Assembly Standing Committee on Privacy and Consumer Protection

Okay, we're going to start off here, folks. Welcome to the Assembly Privacy Consumer Protection Committee hearing. As we convene this hearing, I have a few announcements to make in regards to today's hearing. So, I'll start by gaveling in. First of all, I'll be standing in as the Committee Chair for today's hearing.

Assemblymember Bennett is also going to be subbing in for Assemblymember Bauer-Kahan, and Assemblymember Hoover is going to be subbing in for Assemblymember Macedo. There are eight bills on the agenda today. Three of the bills are on the consent calendar.

The bills proposed for consent are SB 50 by Assemblymember—by Senator Ashby—with a motion of do pass as amended to the Judiciary Committee, SB 361 by Senator Becker with a do motion pass—with a motion of do pass as amended to the Appropriations Committee, SB 446 by Senator Hurtado with a motion of do pass to the Judiciary Committee.

To effectively manage our time today, we're going to be limiting testimony to two witnesses for support, two witnesses in opposition on each Bill. Each witness will be allowed two minutes to present their testimony. After the support witnesses conclude their testimony, the Committee will call additional supporters who may only state their name, affiliation, and position for the record.

No further testimony will be permitted. Same process will be followed after the opposition witnesses conclude their testimony. That time, additional opposition will be called. They may only state their name, affiliation, and position for the record. I'd like to note that we are accepting written testimony through the position letter portal on the Committee's website.

We'll vote on the consent calendar as soon as we establish a quorum. So, on that note, we are going to be starting off as a Subcommittee until we have a quorum.

It's important to note that the Assembly has experienced a number of disruptions to Committee and floor proceedings in the last few years. In order to facilitate the goal of hearing as much from the public within the limits of our time, we'll not permit conduct—conduct that disrupts, disturbs, or otherwise impedes the orderly conduct of legislative proceedings.

We'll not accept disruptive behavior or behavior that incites or threatens violence. All public comment needs to focus on the Bill and topic presented. Comments on other issues will be ruled out of order.

Conduct that disrupts, disturbs, or otherwise impedes the orderly conduct of the hearing is prohibited. Such conduct may include talking or making loud noises from the audience, uttering loud, threatening, or abusive language, speaking longer than the time allotted, and I will also document on the record the individual involved and the nature of the disruptive conduct.

I may temporarily recess the hearing. The conduct does not stop, I will request the assistance of the sergeants in escorting the individual from the Capitol Building. Thank you for your cooperation. We can now turn to the items before us today. And I see Senator Wahab who is here to present SB 259. Please come forth.

Chair and colleagues and members of the public, I want to thank Committee staff for their work on this Bill. We agreed to the amendments with the Committee that went into print on June 19th.

SB 259 will limit businesses.

All right. So, even the type of phone, the model of phone you buy is being used against you.

Hotel booking sites have been found to show higher prices to travelers in the Bay Area based on the location of the device when it's being used, versus if you were to be in a different part of the State of California.

In 2015, the Princeton Review was charging higher prices in zip codes that were predominantly Asian American for their online SAT tutoring course. Corporations are willing to use whatever data is available to them to engage in discriminatory pricing practices.

They are investing in research to determine how data about our devices can be used as proxies for other data points. There is research on the density of wireless connections as a determinant of the socioeconomic positioning.

According to a January poll by consumer reports on loyalty programs, consumers don't even want retailers using this type of data as consideration for discounts they are given. SB 259 simply asserts that your device should not be a determinant of a price you are offered. I would like to introduce my first witness, Ivan Fernandez, Legislative Advocate for the California Labor Federation.

Good afternoon, Mr. Chair and Members of the Committee. Ivan Fernandez with the California Federation of Labor Unions, here to speak in support of SB 259. The average worker is forced to stretch their dollar further than they've ever had to before. And this isn't because of some nebulous cause.

Frankly, it's in large part due to large corporations consolidating in very key industries and choosing to increase prices to maximize their profits, all while slashing wages for workers. Now, these same corporations want to use our data to squeeze every cent they can from working class people.

The practice of surveillance pricing is a high tech assault on working people. Using data such as a person's geolocation or their phone battery to determine how much to upcharge them for a good or service further exacerbates this issue of affordability for our affiliate members and for workers throughout the State of California.

As made clear by the Senator, businesses should not have the ability and discretion to alter prices by feeding consumer data to these opaque algorithms. Opaque algorithms that if used without guardrails can also just as easily be used to set worker—to set disparate wages for workers.

SB 259 sets needed guardrails to prevent these algorithms from setting potentially discriminatory prices, and with that, I respectfully urge your aye vote at the appropriate time. Thank you.

Thank you. Are you also here to speak? Okay. Okay. Are there any—is there anyone here to provide additional testimony here, speak in favor of the Bill? Any me toos? Seeing none. Is there any opposition to this Bill? Any opposition witnesses wish to come forward?

Thank you, Mr. Chair and Committee. Thank you to the author and her staff. I'll actually keep it really brief for this Committee. We appreciate the amendment taken just prior to the Committee actually in print already. So, we do appreciate that. That actually greatly helps some of our concerns.

We do actually have concerns with the geolocation data provisions in the Bill. We just provided amendments to the author. We greatly thank them for their patience while we were working on getting them those amendments. We're going to continue to work with them. We do have concerns with the geolocation provision specifically in the Bill.

We're hoping that we're going to be able to work with them on those provisions specifically. So, for the purposes of this Committee, we're just going to keep it brief today, but look forward to working with them. Thank you.

Thank you so much. Okay. Is there anybody else here to speak to me too, to add on opposition to the Bill? Name, organization, please.

Oracio Gonzalez, on behalf of California's Business Roundtable, in opposition.

Robert Boykin, on behalf of TechNet, in opposition. Thank you.

Margaret Gladstein, on behalf of California Retailers Association, in opposition.

Naomi Pedrone, on behalf of the California Credit Union League, in opposition.

On behalf of the California Tribal Association, in opposition.

Matt Murad, on behalf of the Association of National Advertisers, in opposition.

Jasmine Vaya, on behalf of the Civil Justice Association of California, in opposition. Thank you.

Brandon Knapp, representing Personal Insurance Federation of California and Chamber of Progress, in respectful opposition. Thank you.

Thank you. Okay, let's bring it back to the dais. Ms. Wilson.

Thank you, Mr. Chair. Thank you to the author. You know, definitely understand the intent and think it's righteous in nature. And one of the questions though I had when getting briefed on the Bill and looking through, sorry about that, It's my colleague.

Looking through—was this thought about location, because I know location is used a lot in pricing in terms of something costing different at one store versus another or service and one particular neighborhood because the cost might be different than another.

And so, I'm just wondering how that's captured within your Bill and if you can provide greater clarity just on the location—geolocation/ location—portion of it.

Okay. Any definition that narrows the scope of geolocation would have the effect of saying some use of geolocation is acceptable. And we, for example, the definition of precise geolocation in the CCPA would still permit the use of geolocation data that identifies the zip code or county, right?

We can't get away from that, especially even, you know, what towers are being used, where the Wi-Fi is, even when you're, let's say, just putting in your own zip code to get rates, location's often used. But we are trying to, you know, have a balancing act.

