their third-party sellers
is verified. In fact, many of our members operate e-commerce platforms and they stand behind
this legislation. We believe all online marketplaces should do that which is within their power
to protect consumers as well. I will now turn things over to Mr. Seibert and we will be happy to
answer any questions you may have after the conclusion of his and Mr. Sherman’s remarks.
Thank you.
Thank you, Alex. Chairman Stein and members of the committee, thank you for this
opportunity to testify in support of HB 272. I am the proud owner of Jack Seibert Jewelers, and
I am equally proud to say we have been in business serving our customers in Columbus, Ohio
for 42 years. As you might imagine, I have seen a lot in my day, especially when it comes to
jewelry. In recent years, I have become increasingly aware of the pitfalls consumers sometimes
encounter when attempting to purchase jewelry via online marketplaces. Too often, consumers
unknowingly purchase counterfeit jewelry such as gold rings or diamonds, believing they are
legitimate and authentic, only to be greatly dismayed when the product finally arrives. For
instance, a gold ring might be sold by a third-party seller on an online marketplace and that
ring is marketed as a great deal, attracting significant interest from consumers. The seller says it
is made of real gold. The picture looks great, but the customer finds the ring is completely
hollow when they receive it. Another great example can be found with diamonds. Today,
diamonds can be produced synthetically in a lab. These synthetic diamonds have many of the
qualities of natural diamonds, but their value is much less than that of a natural diamond.
Unfortunately, illegitimate sellers often utilize online marketplaces to sell these diamonds as
natural, misleading the consumer and defrauding them out of their hard-earned dollars. A
simple internet search reveals these are not isolated incidences. In fact, just this past Mother’s
Day, the United States Customs and Border Protection (CBP) Agency issued an alert to
consumers after seizing $4.26 million in counterfeit jewelry in Cincinnati, Ohio (CBP, 2021). The
merchandise was purportedly going to be sold online. It is worth noting that the CBP guidance
for consumers shopping on online marketplaces states the following: “When shopping online,
read seller reviews and check for a working U.S. phone number and an address that can be
used to contact the seller”. That is exactly what HB 272 requires.

There are legitimate jewelry products sold online and many jewelers go above and beyond to
stand behind their products, providing their customers with a high level of confidence that they
are indeed getting what they paid for. HB 272 will hold all online marketplaces to that same
standard. Thank you again for this unique opportunity. Now I will turn things over to Adam.

Good afternoon. My name is Adam Sherman. I am a partner in the eControl law practice of the
Vorys, Sater, Seymour and Pease LLP law firm. I am pleased to offer this testimony today in
support of House Bill 272 on behalf of the Ohio Council of Retail Merchants and its more than
7,000 members.

                  Online Marketplaces Present Various Risks to Consumers

Online marketplaces present some unique challenges to consumers. A consumer buying a
product online is not able to inspect the product or determine its condition. They can’t confirm
that the product is actually what the listing says it is, or whether it is damaged, expired, or
tampered. Instead, consumers must rely on the information provided on the online
marketplace. Depending on the marketplace, the information provided—the listing content—is
often not created or customized by the particular seller offering a product. Any seller that
simply tells the marketplace that they have a particular product to sell uses the same content as
every other seller. Because consumers only get to see the stock listing before making a
purchase, a consumer doesn’t truly know what they’ll be getting until it arrives at their home.

Some of the most popular online marketplaces use a “buy box” system, where multiple sellers
offer products for sale on the same listing. These listings contain the exact same information
about the product being offered, without providing any information about where the seller
obtained the product. Consumers see the same information regardless of whether the seller is a
professional operation selling items obtained from the manufacturer or an individual sourcing
products from other online marketplaces, flea markets, liquidation outlets, or other sources,
including outright theft. As part of the Vorys eControl law practice, we do hundreds of test
buys from online marketplace sellers every month. The range of quality of products we receive
through these test buys varies considerably. It is not unusual for us to receive products
damaged or with incomplete packaging, expired products, or products with a retail store’s
labeling.

Online marketplace models can create opportunities for disreputable sellers to take advantage
of consumers. One way marketplaces enable these opportunities is by freely allowing sellers to
change their storefront names. Most marketplaces allow a seller to change their storefront name
at will, making it more difficult for consumers to keep track of sellers.

Presently, major online marketplaces allow sellers, as a practical matter, to operate with near
anonymity. Online marketplaces determine on their own what seller information is shared with
consumers. This results in varying information on the marketplaces.

