Assembly Standing Committee on Privacy and Consumer Protection

[Roll Call]

We have a quorum Senator, when you're ready.

Thanks very much, Madam Chair Members. In 2022, I authored SB 301 and SB 3001's purpose. Well, SB 301 just acknowledged what we all know, which is where we buy things, mostly these days, is online. So gone are the days where if you're somebody who steals a lot of goods or you're an organized retail theft entity, you're not selling on a corner or out of the trunk of a car, you're selling online.

So given that you're using various Internet marketplaces to sell online, the purpose of SB 301 was to get the marketplaces to verify that they're high volume sellers. Not just like, if I go sell something, me as an individual, but they're high volume sellers, meaning, you know, multiple transactions in a year over a certain dollar amount, legitimate businesses.

So ask them for information like, excuse me, tax ID numbers, various things like that. So it's great. It's been working really well. The AG's office and various of our Das across the state have been able to go after organized retail theft.

Some of you may have remembered the article, lots of articles about the very wealthy couple in San Diego who would text, they would employ people. Now, I doubt they paid employment taxes, but still, they were paying people to steal things, and they were texting them and saying, hey, this kind of perfume is really popular these days.

We need a whole lot more of that. Go to all the sephora, steal it. Right? So if you're a petty theft and you're stealing perfume, you're not going to make much money off it. But if you're working for an organized retail entity, who's going to pay you to steal that stuff?

Because they then sell it in large volume online, you're making a big. You've got a big business. Right? So what's happened since 301? Many of these organized retail theft entities are using marketplaces where the transaction, the dollar exchange, doesn't happen exactly on the site, but they're still selling high volumes of stolen goods.

So the purpose of this Bill is to get those marketplaces to get the same information from those retailers. I call them retailers, those thieves, so that we can have our best shot at verifying if they're a legitimate business. And if they're not a legitimate business, it enables our Ag or DA or whoever to then begin to prosecute.

So that's really the purpose of the Bill. And we're going to hear from our opposition various things which I'll wait and let you ask me questions about so I can respond to why it's not necessarily credible. I won't go into that now. I'm just going to let my witnesses and support speak, and we'll proceed.

And so I have here Cristine Soto DeBerry from the Prosecutors Alliance of California and Margaret Gladstein from the California Retailers Association.

Good afternoon. Chair and Members of the Committee, happy to be here today. The Prosecutors Alliance Action works with prosecutors, victim advocates, crime survivors to develop strategies for safer communities throughout our state. We're a proud sponsor of SB 1144.

As prosecutors, we understand our best work is done when we can prevent crime rather than simply showing up after the fact with consequences. And SB 1144 is precisely this kind of measure. It's a smart solution that allows us to curb retail theft before it happens.

As you heard Senator Skinner indicate, there is a massive opportunity and incentive at the moment to steal items from brick and mortar stores and sell them online. The couple referenced in San Diego made over $8 million selling those items online, an enormous profit margin. And the opportunity is where we have the greatest ability to curtail this conduct.

In the State of California in 2022, only 6% of theft crimes were solved... single digits. And so while enforcement is an important strategy, and one obviously as prosecutors that we support, it cannot be the sole strategy in dealing with retail theft. And fortunately, in this area, we have the opportunity to employ smart regulations that will help us shrink the opportunity for this kind of crime.

This measure simply requires that of sellers that make over 200 transactions in a calendar year that totals more than $5,000 have additional requirements that they must submit to the online platform Amazon offerup Facebook marketplace, so that if law enforcement suspects conduct that is illegal, they have an ability to identify the source of those goods and conduct an investigation.

It also allows consumers to ensure that the people they are purchasing items from have complied with those requirements and provides opportunities for us as consumers to share what we think might be activity of stolen goods. All of these are important improvements that will help us get a handle on the issues of retail theft in the State of California. We're excited to be a sponsor on this measure. We have been proud to work with Senator Skinner. She has worked diligently to meet with all of the important stakeholders. The online marketplaces themselves retailers, law enforcement, all in support. This will make a difference. We urge your aye vote.

Thank you, Madam Chair and Members, Margaret Gladstein Kepler here on behalf of the California Retailers Association. We're in strong support of this measure. We were pleased to work with Senator Skinner when she carried SB 301. That was a very helpful piece of legislation, and we're very pleased that we have worked with her on this Bill, which we think closes a few of the loopholes that we have seen in SB 301.

So we think this will bring additional enforcement and will again help stop the back end problems that we're seeing, where stolen goods often, sometimes store branded goods are being sold online, not at that store. So we appreciate all of the bills that are going through to help stop retail theft, including this one. And we ask for an aye vote today.