So, for example, I'm not saying, okay, saying consumers in Alameda County may be subject to prices that are different than Kings County, right. At the end of the day, it's California. We know how things work. However, we do have a small carve out to make space for legitimate price differences that arise due to things like regional considerations, right?

Maybe the distribution center is located in Kings County and trucking to Alameda County takes place. And so, there's a slight focus that really is included in our Bill, and that's what we are trying to gather.

We have been working with the Chamber, in fact, for weeks, going back and forth and reaching out to their office for language considerations, amendments. We have been kind of crafting this Bill to accommodate some of the needs that just the cost of doing business, which we understand.

So, it's, it's a little bit of that when we're talking about location. We can't completely remove it, but we also don't want to have it utilized completely against us either.

So, you are working through potential amends to tightened or maybe a bit more nuanced around geolocation and just location in general, given the fact that it is a legitimate factor in pricing. I think the rest of it is good.

And I think in terms of, you know, targeting me, where I might be grabbing my phone versus somewhere else, going to the same source is not okay, right, just because you might be in a different area, but we're getting from the same target or Walmart or wherever, then you know, that's not acceptable—or the same service getting charged a different.

But if there is a difference between that particular location and this other particular location

or legitimate concerns,

Yeah, that that should be addressed, so.

And there is language already that handles those concerns. And so, very similar to you, I know I have those concerns. I was actually very shocked that some of this is utilized to the extent that it is utilized. So, we are trying to have a balancing act.

And of course, as we have been hearing from the Chamber, we've been working with them as well.

Okay. Well, I look forward to seeing what the final language is on the geolocation part, but thank you for answering my questions.

Thank you.

Assemblymember Ortega.

I, I wanted to thank the author for bringing this Bill forward. A number of bills have come our way in this space, in particular when it comes to protecting our data and how our data is being used.

When asked about this Bill and other bills related to, you know, the use of data to come up with pricing, I've compared it to redlining. You know, it's modern-day redlining. It was not okay then and it's not okay today. So, really appreciate you bringing this Bill forward.

Thank you.

Mr. Ward.

Thank you. I want to thank the author for bringing this Bill forward. I see this is very complimentary to work that we're doing as well within the...bill now over in the Senate that is tackling the same idea from through a different lens.

And I think that, you know, between our two bills, we can really try to—hopefully we're both successful—find a way to help level set the field so that consumers are ultimately protected, that they're not having their own personal information used against them.

And I really appreciate that we're on this journey together to be able to achieve that end. I'm curious, in your Bill, two things. One, the enforcement mechanism, how are you resolving that? You're relying on the Unfair Competition Act.

And is that sufficient or do we need to look a little bit more, and maybe you'll cover this in Judiciary Committee, about the most optimal way to make sure that this is enforceable?

Definitely. So, SB 259 would be enforced through the unfair competition law, with penalties up to $2,500 for each violation to be assessed and recovered in a civil action, in any court of competent jurisdiction brought in the name of the people by—and I really want to highlight this because we don't have to wait for just one entity.

We have a number of different options.

The Attorney General, any District Attorney, any county council authorized by agreement with the District Attorney in actions involving violations of a county ordinance, any city attorney or city having a population in excess of 750,000 individuals, a county council of any county within which a city has a population in excess of 750,000.

Any city attorney of any city and county, a city prosecutor in any city, having a full time city prosecutor with the consent of the District Attorney.

And the enforcement for, you know, when we're talking about private right of action, which I think that that's where our difference is in, in the Bill is that, you know, we are kind of concerned with small mom and pop just trying to use a tool that somebody else kind of creates.

And so, initially there is no private right of action. And we find that years down the line that such enforcement is going to be needed. Oftentimes, when we are talking to law enforcement, they would like it to be at different levels so they can have the option of, we're seeing this only in our city.

And to your point about geolocation, I'm going to be very frank. There have been businesses, for example, the Princeton Review charged people higher prices if their zip codes had a higher concentration of Asian Americans, right. And so, we're trying to give more localities the option to just enforce the laws that protect their residents.

Okay, fantastic. Well, I'll look forward to the discussion in Judiciary. As well, on the, on the approach in the Bill that you are finding a prohibition, whether there is an integration with pricing and the presence or absence of certain apps or software. I get on the surface it's connection there where we're trying to—you'll be using somebody's kind of individualized electronic information.

I find that seriously, you know—yes. I'm wondering, as I've been working with a lot of opposition on this too, how might that intersect with issues or needs about—around—memberships, discounts, loyalty programs, good things that are out there for consumers, I guess that, you know, we wouldn't want to interrupt?

And whether or not this is—have you been running into that same conversation? How are you accommodating some of those maybe good consumer interests that, that are also of interest to the companies?

Okay, so we've actually met with a lot of the—there's one particular coupon group that came by and visited and we've had some conversations also internally. We're not upending how discounts are done with this Bill, and I want to be very clear about that. We actually met with them.

This Bill has nothing to do with veteran discounts or senior discounts or about the characteristics of your device and that the characteristics of your device should not have a bearing on discounts you get. And that is largely based on the algorithms that those organizations create to begin with. It has nothing to do with the Bill, in fact.

And as a former tech worker in Silicon Valley, it's based on the algorithm that they create. And so, one—in another Bill that will be coming forward, there's a conversation about private data as well, right. And so, again, it's based on the algorithm that they create and how they apply this type of information.

So, again, it does not apply to, again, the device or the zip code or any of the things in this particular Bill. So, those discounts can still work as needed.

Okay, and I, I agree with that. And in other, inn my—and in other bills that we've been working on this space, too, I think that was never the intent and we don't see that connection so directly, but it is the belief that these would also be impacted.

Yeah.

Inadvertently, maybe through, like, you know, the—through the implementation language here.

Yeah. And we, we met with them, and I think that they left our office understanding that that one—number one—is not the intention at all. Number two, again, it really depends on the algorithm and how they set up that pricing scheme very directly, whether it's on their website or their application.

And as long as the algorithm itself has nothing to do with the consumers' individual data, based on their device and their location, they are good to do business as usual.

Okay, great. Well, thank you again for your work in this area and happy to support it today. Thank you.

Senator, if you would bear with me for a moment, we have enough Members to establish quorum. Let's do that so we can take a vote on your Bill.

[Roll Call]

Okay. Moved by Ms. Ortega. Seconded by Ms. Wilson. So, this is a challenging space. I certainly support the Bill and it's do pass, as amended. This intersection of maximizing profit with key factors that give people a lot of consternation in their daily lives, it's just important that we are fighting to keep unrelated factors from being considered in the marketplace and that our economy exists on a level playing field.

We ensure Californians don't fall victim to predatory pricing. And with that. Oh, yes, Ms. Dixon.

I think, I believe when the state—California Chamber—person was speaking, I don't know if she's still here, are there amendments that are pending or been approved, or what were those amendments?

Sure. Thank you. Ronak Daylami with Cal Chamber. We did ask the author for amendments. Again, we gave them the terror just yesterday. So, we expect there to be some time for them to look them over.

Our first amendment, of course, as I mentioned, was to strike the geolocation reference that would leave the hardware state and the software references in the Bill with some other exceptions in the amendments that we offered.

