Opposition Testimony to HB 272 — Letter to the Honorable Dick Stein, Ohio House Commerce and Labor Committee

Summary

Letter dated December 6, 2021 from Tyler Diers, Midwest executive director for TechNet, to Chair Dick Stein of the Ohio House Commerce and Labor Committee, headed "Opposition Testimony to HB 272". It states that TechNet opposes the bill for 3 main reasons: negative effects on small sellers, little effect on organized retail crime (ORC), and other alternatives. The letter says a seller could be considered a high-volume seller for making 4 sales a week on an online marketplace, and raises privacy concerns about disclosure of seller address information. It proposes an organized retail crime task force similar to one passed in Arizona earlier this year, and closes by urging the committee to reject the legislation.

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Full text

December 6, 2021


The Honorable Dick Stein, Chair
Ohio House Commerce and Labor Committee
77 South High Street
12th Floor
Columbus, OH 43215

Re: Opposition Testimony to HB 272

Dear Chairman Stein and members of the Committee:


My name is Tyler Diers and I serve as the Midwest executive director for the for
TechNet. Thank you again for allowing me back before your committee today.

TechNet is a national, bipartisan technology trade association advocating for the
innovation economy at the federal and state level. We represent 85 member
companies in the fields of information technology, e-commerce, the sharing and gig
economies, advanced energy, cybersecurity, venture capital, and finance.

We are opposed to HB 272 for 3 main reasons. One, this legislation would have a
negative effect on small sellers; two, it would do little to actually curb organized
retail crime (or ORC); and three, there are other alternatives to addressing ORC
than HB 272.

Impact on Small Sellers and Privacy Implications
This bill would have negative consequences on small marketplace sellers that sell
on online marketplaces. The bill seeks to define these small sellers as “high volume
sellers” even though you could be considered a high-volume seller for simply
making 4 sales a week on an online marketplace.

This bill casts a wide net and treats all marketplace sellers as if they’re criminals,
when in reality an overwhelming majority of these sellers are good, honest actors.
At a time when many state governments are trying to find ways to reduce red tape
on businesses, this bill seems to be adding additional requirements on those who
need regulatory relief the most. This bill hurts small businesses and favors large
retailers who do not need an online marketplace to connect with their customers.

This bill also raises some significant privacy concerns and is not privacy protective.
It would force Ohioans to compromise privacy information in order to sell on online



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platforms and if they don’t feel like supplying some of this sensitive information,
then they’d have to forgo selling and lose essential revenue streams.

There was some confusion at the last hearing that the address of sellers was not
required to be posted online. I wanted to take the time today to ensure that
members of the Committee are aware of these provisions.

        Page 6, line 135: Sec. 1349.67. (A) An online marketplace shall require a
        high-volume third-party seller to disclose to consumers in this state in a
        conspicuous manner either on the product listing or, for information
        other than the high-volume third-party seller’s full name, through a
        conspicuously placed link on the product listing, the following
        information: (1) Subject to division (B) of this section, the identity of the
        high-volume third-party seller, including all of the following: (a) The full
        name of the high-volume third-party seller; (b) The full physical address
        of the high-volume third party seller;1 (c) Whether the high-volume
        third-party seller also engages in the manufacturing, importing, or reselling
        of consumer products; (d) Contact information for the high-volume third-
        party seller, including a working telephone number and working electronic
        mail address. Such working electronic mail address may be provided to the
        high-volume third-party seller by the online marketplace.

Another committee member pointed to Page 7 of the bill where there is language
that allows for partial disclosure of the identity information. While it is true that the
seller can then request that such sensitive information not be posted by the
marketplace, that’s all this is, a request. The seller must certify that they don’t
have a separate home address or phone number to prevent disclosure of these
items, but the bill allows marketplaces the discretion to decide whether or not to
honor this request for partial disclosure.

It’s up to the marketplace, who has civil liability for granting partial disclosures
when they shouldn’t be, and for not suspending sellers who do not comply perfectly
with the bill’s requirements. So, a small seller working out of their home may
suddenly be faced with a hard choice under this bill: (a) have their business
suspended, or (b) send the marketplace their sensitive information and hope the
marketplace grants their request to not post their home address and personal
phone number for the world to see.