Thank you so much. Anybody else in the room in support of this measure?

Good afternoon. Tamar Tokat, on behalf of the Los Angeles County District Attorney's Office onsupport.

Good afternoon. Devon Anderson with political solutions on behalf of Target and Home Depot in support. Thank you. Thank you.

Jolena Voorhis, on behalf of the League of California Cities in support.

Thank you.

Ryan Morimune with California State Association Of Counties in support.

Glenn Backus for Ella Baker, Center for Human Rights and Smart Justice California, in support.

Jaime Minor, kind of a tweener on behalf of Ebay. We really appreciate all the work that's gone into it and the amendments taken by the office. We were pleased to support SB 301 as well. We're moving towards a neutral position and appreciate again, all the work.

Thank you. So do we have any primary witnesses in opposition? Okay, Technet, come on up.

Thank you, Madam Chair, Members of the Committee, Dylan Hoffman, on behalf of Technet, and we are respectfully opposed to SB 1144. And while we do really appreciate the recent amendments and the efforts to address some of our online marketplace Members concerns, they don't impact our main concern, which is that this Bill and the changes to the definition of high volume stellar takes California out of alignment with the rest of the country in terms of the Inform Act.

We believe this Bill will create some separate and burn some requirements for small businesses, small sellers, and individuals who are looking to sell online in California. And furthermore, there's no direction as to how certain platforms can or should track in person transactions for these accounts and dollar amounts for compliance purposes.

So tech net, our marketplace Members, take the issue of organized retail crime very seriously. We've participated in a thorough stakeholder process organized by the Attorney General. We've testified at informational hearings to provide information on our work in this area.

We were also part of the national negotiations in 2022 on the Inform Act, both in Congress and also here in California on SB 301. We are partners on that. We reached a compromise. Technet ourselves remain neutral throughout that process, and both of those laws went into effect during the summer of last year.

But since that time, we're not aware of any data or evidence to justify the changes in this Bill to the definition of high volume seller. That definition was the subject of careful negotiations here and in Congress. It was a deliberate policy choice, not a loophole, to exclude off platform sales.

This is because it is impossible for certain online marketplaces to know if an item was actually sold through the platform, if it did not facilitate the payment or the shipment. As an example, if you've ever used a platform like offerup or Facebook marketplace, usually the first question that either a buyer or asks if they're reaching out to a seller is, is this still available? Because it's impossible to know.

And a lot of people leave up that listing even after the item has been sold or they've decided not to list it anymore, and the platform itself doesn't know whether that transaction has been completed. Oftentimes people meet up in person.

They either complete the payment through a different payment processor or through cash, and so there's no way to track whether that actually happened as far as the thresholds in a high volume seller are concerned. And so without that exclusion, marketplaces will have to consider all sellers as high volume sellers in order to comply with this law.

To do otherwise could open them up to investigations and enforcement actions by the Attorney General. Consequently, requiring these marketplaces to collect, hold, and sometimes disclose sensitive personal information, such as Social Security numbers, bank account numbers, from many Californians who use these platforms to advertise these sales we don't believe is warranted.

This balancing current law was struck to protect small sellers and their private information. The current threshold in the definition recognizes that when sellers reach a threshold level of activity or sales, the privacy trade off is warranted. But striking the off platform exemption is contrary to California's principles for protecting consumers and sellers sensitive personal information. And for those reasons, we are respectfully opposed. Thank you.

Thank you. Any other witnesses in the room in opposition, please come forward.

Thank you, Madam Chair Members. Jonathan Arambel, on behalf of OfferUp, also in opposition.

Thank you. Okay, seeing no additional witnesses in opposition, we'll bring it back to the dais. Questions or comments? Motion, do we have a second? Mister Lowenthal. Yeah, Mister Vice Chair.

Great, thank you. In the event, just a question for opposition. In the event that a platform has suspected stolen goods on their platform, I'm sure it's different per platform, but what should occur?

I think that's a really good question. And as you noted, it does differ depending on the platform. They have different levels of control and sort of relationships with each sort of seller. Some have much closer to a contractual relationship. Many are sort of forming that through terms of service.

And so to my knowledge, all of our Member companies have policies against selling, selling both counterfeit but also illegal goods on their platforms. So many are utilizing their internal review systems to identify and remove those listings, ban those types of sellers, so that work is ongoing on the platform side to try to be responsive to this issue.

Through the chair, if I may address that. Of course, as we heard from our opposition, this indication of, well, first just affirmed that they are doing their best to try to not have stolen goods sold. However it is, what this Bill does is allow our DAs and our AG to get involved in that enforcement and not purely to rely on the marketplace to be the police of this.