The other amendment that we offered in lieu of that, if that is not amenable to the author, deals with the geolocation data references.

One of the things we've asked for is narrowing down what is meant by geolocation data, so making it about precise geolocation, since there's no definition of geolocation in the Bill right now, clarifying what that has meant.

The author talked about one of the issues very well about what we are concerned about, in terms of like the physical locations and some of the different pricing there. So, we did want some clarification around some of that issue.

I think one of the fundamental differences that we have, that's in our letter, that we had talked about, is that the Bill starts from an approach of generally banning the use of geolocation data and then adding in exemptions.

And we just think that's the wrong approach to take because it's hard to foresee kind of what might be future uses of the data and providing enough exceptions for everything, but we did do our best to provide some other exceptions that would cover potential uses. So, that's kind of the, the amendments that we've given her.

But we, again, recognize that she needs some time to take a look at those and that's why we're looking forward to working with her and Judiciary Committee on those. Thank you.

Have you, Senator, have you accepted those amendments? Are you working on them?

We got them late yesterday, so we are reviewing. I had a Bill this morning and we have a couple of committees, so we have not had a chance to have that conversation.

I saw you.

But we have proactively been reaching out to the Chamber, so I just want to highlight that.

And we do want to strike a balanced policy. That is the intention of everything that I bring forward.

Very good. Thank you.

Any other comments from the dais? Mr. Bennett.

I, I am here as a substitute for the Chair, who's not here today, and so I'll be voting consistent with what I believe the Chair is recommending on these issues. But I reserve the right to analyze all of this later since I haven't had time to work on all of these.

Appreciate that.

Okay. With that, we have a motion from Ms. Ortega and a second by Ms. Wilson and Clerk will call the roll.

Do I close?

Oh, would you like to close?

Yes. I'll just keep it pretty brief. I, I do want to highlight some of the things that have been happening. Uber has been accused of charging people more based when their battery is low. Staples was caught altering prices based on the consumer's location. There's also reporting that indicates the device itself is used to determine pricing.

Target settled a lawsuit alleging false advertising overpricing and fined $5 million. Hotel booking sites show higher prices to travelers from the Bay Area. These are all legitimate things that are in the background.

We are deeply concerned with this because it is not fair to an average person, including those on a fixed income that just live in different regions. So, I flag this. I respectfully ask for an aye vote, and I think that this is a decent policy moving forward.

Thank you, Senator. Okay. Now, the Clerk will—we have a motion—and the Clerk will call the roll.

[Roll Call]

That bill is out 7 to 1, and we'll keep it on call. Okay, I see we are eight to one. Excuse me. That. That. That vote was eight to one. We're gonna do very quickly, before we get to you, Mr. Laird, we're going to do the consent calendar. It's been moved by Ms. Wilson, seconded by Ms. McKinner.

Okay, we'll call the roll.

[Roll Call]

8 0. That's out. And we will keep that open as well. Mr. Laird, nice to see you.

Good to see you. Thank you, Mr. Chair. I'm going to present SB 22, but before I do it, I would like to wish happy birthday to my own Member of the Assembly who is sitting over here. And I have already attended two birthday parties for her. I intend to attend a third that's on my schedule.

I suspect she stepped out of the room because there was another birthday party. Too much? Yeah. And I'm just sorry, since I hosted one of the birthday parties in my backyard in Santa Cruz. And you had to wear crazy hats. I challenge her to wear her hat to a floor session or Committee meeting.

But it did leave a lot in its wake when she left. So anyway, happy birthday to my Sam.

Happy birthday. Happy birthday.

Let me try to cut to the chase on this gift card bill because there's been a lot of confusion. In 2007, a Senate Bill was enacted to allow the redemption of gift cards and amounts up to $10. It has never been changed since then. My real goal is to deal with an inflationary increase of the amount.

In the ideal world, if I could get $15 and something that took care of the next tranche of inflation, I would be done. And in fact, we had a deal to this end earlier at the beginning of the year and the other side walked away.

And if they'd stuck with the deal, this would have been on the consent agenda. And what is my goal with this bill would be adopted. And so what's happened is that there's an attempt to relitigate the underlying pieces of the original bill.

And somebody said to me about this, well, why don't you just take their amendment that moves it to $15. That was the basic part of the deal that we agreed to. If I had that with an inflationary thing, we would be done. And so that is what this is about.

And it is fairness to consumers because the consumers, it has lost the value of what it originally was. And so if you go through some of the criticisms, which to me are many, about the existing system that was adopted in 2007, it was like, oh we'll have to keep a lot more cash on hand.

Cash is not required as the method of redemption. There is no need to do that. There have been claims of fraud, and some of the fraud is about how the gift card was issued at the point of sale, not at the redemption.

There have been concerns about a federal limit on cash back, but Massachusetts has a limit that's much higher than this bill that's not been enforced or it's not caused Massachusetts to have to undo it. There's been concerns about a cashback requirement for donated gift cards that's been in law for two decades.

There's an existing exemption for donated gift cards. So when the amendments recently, just recently were given to us, it was $15 and changing a lot of these underlying things. If we. I do not want to re litigate the original bill. I want to have the consumers have a higher amount that's consistent with inflation that they can redeem.

If if this was $15, and then we have some understanding over time, if there's inflation over the next five years or seven years or 10 years, how we deal with that, I'm good. So. And I'm sorry.

Even though I have immense respect for the person that's chairing the meeting, the chair of this Committee has very strong opinions about this. And I was looking forward to them being expressed because in a previous hearing, she was like, don't go below $25. Well, $25 is what is establishing the debate.

If we can get to a point that we can do inflation and future inflation, I'm done. So this is about consumers. This is about the $21 billion that exists in gift cards that's not cashed. And at the appropriate time, I would respectfully ask for an iPhone.

Senator, can you clarify, are you accepting the Committee amendments?

Yes, for the Committee amendments. They clarify that the bill applies to e gift cards, and there's something about registration of notices, and I accept those amendments.

Okay. And then you also made the statement that you would be willing to consider to work forward on the bill as it's moving? Yes. Okay. Okay. Thank you, Senator. Are there any speakers in favor of this, Any witnesses and testimony for this bill?

Not a testimony just to me to. Dani Kando Kaiser, Kaiser advocacy on behalf of the California Low Income Consumer Coalition in support.

Kim Stone, Stone advocacy on behalf of Consumer Watchdog in support.

Okay, let's go ahead and get all the me toos right now. So is there any me toos wanting to add on to the bill? Seeing none. Anyone in opposition to the bill?

Mr. Chair and Members, thank you. Margaret Gladstein here on behalf of Capital Advocacy. Sorry, with capital advocacy here on behalf of the California Retailers Association. We are opposed. I do apologize to the chair, to the author of this bill. He is correct. We did almost have a deal. It's the same way offered him last year.

What happened this year is our members started to do a deep dive and recognize how great the fraud on gift cards is here in California. And the reason is we effectively have the highest cash back amount. I'm happy to answer questions about Massachusetts, but I won't do that here.

Essentially, there is more gift card fraud here than in other states because we have that high cash back amount. There are also problems with the existing law and we would like this opportunity to correct them. So we now have an opposed and less amended position.