Even when the online marketplaces require disclosure of some seller information, they often do
little to verify the information disclosed by sellers. As part of our practice, we investigate
hundreds of online sellers a month, and frequently find that the information disclosed by the
seller on the marketplaces is inaccurate or incomplete. This ability for sellers to conceal or
mislead as to their identities provides the opportunity for bad actors.

For example, I regularly deal with counterfeiters on online marketplaces. They are especially
attractive to counterfeiters because consumers cannot see the product before it is purchased and
delivered. Thus, they have no chance to determine whether a seller’s product is counterfeit
prior to purchase. It is easy for bad actors to offer a product for sale on a legitimate listing and
fulfill the order with a counterfeit product Consumers, who may not be familiar with the
product they’re ordering, often cannot identify the product as counterfeit even once they
receive it. When counterfeits are reported, sellers can hide behind the anonymity provided by
the marketplace to avoid legal consequences, and online marketplaces are typically slow to take
permanent action to ban even reported counterfeiters. Because the online marketplaces do not
appear to verify the information provided by sellers, it is easy for these counterfeiters to create
new storefronts using fake information and start re-listing products even if their previous
storefront was reported and taken down.
In addition, online marketplaces are an easy outlet to liquidate stolen products due to the near
anonymity permitted by the marketplaces. Thieves can easily create accounts and offer stolen
products on online marketplaces. For the most part, online marketplaces do little, if anything,
to vet where sellers are obtaining their products. Because online marketplaces provide a
centralized place to sell products, it is easy to liquidate stolen goods quickly. Losses to
businesses caused by organized retail crime are passed along to consumers in the form of
higher prices.

Marketplaces have also become a convenient spot for credit card fraud, with fraudsters offering
low prices on popular products, and then using stolen credit cards to fulfill the orders directly
to the unknowing consumer. In these cases, consumers unknowingly receive stolen products.
Because these sellers are easily able to conceal their identities, they can continue to create new
storefronts to perpetuate their fraudulent schemes.

These issues are prevalent for all types of brands and products. In the Vorys eControl practice,
we’ve seen counterfeiting of relatively low priced dietary supplements and cosmetics, as well as
high priced luxury goods. In one instance, a counterfeit dietary supplement caused adverse
effects in consumers because of excess vitamin concentration. We also addressed counterfeit
cosmetics that contained an ingredient prohibited for use in cosmetics in the United States.
Luxury brands we represent also attract a significant volume of counterfeiters and thieves
because of the high price of the products. They can provide cheap imitations or stolen products,
and offer steep discounts that will lead to fast, high-volume sales.

It is critical to understand that only the online marketplaces themselves are in a position to
address these issues. Without laws like the one being considered today, consumers are not
given enough information to make informed decisions about whether sellers are reputable or
the products legitimate. House Bill 272 puts the responsibility of vetting online sellers and
confirming their information on the only parties in a position to do so. The verification
requirement would deter bad sellers by making it difficult to provide fake information to hide
their identities.

                                         House Bill 272

House Bill 272 is intended to address the issues of stolen, poor quality, and counterfeit goods
being sold online. The bill requires high-volume third-party sellers operating on online
marketplaces to provide certain information to the marketplaces and consumers and requires
the marketplaces to verify that information. This information is simple and straightforward –
the sellers’ government ID, tax ID, bank account information, and contact information. This is
basic information that all legitimate sellers have (or should have).

House Bill 272 is modeled after the Integrity, Notification, and Fairness in Online Retail
Marketplaces for Consumers (INFORM) Act, which was introduced in Congress in March
2021. In April 2021, Arkansas became the first state to enact legislation that mirrors the federal
INFORM Act. Similar legislation is pending in at least 14 other states.

This legislation provides much-need transparency and accountability in online
marketplaces. House Bill 272 is something Ohio needs to help combat organized retail theft and
its impact on Ohio’s businesses and consumers. It is a good first step to take in curtailing the
criminal acts perpetuated by certain online marketplaces.

Thank you for the opportunity to testify today. At this time we would be happy to answer any
questions you may have.




United States Customs and Border Protection. (2021, May 3). This Mother’s Day – Be Alert for
Counterfeit Goods Sold Online. Retrieved from https://www.cbp.gov/newsroom/local-media-
release/mother-s-day-be-alert-counterfeit-goods-sold-online


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