But additionally, there have been issues raised that there's no way some of these marketplaces can, they don't know these things about a seller, but any of us, and I had my staff do this. As we know, when we use any site, we're often, you know, we have to agree to permissions right before we can get access to it. We have to agree to various things. These are the terms of this particular site.

Well, many of these marketplaces, their terms are that you, that they would be able to request that this information is not private, that they would be able to request your name, your email address, your contact information, your location, your bank info, potentially tax ID, various of these things. So as the user, you have already agreed. Whether the marketplace is currently collecting that or not, I can't verify, but you've certainly, by just being the user of it, agreed to that.

So that, number one shows us right away that these marketplaces have the ability to get that information and be able to provide it to law enforcement if necessary, if law enforcement is seeing a pattern of potentially stolen goods from a particular user. But the other issue is that this does not cover every single user of these marketplaces. It only covers high volume sellers. So it is a distinct universe, and those have to be 200 distinct transactions in a year.

Thank you, Senator.

Yeah, so I mean, you know, obviously we've done a lot in this Committee with various things coming through. One thing that has been of interest to me just since I got here is the sale of fentanyl that occurs online, whether, you know, I've always agreed that none of the platforms want it to happen and they have robust tools to, you know, try to track it down and get rid of it on the platform.

And the criminals are good at evading that as well, changing sort of their mechanisms on how they sell fentanyl. But I kind of feel like if the platform knows that there's stolen goods being sold on the platform, just like as if they knew there's fentanyl on the platform, that they ought to report that to law enforcement.

I can see some complications around the reporting mechanism and sort of who's sitting behind the computer and, you know, how that's all going to work in practice, but I think is a General rule that should be reported to law enforcement.

And so that's what I'm kind of, I don't think, I mean, I hope the platforms don't disagree with that if the platforms are being facilitated, being the facilitator of selling stolen goods. So that's where I get kind of, you know, what's the other option on this? And so I'm open to other options.

Voted for it like 2 hours ago, but that was my First Judiciary Committee, so I didn't really, I didn't even know what statute of limitations was, but I'm just joking. I already used that joke in that Committee. But, yeah, I just feel like there's certain, if, you know, there's illegal conduct going on, you ought to report it.

I mean, that's kind of where I'm coming from on this Bill, and I'm always open if you want to respond to that, by the way, I'd love to hear, hear it.

Yeah, no, I think we absolutely agree that not only are platforms looking for it to try to rat it out and report it, but when they do find it, they are reporting it. We have pretty robust relationships with various agencies and departments of law enforcement.

In order to facilitate that, I think where I would sort of caution is the requirement to do so, I think you start running into Fourth Amendment problems related to unreasonable searches and seizures. With that guardrail aside, I think there are ways for platforms to be more proactive and work with law enforcement, and those are the types of relationships we've been facilitating over the last few years.

I'm also not a fan of violating the constitution, so I would encourage our law enforcement partners and the government to not do that if this Bill passes. Couldn't agree more. Thank you.

If I may, you have to have an expectation of privacy, and as the Senator pointed out, terms of suffix explicitly say you do not have a right to privacy, which would preempt the Fourth Amendment claim. Mister Ward.

Thank you for bringing this Bill for us. I'm kind of thinking about this really in three parts. There's two I have no problem with as well. The expansion and ability for local prosecutors to be able to do this, I think can be very helpful, a lot quicker to be able to investigate and resolve and prosecute an issue.

And I think, to my colleague's point as well, another provision in there that really would require platforms to have a mechanism for communication with law enforcement to report stolen goods.

My only curiosity there is, you know, what about an errant user or somebody that is sort of providing difficulty there, maybe miscategorizing something as stolen good and using this as an opportunity to lead on a lot of wild goose chases that are really legitimate or ... factors, something to think about.

But I like the mechanism there because I think it would satisfy the communication length there, the challenge that we have about reporting stolen goods, the ability to prosecute that. But I do have concern on the first part, this definitional change right now.

And while it makes sense to me on one hand that we are limiting to the high volume users as you've defined it, I have been processing what the opposition has been saying about the definition change maybe being so ambiguous or so difficult for them to be able to ascertain whether or not it applies to them, that they are running risk of this Bill. Were this to be the way it is going forward, making it infeasible for them to, or too risky for them to maybe be able to implement.

In other words, thinking about maybe some of the actions that Congress has been vetting on technology laws recently as well, too, and the threat is, well, we may just have to go out, go out of business altogether. And these are useful platforms for just a peer to peer transaction.