We have said that we would go to 15, strike the posting requirement and restate some of the many of the provisions that are already in law that are not being interpreted the way that the author, I think, thinks they are. We just want clarity on how the existing law works.

And we also want to add that if you return merchandise and get a gift card because you don't have a receipt or can't go back to your credit card, that you. That gift card cannot be exchanged for cash.

So we do believe that when you open up a code section, we do have the right to ask for changes to make it clear what consumers can and cannot do with these cash back amounts. So I have a lot longer testimony. I know we have very little time and there's been a lot of discussion about this.

I'm happy to answer any questions, but. But we would very much like to see a deal with the chair. Sorry, with the author that does clean up this code section and make some other changes which have been shared with you and your staff. So for these reasons, we're opposed unless amended.

Thank you, Chair Members. Marlon Lara, on behalf of the California Restaurant Association, we have serious concerns about this bill. From the safety aspect of it making it to where restaurants are now going to become cash centers. We're going to have to have large amounts of cash on hand. This bill. We don't know how many people.

There is no limits on the amount of gift cards that could be cashed at one time. And this would devastate more of the neighborhood restaurants because most of our gift cards are actually under that $25 limit.

Gift cards are wildly popular with the dining public and they provide a wonderful opportunity for the giver to give a restaurant experience again as I mentioned there is no limits on the amount of cards that be cashed out on any one given day.

If somebody wants to give an individual cash, they can simply purchase a cash card instead of gutting restaurant gift card programs. There are costs also associated with running a gift card program and restaurants happily take on those costs. But forcing restaurants to offer the equivalent of a cash card feels punitive.

Add to that a required sign at all points of sale informing the public that they can cash out gift cards of less than $25 puts us at a serious safety concern. This advertises to the larger community that restaurants have large amounts of cash on hand.

Having unnecessary cash on site is the last thing a small business operator wants to do right now, given the ongoing public safety challenges. And it's really well documented on a lot of news articles with a simple Google search that restaurants are targets of smash and grabs and robberies.

Given this, SB 22 will force a restaurateur to cash out the entire value of a gift card in many cases with no purchase requirement from the guest and at an administrative and financial cost to the restaurant. Please don't gut restaurant gift card programs and instead we respectfully request a no vote. Thank you.

Thank you so much. Any any additional witnesses in opposition, any MeToos that want to add on opposition to this bill?

Thank you Mr. Chair, Members of the Committee, Carlos Guterres here on behalf of the California Grocers Association with opposing this amended. Thank you.

Anthony Butler Torres on behalf of the California Hispanic Chambers of Commerce. In opposition unless amended. Thank you.

Good afternoon. Chris Anderson on behalf of the California Chamber of Commerce, respectfully opposed unless amended and would remove opposition with the amendments described by the retailers. Thank you.

Matt Murad on behalf of the Association of National Advertisers, in opposition.

Jack Yanis on behalf of the California Fuels Convenience alliance, opposed unless amended. Thank you.

Okay, thank you everyone. I will bring it back to the dais. Mr. Ward, great.

Thank you for the bill here today. I guess I wanted to again on the premise, and it's all I have in front of us right now, that the author's intent was purely to address something that would reflect inflation. And that's the limits that he was interested in working on this topic right now.

Nothing would have prevented, I guess working with a different author as well to maybe tackle some related issues if that's where we wanted to go back and open something up to. And that could be for another day.

But as the law is today, and as the requirements are here today and for all of the concerns that you've raised here, what evidence today that under a $10 requirement right now are you finding these crimes, this abuse, this, you know, the world falling down on itself?

Sure. We have numerous examples of cases where fraudsters take stolen credit cards. And literally there was recently a case in Sacramento, there was a news story about it showed a camera above a cash register and somebody was trying numerous stolen credit cards in order to buy gift cards.

What they do from there is they, once they get say a $300 or $500 gift card, they then purchase, make purchases of essentially for 999 and then they return those and get a gift card for 999 and then they're eligible to cash that out.

So when you increase the amount, it will make crime pay even more quickly if we go from 9.99 to 24.99.

So if it does. But I mean, the original transactions that you're talking about are quite severe and themselves already probably covered under law for, for what was significant penalty. In other words, if you could catch and prosecute the individual for the original fraudulent transactions, that, that seems even potentially more severe of a, of a punishment, then.

I don't know, it just. There's an interesting argument there that, and maybe I'm naive or maybe just not fully aware of the gravity and the frequency of this happening, that individuals are out there willing to try to procure 100 gift cards at $9.99 each. It just seems really a high degree of effort for their criminal activity.

I want to just clarify how the transaction works. They take a stolen credit card, they buy a $300 gift card, okay. In turn, they go through a number of nine purchasing something for 9.99, then they can cash those out.

And while that is a laborious process, if that amount increases to 24.99, it's, it will make it easier and more efficient for the fraudsters to do that.

Still, the criminal is taking a $300 gift certificate and trying to change that into 30 $10 gift certificates.

It's helping. I mean, most people who commit crimes want cash and this is how they get cash. We have numerous examples of individuals who show up with stacks of gift cards to exchange. We don't think it's because somebody thought they really loved a store that much or a restaurant that much.

We think it's because those gift cards have been either used to pay somebody to commit a crime or being were attained fraudulently. We have provided many, many of you and your staff with examples of how these schemes work.

I'd like to see that, if you wouldn't mind resending those to my team just so I can see the evidence for itself. Because if that is severe in its inactivity, you know, then there's something here that probably needs some guardrails on.

But I wonder if this is one of those situations that is very isolated and rare in occurrence and if that's the case, the balance of trying to be able to support thousands, if not tens or hundreds of thousands of individuals that would like to be able to get the $12.50 remaining on their gift card back to themselves, that was something that I would like to be able to afford Californians the ability to basically clear that out so it doesn't just get wasted.

Thank you, Mr. Ward. Assembly Member Wilson.

Thank you, Mr. Chair. To the Senator who have had the opportunity to see this Bill twice now. And one, I just want to say I appreciate you the way you work a Bill and the way you try to include the thoughts and concerns of others. And that has been amazing, including on this Bill as well.

When I heard it the first time, I was concerned about the CPI just because it's unknown amount. And so one thing that helps consumers is for it to be really clear about what they can and can't do with it changing. It's not very clear. Right.

I was glad that that was taken out and I know there's talk about if you get to agreement putting it in, but that was the concern I had. I think the posting on the disclosure disclose the posting is sufficient.

With the disclosure that's already on the card and making sure it's updated when you get the card, it tells you you can cash this out at a certain amount. I think that's sufficient. I mean, having it posted everywhere doesn't seem like it's add value to the consumer.

And then the last piece I wanted to bring up was in terms of when it's a return purchase, I think if we increase it to 25 and allow for a return gift card to be cashed out, whether that's because they got the returned gift card because of 30 days or even, you know, they didn't have a receipt, I think what would happen is retailers would stop offering a return card and then not let you return purchases.

So I do think that that should be factored in because I think that is an absolute benefit to consumers is to be able to if they lose a receipt or it's gone, it's been too long or they don't have the card anymore to be able to get that back.

And I'm afraid that retailers would be like, well, I'm not going to do that anymore if, if, if they have to worry about cashing out those types of cards. And for most retailers, those cards look slightly different. And so that would force them to make them all different.