Additionally, even if the marketplace agrees that the seller’s info should be
protected, the bill states that the marketplace must constantly assess this decision
and reverse it if (Page 8 lines 197 – 203): (1) the marketplace becomes “aware”
that seller gave false representation on the need for partial disclosure; or (2) the
seller is not providing “responsive answers” in a “reasonable timeframe” to


1 See also, LSC Bill Analysis, pp. 2, 3; LSC Fiscal Note and Local Impact Statement, p. 2.
consumer inquiries via email or phone. If either of those events occur, the seller
must be suspended until they agree to the full disclosure of their sensitive
information.

It was also stated by committee last time around that it was very important for a
buyer on a platform to be able to reach out directly to a seller on a platform and
this is the reason this information needs to be posted on the platform. We
disagree. Marketplaces are dedicated to maintaining the trustworthiness of their
platforms and ensuring the safety of their users. Indiscriminately mandating the
direct communication between buyers and sellers to occur off-platform prevents
marketplaces from ensuring the safety of its users.

Marketplaces operate a variety of direct communication tools between buyers and
sellers on-platform which allows marketplaces to protect their users. Without
these controls, the privacy and safety of users can be seriously compromised if the
ability to communicate off-platform is mandated or, at a minimum, facilitated by HB
272.

Any legislation should represent the diversity in business models and desire of
marketplaces to ensure the safety of its users by allowing flexibility in how buyers
and sellers interact.

The private right of action, which was lauded by the retail groups, should also be a
reason to oppose this bill. A violation of the bill’s requirements is considered an
unfair or deceptive act or practice in violation of the Consumer Sales Practices Act,
for which two civil remedies would be available. First, the Attorney General’s Office
can investigate violations, seek a declaratory judgment, an injunction or other
equitable relief, or organize and bring a class action. Second, a person who is
injured by such a violation has a cause of action and is entitled to relief.
Potentially, this could mean that any minor infraction or disagreement about any of
the vague standards in the bill leads to more lawsuits. 2

At a time when policymakers and companies are working to improve privacy
protection for individuals, this amendment is swimming against the tide of that
progress by requiring personal information to be plastered all over the internet.

Bill Does Little to Address ORC
This bill would do little to actually curb organized retail crime. Efforts to stem the
flow of counterfeit and other illegal goods cannot focus on online marketplaces
alone. They must consider the cooperative role physical marketplaces continue to
play.

As I’ve stated before, the internet isn’t stealing items off of in-store shelves.
Thieves and often times, employees are. This is as much of shrink issue as it is

2 LSC Fiscal Note and Local Impact Statement, pp.2-3.
anything else. Just as brick-and-mortar retailers are able to institute voluntary
business practices that help to remediate the proliferation of organized retail crime,
marketplaces similarly should have the same flexibility to institute business
practices without heavy-handed regulation.

I would also like to point out that some of the big-box retailers that are for the bill
would be exempted from the bill because they have an ongoing contractual
relationship with third party sellers selling onto their platforms (page 2, line 42).

An Alternative Approach
While, we believe the issue of organized retail crime is much better addressed by
implementing a federal standard, we do believe the state can be creative at
effectively addressing organized retail crime.

As stated previously, we believe this does little to actually address ORC. In order to
curtail such activity, we stand prepared to provide you all with a draft state
organized retail crime task force similar to what is passed with support from online
marketplaces, and retail in Arizona earlier this year. The task force brings together
law enforcement, retail loss prevention experts, online marketplaces, and other key
stakeholders to collaborate on investigations and prosecutions of organized retail
crime.

And these efforts to date have been successful. Just last week in Illinois, Attorney
General Raoul successfully announced a major bust just a few months into
launching the Task Force in Illinois. The Task Force recovered thousands of stolen
goods at several storage units in Chicago. While a complete inventory is ongoing,
the stolen goods are estimated to be worth millions of dollars.

These sorts of public-private partnerships are much more effective in addressing
organized retail crime because you bring the right people from the right
organizations together in a comprehensive way to address what all of us agree on –
which is addressing organized retail crime.

Closing
In closing, this legislation risks the privacy and personal information of small
businesses and online sellers, does little to address ORC, and would only add
additional red tape on businesses that need regulatory relief the most. Opening up
Ohio to frivolous lawsuits and finger pointing does not address ORC. Let’s reject
this legislation, allow cooler heads to prevail, establish an organized retail crime
task force, and stop this activity in its tracks.

Thank you, Mr. Chair, for allowing me time today. I’d be happy to answer any
questions you or the committee may have.


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