If you're trying to sell your couch, it's honest and it's helpful and it's a good thing users like it. I'm trying to sort of thread that, to make sure that this isn't a vehicle for criminal activity, right.

But that the mechanism of the platform is still functional in a way that allows for the good activities to happen, but isn't requiring something that is so difficult for a technology company to be able to fully encapsulate to the extent that we are prescribing in this Bill? And how would we thread that.

Well there's a change in definition. It still has, it still has to be a lot of transactions and a large dollar amount. For example, if you sell your couch on one of these sites, you're not going to fall under this.

Now, yes, it's conceivable that somebody could steal 20 couches and use 20 different marketplaces, but you're not going to make much money on that. In other words, if you're somebody like the couple in San Diego, you're a big business who is unloading large amounts of goods on probably maybe one or a couple of sites, right? And when we think about any of these, our Internet platforms, their business is collecting data and they have the data and they.

So I will let one of my sponsors, let Christine also add to this from prosecutors alliance, but I think the fear that this is going to pull in those of us whom casually, instead of the garage sale, decide to sell things online, it's just not going to be that level of individual transactions. But go ahead, Christine. Why don't you add to that?

Thank you, Senator. I think this is a really good question. We've gone through a lot of amendments to make sure we're as tailored as we can be in this approach. All of the online platforms that we've looked at, the large ones you all know about, collect dozens of fields of information already. Upwards of 22.

What we would be asking for those that cross over into this high volume seller is that they provide, for example, with offerup collects 22 fields of information. We'd be asking them for two additional, which would be a government ID, a bank account, or their tax ID.

So options, not necessarily all of these.

Those are the three that are triggered by being a high volume seller.

Okay.

Offerup already requires a government ID, so it would just be the bank account and their tax ID. So this is a very small additional requirement on those sellers that cross over into the threshold. I think that each platform will decide how they want to go through the various sellers they have in their business and apply this.

We didn't seek to prescribe that for them in the same ways we didn't seek to over regulate what that communication to law enforcement looks like, because we know, we expect that most of these are businesses that indeed don't want that activity on their platform as well and will be good partners in this. But it is really a minuscule additional requirement for those sellers that cross over.

I'd agree if they were at that level. But playing devil's advocate, if you were the Sephora couple and you created an account and tried to sell 100 of those items, you wouldn't meet the definition. You wouldn't maybe need to register as this. Right. But as you can, you can log out of that, you can create another account.

I can create 100 Gmail accounts. Right. And so you're doing this sort of, you know, on a singular basis, and none of those accounts then would then be subject to. Because as individual accounts, they're not a high volume seller.

Yes, but you're. Okay, so you use the email as an example. But since you are ready for most of these sites already have to give the ID independent of an email. Are you going to have to, are you going to go and create 100 fake ids? Are you going to have 100? So it's.

I can imagine criminals are clever. They can potentially game it. But in general, we've tried to design this so that it does not capture the individual sellers, but in fact captures the high volumes.

Years ago, when I signed up for a Facebook account, I didn't upload an ID. So does marketplace require that now?

Facebook marketplace does not, OfferUp does. So it varies across the platforms, but they all collect at least 17 different fields of information, upwards of 22. So they're already gathering a lot of information about the people conducting transactions on their sites. It is just for those that cross over these additional items.

And is the platform then at risk of liability if there's, if there's somebody, a user, I guess, in the gray zone? In other words, if they had not been reporting suspicious activity to law enforcement or somebody had crossed the 200 item threshold.

So the standard in the language now is knew or should have known. Right. So if the platform can explain to the local prosecutor, either the city attorney or the District Attorney, and that's pursuing the case, we had no way to know because they masked their identity through all these different strategies, then a prosecutor, being one myself, would say, we understand that seems reasonable, but if they came forward and they were using all of the same identifying information and changing one very small variable, then you may look at that differently. So we've created a relatively high standard for when civil penalties might apply for the platforms.

Okay, thank you. I'll just close and say, you know, unless the opposition had any further detail to kind of provide on this, that my confusion that I'm inclined to support today, but I'm really nervous that, of what I'm reading here, that somehow we might be prescribing something so, so clearly under a definition that it is going to cause a chain reaction that's going to make some convenient platforms feel that it's unworkable here, given that this is material that's been developed thus far, really through very good and helpful negotiation to be able to get definitions right.

That's the source of my anxiety here, is I don't want to throw out an opportunity for 99 plus percent of users that are doing something conveniently, lawfully, because we are, we're messing up a definition here. And I'm just, I'm reconciling.