But going to support, you know, your Bill today because last time I was not very supportive of it, but I seen the due dil and your ability to adjust. And so I will be supporting it today.

But I would just ask that you factor in that part around the return card and ensuring that consumers have an opportunity to still take advantage of that and that retailers don't take that away.

Thank you, Assembly Member. Assembly Member Pellerin.

Thank you to the Senator for bringing this Bill forward. So some businesses are moving to cashless and in your testimony you talked about maybe not having it be a cash redemption or what was your comments about that?

Because I'm worried about a business, a restaurant, retail, not having enough cash to be able to pay out to the consumer coming in if they have several $25 gift cards in a day and they don't have sufficient cash.

I was trying to be clear in my opening statement. It is within the law now and is not proposed to be changed by this Bill that you do not have to redeem them in cash. Could mail a check.

You can do other things when it's like, zero, this is horrible, they'll have to do more cash that is not required by the system now.

Okay. Yeah, I wasn't aware of the other methods of return.

So thank you, Vice Chair Dixon.

Thank you. Mr. Chair, have you had a chance to talk with law enforcement about the fraudulent uses of the card? This is what I understand to be the case, is that it's not just somebody getting one card.

It's the theft of large quantities of gift cards from where they get them, who knows, and then taking those in to a retail outlet store, whatever, restaurant, and presenting them forward for cash. And, and that is a well known, from the law enforcement perspective, money laundering opportunity. Can you address that, please?

Yes, because. And this is where I might not understand how every single retailer does it, but they have to actually activate and authorize the card. It's not as if you can go to the standard Safeway and just steal all the cards. That card would have had to be taken through the checker, paid and activated.

And, and so it is very difficult to steal lots of cards that have money on them.

Well, or somehow they're stolen or they're replicated in some way or counterfeit cards.

I, if you see. But you're addressing what I think is one of the underlying issues here, which is some of the fraud is really greater or outside of the system for redemption. If somebody is stealing a credit card and using it, there's a whole process for being in the.

Well, I'm not saying the credit card, it's the gift card.

No, but, but my point is it's the same in the sense of, of whether it is a credit card or whether it is stolen cards.

There are ways that, that you try to prevent theft or you try to identify theft, or you try to prosecute theft, which isn't necessarily related to redeeming a small amount that's left on a gift card.

Well, I don't even know if it's left on a gift card. It's $25. I mean, multiply thousands of $25 gift cards and you have major money laundering opportunities. I mean, crime goes on when we don't even see it. I mean, there are ways and avenues to take a gift card. You talked to law enforcement.

That was my original question. Have you talked with law enforcement to get there?

I haven't talked to them. To my know, maybe my staff has, but I'm not aware we have. Well, and I'm happy to do that out of this hearing if, if, if this indeed is a secure limited system that is protected from fraud, that's fine.

But right now I'm concerned about its, its availability for fraudulent use. So thank you.

Sure. Thank you. Thank you, Madam Vice Chair. Assembly Member McKinner.

Yes. Senator, as I talk to you, my family owns some small restaurants. Matter of fact, one in my district, one in Mr. Bryan's district, and they're really concerned about the $25. And I think that if I heard you right, you would take the $15amendment. Yes. Yeah. For $15. Because they were very concerned because they're small.

You come in and you have to give them, give people back cash. They're, they're, they're very concerned with that. Now also we have like the donated cards like you can buy car, restaurant. They're a small business, a very small business.

You could buy the donated cards and people give them out at Christmas time and then they don't want those returned either.

As I said in my opening statement, there's an existing exemption for donated gift cards.

Okay. Okay.

Thank you.

Thank you, Mr. Chair. My questions are for the two opposition witnesses here.

Mr. Bennett

We're talking a lot about fraud, but in my mind the fundamental question is $21 billion of unredeemed gift cards out there, and that's potentially an awful lot of profit without doing, you know, very much work on the part of the business side of it.

So in my mind, we, we need to do something to try to decrease that $21 billion of unredeemed gift cards that are out there. That this is a, seems like a reasonable way to try to do it. You testified that you had an agreement to go to $15 with, with inflation built into it.

And then because of the amount of fraud that your Members saw, you decided to pull out of that agreement. In terms of doing that, that doesn't, it doesn't equate with. At $10 a number of years ago. $15 with CPI is. It's the same agreement that it's the same Bill that was out there before.

So you're making a decision as a business, not you, but these businesses are making decision. Do they want to do the gift card route or not?

If the fraud is so bad that we can't go to $15 with, with, with inflation, but we can live with it at 10, I wonder why would you stay with a gift card program at all? But at some point in time, it's the decision that you have to make.

And yes, there is some increase in incentive for people to try to work the system, but there's also an incentive to keep the system going without having the cash being paid back because it results in a whole lot of gift cards not being redeemed. So could you.

Which is more important from the public's benefit, Protecting the businesses from potentially a little more incentive for fraud or protecting consumers from tremendous incentive to not have these cards actually be properly redeemed.

I'm sorry, thank you, Assembly Member, for asking that question. Certainly there are a level of unredeemed cards. I can't comment on that. What I can tell you is that California gift cards, in California, gift cards never expire.

So when you clean out your sock drawer and find that lost gift card or it's in your wallet tucked behind something else, you can still use that no matter how many years forward it is. So gift cards here don't expire. That is a very strong consumer protection law that we have here in California.

The other thing I would note you mentioned $15. I think at 1.0 Mr. Ward may have talked about $12. As I said in my opening, we have offered a deal that would be less than $15. What we also need along with that is clarification of Existing law.

I understand that many of the words that we have in our amendments are moved around, but in existing law, many of our Member companies read the existing law as not being clear that donated cards aren't covered. Not being clear that cards sold for a discount to a charity are covered. And so we're just asking for clarification there.

So thank you.

Thank you.

I think.

Yeah, Please go ahead very briefly, Very briefly, if I can. Restaurants offer experiences and what we want to do is we want to encourage customers to visit our establishments. Right. These gift card programs are used to incentivize people to come in through our doors. They're given for many different, you know, reasons.

But we take the position that we want our customers to come into our restaurants and use those cards.

Thank you, Mr.

Bryan.

Thank you. Robust conversation and heard her opening remarks on my walk over here, Senator. I mean, it's important policy. You're Talking about a $21 billion interest free loan to these giant companies from consumers, essentially. Right. That could be drawn down on. Hasn't been drawn down on.

I think the data though is also not kind of enough for us to fully get at the heart of this because I'd imagine it's a few or significantly fewer operators in the space than all restaurants, certainly not small mom and pop restaurants that are holding on to that unused gift card amount.

I personally like the consumer Price Index and I think if you adjust it from $10 in.07 to now, that gets you about 15 bucks. To me that makes some sense, assuming that $10 wasn't completely arbitrary by the Members of that day who pulled out a number. So I would love to see some sort of landing spot here.

But I think what you're going after is absolutely righteous and I'd love to kind of further explore the relationship between those unused dollars and consumers kind of floating that interest free loan to private hands. But this is to me more complicated than this, raising the limit from 10 to 25 or otherwise. Just my personal preference.

I think the Consumer Price Index is the better measure given that inflation is all household goods and consumer price is more relative to what urban communities would spend on specific types of goods. Just my two cents on it. But you've got my support getting out today and I trust that you'll continue to have these conversations with folks.

Okay. I think that's pretty much everybody. That is everybody I want to walk in. First of all, I think this is a good consumer protection bill. I want to align my comments with my colleague from Ventura, my colleague from Los Angeles, that Ultimately, money is being spent for a good or service and it's never being received.

I'm also a restaurant owner. There's not a deep concern about having enough cash available to be able to deal with things like this.

And I know that any restaurant owner that would receive a huge stack of 200 or 300 cards, probably call law enforcement is the first thing that I would do or my managers would do in that environment. So want to support our restaurants and certainly hear everything that you've had to say and it's very valid concerns.

And I think that my other colleague from Los Angeles pointing out that there is a better deal on the table that I think is going to get people a lot closer anyway. The money spent on gift cards should not be lost to the consumer as a result of any circumstances.

I don't think our currency is designed to be transferable. So too should our gift cards. And this is a do pass as amended. And with that, would you like to close? Thank you.

I really appreciate the robust discussion. But. But since I have the only Bill left in health right now, Assembly Member Bonta is aware of this long robust discussion. She's going crazy. And just a couple of comments on the CPI. I mean, going to 15 or 1499 is the CPI for now.

And I think one of the problems that Assembly Member Wilson had last time is that we wanted to just go CPI annually and that doesn't work for. For the people that operate the gift cards.

And so that's why the tentative deal and what we would hope for is go to 15 and then just have some agreement on a tranche for the next thing of inflation and do it.

We are working with Ledge counsel to see if they will just absolutely confirm and clarify the issue about donated cards being exempt the way we think they are. And we do have concerns that some things that are characterized as care as clarifications are really changing the underlying stuff. We'll work on that.

So with that, I appreciate this, we will continue to work. We don't want the goalpost to be moved, but we will work on those numbers. And I would respectfully request an iPhone.

Okay, thank you. Angering the chair. I would like to wish assemblymen assimil woman pillar and happy birthday. Noted.

That is hilarious.

We have a motion by Mr. Bennett and a second by Mr. Bryan. Clerk will call the roll.

[Roll Call]

Senator, that bill is on call. Six to one. Senator Umberg. Well, you look like you're ready to go.

I am ready to roll. Wow. Okay. I hate to actually hurt my tentative eye, but nevertheless, Mr. Chair, thank you very much. I want to thank the Committee and John Bennett for the work of the Bill.

And I also want to wish Assemblymember Pellerin a happy birthday because I need to redeem myself because I spent a half hour in her office today and failed to do so. So happy birthday. Right. This- We all have bills that we like. Some we like more than others. This one I like the most.

This is known as the Calm Act. And let me just give you quickly the genesis of the Bill.

Genesis of the Bill is a young woman named Samantha Rose Keller, who's about an eight month old baby, who was awakened because when her parents were watching some show on streaming services, an advertisement came on that was exponentially louder than the actual TV show and thus woke her up.

And anyone's had a baby, you know that the golden rule is you got to keep the baby asleep. And anything that wakes that baby up should be closely scrutinized, as should streaming services, who exponentially basically increased the volume on advertisements. Broadcast TV can do that today. In fact, they do it as a consequence of federal law.

This simply says, hey, you got to play in essence, by the same rules. You can't boost those ads like you are doing today. It's a simple Bill and I urge an aye vote.

Thank you, Senator. Senator, do you have any witnesses to speaking up in favor of the Bill?

Samantha is only eight months old, so she was not available.

Still working on her speech. Working on her speech.

Exactly. Yes.

She'll be working on that for a little while. Are there any me toos that wish to add in support of this Bill? Seeing none, is there any opposition to this Bill? Testimony, please come forward.

Thank you. Thank you, Committee Members, Chair. On behalf of the Motion Picture Association and the Streaming Innovation Alliance, my name is Melissa Patack, and as explained in our memo in opposition and laid out in the Committee's analysis, we oppose SB 576 for several reasons.

While well intended to protect viewers and children especially, the Bill seeks to incorporate federal regulations that govern advertising that is displayed and aired by TV and cable networks and apply that same standard to streaming services. Those regulations and compliance with the federal standards are administered by the Federal Communications Commission.

By contrast, this Bill would adopt those federal regulations into the BNP code and impose them unilaterally on streaming services and likely make an alleged violation subject to the Unfair Competition Law. SB 576 overlooks the many stakeholders that are involved in the streaming ecosystem.

Unlike in the broadcasting cable network environment, where advertisers sell their ads directly to the networks, streaming ads come from several different sources and cannot necessarily or practically be controlled by streaming platforms. The technology that encodes and inserts ads from advertisers and third party intermediaries into programming occurs in real time. There's some technology. There we go.

There we go.

It's a very powerful organization.

Had nothing to do with it. I can assure you. I can assure you we all answer to a greater power. What that means in terms of what I mean by real time.

That means that you or any one of us and I could be watching the same program, but we may have started it at different times and therefore we'll probably see different ads based on the dynamic ad insertion with the digital file.

When you choose a program on your streaming service, you're actually calling up a digital file and advertising is paired up with that in real time. The streaming platform may not be able to control the loudness of a particular ad.

That being said, there has been a significant amount of work done by stakeholders through, for example, the Audio Engineering Society and the Interactive Advertising Bureau to address loudness issues and develop best practices to match the loudness of ads with programming.

Many streaming services publish audio specifications to advertisers to ad networks and ad exchanges, and also request source coding from advertisers so that they can.

If you can conclude, Ms. Patek.

Reasonable efforts to normalize ad loudness. But it's not a perfect system. We want streaming services want the experience of the viewer and the listener to be satisfactory. But this Bill is not a solution. We would encourage a no vote.

We stand ready to work with Senator Umberg to develop language that would acknowledge the existing best practice standards and set out some provisions that would hold all stakeholders accountable and recognize the reasonable efforts undertaken to normalize the loudness of ads and programming and that that should not be unduly punished. Thank you very much.

Thank you. Ms. Patak, you interviewed me for a job at the Association in the 90s. I know how long you have been at the organization.

So did you get the job?

No, did not get the job.

We will stipulate you're both in high school. Yeah. Okay.

Okay. Are there any other witnesses in opposition? Me toos that want to add on to this Bill? Seeing none. We'll bring that back to the dais. Miss Irwin.

Yeah, I'm. I'm sorry. I walked in a little late because I was presenting in front of your Committee. I. It seems that on regular broadcast TV that this is still an issue that we haven't really resolved the loudness of commercials problem because I'm watching a show and I'm constantly having to turn down the volume.

So what is the. I mean, how is compliance supposed to be enforced on for broadcast television?

FCC

And are they just not doing enforcement?

I'm not an expert. I don't know. Oh, I'm sorry.

Oh, sorry. No, I mean, I don't have broadcast TV and as many of us use cable or streaming services. So yes, in theory, the FCC is supposed to regulate the licensure of those who broadcast. And if they're not abiding by the rules, they're supposed to sanction them either by fine or yanking their license.

And I concur with you. I'm not aware of, of any of that.

Okay. It's just. All right, thank you.

Madam Vice Chair.