I think I, if I appreciate your terminology of messing up a definition, I think that we, as Miss DeSoto pointed out, we did not mess up a definition. We worked very closely with many of the stakeholders, with the AG's office, with retailers, with others to craft a definition that would protect small sellers, that would still allow marketplaces to operate.

And of course I appreciate that folks that don't want to have to either collect this information or fall under this are going to, it's not uncommon to say, ah, this could put us out.

But I think if again, we look at the size of California and the number of people that may use any platform, again in the way it was designed, it is not so onerous as to, especially given that all of these sites already collect, there's literally only one or two additional pieces of information on any one of the, you know, again, some of these marketplaces already collect all of this, and for some of them it's just one or two additional pieces of information that we're asking to collect, and again, only for high volume sellers.

Thank you. Mister Lowenthal.

Yeah, first of all, just want to thank the author. I think this is very important legislation. I'm listening very closely to the opposition and your concerns, and I just had a few follow up questions, if you wouldn't mind indulging me.

The first has to do with the notion that many of the sellers, excuse me, the platforms right now are already contacting law enforcement on their own. And it may be a little bit unfair of me to ask questions about empirical information that you may not be prepared for, but what else are they doing?

Are they simply contacting law enforcement? That's it. Are they contacting the manufacturer of the goods or the producer of the goods themselves, the brands themselves, and providing those brands with requisite information so that they can be contacting them. And do you have any data points whatsoever?

Because clearly I think what everybody can agree is there's a massive problem. And this notion of self regulation versus state regulation I think is an important question we should be asking. But I'm not hearing any data points or any processes or things, that helps me want to lean towards this notion of continued self regulation.

Sure. And again, it'll depend on a platform by platform sort of basis as far as the extent to which they are working with and cooperating with law enforcement, how much they're then referring back to either the, the original manufacturer whose products were stolen, or coordinating with that seller to sort of bring these rings to justice.

But I mean, the Attorney General has been busting organized retail crime rings. Our platforms have been participating very heavily in those investigations, turning over information, cooperating fully. And so I'd be happy to provide additional information and follow up some of that data as you're asking for, because I think we should be sort of data driven in this question, but I don't have those statistics on hand. But like I said, happy to follow up.

And my inclination is going to be to support the legislation today. But as this continues further on, I think empirical information about what precisely is being done and then for the data to continue further, what actually happens as a result? Was there arrests that were made? Did it stop a ring? Did it, you know what happened. To have any faith that this is a path to resolution, that we don't need this, I would really need to understand that information.

Absolutely. Appreciate it.

Thank you Mister Lowenthal. I see me getting up to answer that. Anyone else? Looks like. No other questions. So I want to thank the author also for her working on this.

As was noted by Ebay that sort of in the tweener moving off opposition stage, as well as the Chamber of Commerce that removed its opposition, it's clear that you all have been working to ensure that this works.

Personally, as someone who believes that part of what we need to do to solve the climate crisis is to buy used goods, I'm actually someone who uses some of these marketplaces fairly regularly and I can tell you that 200 transactions is a lot like I can't imagine there's an average person using these marketplaces that would get to 200 transactions.

And also as a user of them, I think they would function better if they asked you to check a box if it had already been sold. So that's a feature you might want to consider just for your users so they don't have to send that email. This is still available, which is so annoying to do.

So I think that these are pretty easy problems to solve. For another thing that was cited by the opposition was not knowing if it's a relisting of the same product, also pretty easy to do tech wise, to be able to re up a listing.

So the listing remains the same if it doesn't sell in the period of time. So I think these are all fairly easy problems to solve for on the tech side and on the benefit of this Bill. It's pretty clear that we have a real problem with organized retail theft and that the ability to sell things anonymously and so in such a widespread way is making it worse.

And so I really appreciate the Senators continued effort to crack down on that and to make sure that California is leading the nation, which is really what this Bill will do in ensuring that law enforcement has the tools they need to go after the folks that are really plaguing our shopping districts.

You know, we know that we are hearing from our constituents that people do not want to be in stores that are being raided, where people are pulling things off the shelves and cracking down on. This is definitely a piece of the puzzle. So I want to thank you with that. I recommend an aye vote if you'd like to close, Senator.

Thank you, chair. I think your summary was excellent, so I will take that as my close, and I ask for your aye vote.

Okay, we have a motion and a second. Let's call the roll.

[Roll Call]

Great, thank you.

The Bill has 10. It is out. We do not know if Mister Bryan is coming. Okay, we'll leave the roll open for now in case Mister Bryan is joining us. Thank you, everyone.

We'll open the roll on SB 1144.

[Roll Call]

Thank you, sir. And with that, we will adjourn.