Thank you Chair. I have a quick question, Senator, or whoever can answer it. How would it be implemented? I mean, it could be compliant or in concert with federal law, but how physically, technically, how is it implemented?

It would be a violation of business professions code 17200 and unfair business practice. And same mechanism public prosecutors might file an action.

To?

To enjoin, typically.

The streaming service.

Exactly.

Oh, okay. All right. Thank you.

Okay. Anyone else? Okay. Seeing nothing. No other debate. This is a good Bill. I, I support this Bill completely. It's bringing uniformity to our advertising regulations. It's important role of our jobs here to make sure the laws are adapted to fit the modern and ever evolving world. This Bill does just that. We have a-

Oh, would you like to close, Mr. Umberg?

I would. Thank you and I appreciate. Ms. Patak and I had a, I think a useful conversation last night about the Bill and the merits of the Bill, et cetera and any modifications.

I'm going to resist the urge to becoming sarcastic, as I am prone to do, but it does seem to me to be amazing that we can't figure out how to make sure that the volume is not increased exponentially on streaming services. It's just technologically infeasible.

I think when I'm watching TV, people can figure out whether I use my right hand or left hand to control the TV remote. They know how old I am. They know what cereal I like. They can figure out how not to increase violence. I just believe so in my soul.

And thus I think that should we implement this law, that they will figure it out.

So we certainly appreciate that you're not using sarcasm today. And on that note, we have a motion by Ms. Wilson, second by Ms. Ortega. Clerk will call the roll.

Item number six SB 576 by Senator Umberg. The motion is due pass. Lowenthal?Lowenthal, aye. Dixon? Dixon, aye. Bennett? Bennett, aye. Bryan? Bryan, aye. Demaio? Hoover? Irwin? Irwin, aye. McKinnor? Ortega? Ortega, aye. Patterson? Pellerin? Pellerin, aye. Petrie-Norris? Ward? Wicks? Wilson? Wilson, aye.

8-0. That Bill is out.

Thank you very much.

Thank you. We'll keep that on the roll open.

Mr. Cortese, the hot seat is yours.

Thank you. Mr. Chair.

Welcome. Please begin.

Appreciate it. Thank you.

Thank you. I will. Is it appropriate to wish happy birthday to one of the members?

Yeah, we haven't heard that yet today. Please do.

We see each other a lot more in the district than. Than up here. Again, good afternoon.

I'm pleased to present SB 683, which strengthens protections for individuals who've had their name, image or likeness usurped. Existing law prohibits the unauthorized use of another's name, voice, signature, photograph or likeness in any manner without consent. Yet we continue to see prevalent misuse. The exploitation of one's likeness can have serious social, mental and economic ramifications.

Given the increasing sophistication of advertising, it's imperative that the law provide immediate individual protection. This Bill clarifies that an individual seeking relief for a violation may seek an injunction or temporary restraining order, commonly referred to as a TRO of course.

Should a TRO be granted, the respondent must comply within two business days from the day the order is served, unless otherwise specified. So if the judge orders earlier, it's earlier. If the judge orders later, it's later. This statute has not been updated in over 40 years. Coincidentally, it was authored by one of my predecessors. Predecessors.

Predecessors. Senator John Vasconcellos. And the original intent still stands true. Our laws must provide protection from invasion of privacy. We haven't changed anything in terms of content regulation in the Bill. Not only are consumers misled by unauthorized material, but the persons depicted can lose compensation, career opportunities, and potentially their reputation.

As we've seen, particularly with youth, much more cases of suicide have been prevalent in this space. Thank you. And I respectfully ask for your aye vote.

Thank you, Senator. Senator, are there any witnesses with you to speak in opposition?

No.

Okay.

We do, I apologize.

Excuse me. In support. Are there any me toos? You can go ahead. Come on up, Mr. Douglas. Go ahead and take a seat. Are there any me toos? Adding on in support of this Bill, seeing none. Witnesses in opposition.

Thank you, Mr. Chairman and Members. Good afternoon. Carl London. London and Gonzalez Advocacy here on behalf of the Recording Industry Association of America. These are basically the record companies that produce, particularly in this state, but worldwide, you know, almost 90% of all sound recordings that you hear.

This certainly Senator Cortese has dived into an area that's important for us. Our artists, images, likenesses, voices are being used today, particularly in this modern world of AI technology. It's a grave concern for us. The problem we have with the Bill is the allowance for up to two days to comply with the court order.

The authority of judges to make a TRO and to put or to otherwise request that something be taken down immediately is well established. And this Bill by offering up to two days we think gives too much time.

We would prefer, and we are talking to the author about this, about having the standard be something that complies with what is practically or technically feasible. Because you know, it may be that somebody in the East Coast is operating whatever needs to operate to shut something down.

But judges authorities are well established to do this, do this immediately. We're used to them putting orders like this in and we would not want to see them have more time. A lot of time, a lot of damage can happen within a two day period these days in the modern world.

And we'd prefer to see it go the other direction where if the judge says comply immediately, comply immediately. We would not like to see the establishment of a longer standard. So thank you very much.

Thank you sir. And please forgive me. I refer to you as Mr. Douglas, not Mr. London. Sorry about that.

Good afternoon Chair and Members Dani Kando-Kaiser, Kaiser Advocacy here on behalf of the First Amendment Coalition in respectful opposition. The First Amendment Coalition is a nonpartisan nonprofit organization working across California first for the last 35 plus years to defend free speech, free press and the people's right to know and engage in civic affairs.

First of all, I want to thank the author and his staff for starting this discussion with us back in April. But the Bill as you see today does not meaningfully address our concerns about its impact on freedom of speech and freedom of the press.

683 would allow plaintiff to seek extraordinary relief TRO or PI to compel a rapid takedown of material that includes a name, image or likeness on limited and one sided evidence that publication is for improper commercial use, not protected speech or commentary.

What we mean by one sided is defendants such as news organizations or any other speaker may not be able to respond in time to explain why its speech is protected before a court grants a prior restraint and prior restraints are one of the most serious forms of censorship.

The Bill would expressly create a new right to an immediate takedown of potentially protected speech without a full trial and final judgment. The author has said that the Bill only confirms existing law. If such a right existed, 683 would be unnecessary, which cannot be the case under settled principles of statutory interpretation.

The Senator says this only applies to commercial misappropriation. But the reality is it's not always clear that it is protected- what is protected speech or what is commercial misappropriation until all the facts are fully developed in litigation.

Given the fundamental rights at stake, freedom of speech, freedom of the press, judges should have the benefit of adversary presentation and a full evidentiary record before issuing any order that could impact First Amendment rights. For these reasons, we respectfully continue to oppose.

Thank you very much. Appreciate it. Are there any me toos to add on in opposition to this Bill? Seeing none, we'll bring it back to the dais. Mr. Bennett? Okay, we have a, we already have a motion from. Okay, from just. There's a motion by Ms. Ortega, seconded by Ms. Pellerin, Ms. Irwin.

Yeah, there is sort of a- when you listen to the opposition, there is a difficulty in trying to figure out how quickly these images have to come down when you're also competing with things like CSAM, and how quickly that has to come down. Is, if we have- how did you come upon two days?

I guess that's really the question because if we prioritize everything, then it ends up with nothing prioritized. So I'm, I'm just curious how tech companies would comply with this if there's a lot of different categories that are requested to be taken down quickly.

Right, so. So the way this statute is 40 years old and since that time Civil code of procedure 527C was created, which says that one of the remedies in this that's available to, to a plaintiff in, that's pursuing an action under this code section one of the remedies is damages. One of the remedies is injunction.

And through 527, one of the remedies would be a TRO, although that was never incorporated into the Bill specifically. We've basically all this Bill does, It doesn't change anything about 3344. It just essentially kind of puts a marquee in the Bill that says among all the remedies, you have a specific remedy of a 48 hour takedown that you complete.

You certainly have to convince the judge that you know, that's the best way to go. The judge has complete judicial discretion under this Bill. And in fact, in Assembly Judiciary Committee we took amendments which say that the judge can require an immediate take down.

In the fact pattern you're describing, you know, in any fact pattern basically has discretion to say TRO effective immediately. TRO in two business days, no TRO. We need to fully litigate the facts. There's no imminent irreparable harm here that I can see, or there is imminent irreparable harm here that I can see. We've had, you know, some-

Well, let me just finish. I just want to stick to your question and not go on a close.

Because what the representative from RIAA says is that it should be take. So, so it's basically the judge saying immediately or up to two days.

Yeah, I mean, I would say as based on my legal training, competent counsel is going to come in under that very urgent irreparable harm kind of a scenario and plead for immediate, and immediate, immediately effective TRO. What we're concerned about is we have a lot of plaintiffs about out there.

Especially we've seen cases with youth, especially where the parents, the parent guardian doesn't understand that this section even exists, let alone that you have a specific remedy that you could plead to get the material taken down in 48 hours or sooner.

So we're really just calling out what a combination of two different statutes allows in combining it, you know, all as remedies in this one statute.

But you haven't heard anything from again, tech, from these social media companies that it's become, that it's difficult to quickly act on these orders.

I've heard that in- I have not heard that specifically with regard to this Bill or in a presentation on this Bill. I've certainly heard it in the four and a half years that I've been here. And I'm not sure that the tech industry has ever really answered the question how soon is soon enough?

Or how long is long enough. And I think that's probably a discussion for a different Bill, a different day. I think it's an urgent issue for us to figure out. If you, if I could share my opinion.

This Bill is content neutral and we know we have Federal Section 230 out there, which means presumably if somebody, a plaintiff went and filed suit and then went in for a TRO, not only could a tech platform, especially a social media platform, respond by saying we don't want the tro, it could also respond affirmatively, you know, with the defense of Section 230 and say you can't, you can't sue us in the first place.

And I don't know if everyone here is familiar with Section 230, but it sounds like you are. And I just wanted to point out we, we don't change that, deal with that or get into content regulation of the speech or the type of medium that it might be on.

Anything that it would have applied to 40 years ago, it applies to now, which is, we could spell that out if necessary. It applies to anything under the scope of 3344, which encompasses any known misuse of name, voice, signature, photo or likeness in any manner for the purposes of advertising, selling or soliciting without consent.

So wherever it might show up.

All right. Thank you.

Used in political materials?

Political materials are not commercial speech, as you know, Mr. Chair. Pure political speech, which would be very, very difficult. Unfortunately. Right. I think there's many of us who would like to have a Bill like this for political speech.

We see some awful things out there. Anybody else? Any others? Anyone else? Seeing no further comments. There's a do passes as on this Bill. It just brings clarification the tools available for individuals to effectively control use of their name, voice, signature, photograph or likeness.

I'm always going to be on the side of the consumer when it comes to this. Err on the side of the consumers. Thank you for bringing this forward. Thank you. And with that, we do have a. Excuse me. Oh. Would you like to close?

I respectfully ask for your aye vote.

Thank you, Senator. Okay.

We have a motion from Ms. Ortega seconded by Ms. Pellerin. Clerk will call the roll.

Item number seven SB 683 by Senator Cortese. The motion is do pass to the Appropriations Committee. Lowenthal?

Aye.

Lowenthal, aye. Dixon? Dixon, aye. Bennett? Bennet, aye. Bryan? Bryan, aye. Demaio? Hoover? Irwin? Irwin, aye. McKinnor? Ortega? Ortega, aye. Patterson? Patterson, aye. Okay, thank you. Patterson. Aye. Pellerin. Petrie-Norris? Petrie-Norris, aye. Ward?

Okay.

Wicks? Wilson? Wilson, aye.

Mr. Ward, you wish us to keep the roll open on this? Just add on afterwards. Okay.

Thank you all.

We're at 9-0, Senator. This bill is out. Thank you. We'll keep the roll open. I thought I see. Mr. Stern. I do see. Mr. Stern. It's a good thing you're here. Mr. Stern, final bill of the day.

Welcome, welcome.

Okay.

Please.

All right. Thank you, Mr. Chair. Members, start off just clarifying a few points out the gates. We worked pretty hard on this bill in the Senate. We're trying to hold platforms to the same standard that we hold regular people for hating, embedding certain crimes. But.

But to be clear, SB 771 does not create a new right of action. All the companies already subject to the existing laws referenced in this bill, they're already subject to them. And this is really a bill to clarify the applicability of these laws in regard to penalties for violating them.

So we know the violence at all time highs here in terms of historically vulnerable populations, this national trend is accelerating. Recent Harvard study actually found a causal relationship between this violence and certain practices and designs within our social media platform.

So our point, and you may see this in other bills that come before you here from our side, as well as bills you guys have passed, is to simply say that just because it's an algorithm doesn't mean that it's not some kind of expression from that platform.

And so when your algorithm facilitates the distribution, say, of criminal content or makes crimes worse or adds to abuses or things that result, say, in hate crimes, that they'll be held to the same standards as an average citizen would if they were facilitating the same kind of crime. So with that, happy to get into details.

I do have two witnesses here in support. Maha Elgenaidi, who's the Executive Director of the Islamic Networks Group, as well as Vlad Kaikin, who's the Executive Vice President, Social Impact and Partnerships for the Simon Wiesenthal Center. And I just want to note that.

Very proud of this pair for advocating together for something that's affecting both of our communities. So do appreciate what you all are bringing to the table and respectfully ask your Ivo.

Thank you so much, Senator. Yeah, look forward to your testimony.

Good afternoon, Chair and Members of the Committee. My name is Vlad Hyken and I serve as the Executive Vice President for Social Impact and Partnerships for North America at the Simon Wiesenthal Center, one of the world's foremost Jewish human rights organizations.

For nearly three decades, the Wiesenthal Center has tracked online hate and extremism Each year we release our Digital Terrorism and Hate Report card evaluating how major social media and tech companies confront or fail to confront extremism, hate and disinformation. In our latest report card, Most companies received Ds and Fs.

They are flunking their basic obligation to protect the public from extremist content that could be intimidating or harassing. These failures are not technical glitches. They are purposeful and systemic. Platforms are slow to act, lack transparency and often reinstate extremist accounts even after removal.

This crisis has only worsened as platforms have loosened what is permitted and gutted moderation teams even while reaping record profits. Chairs and Members here's why this matters. What happens online does not stay online.

From the Tree of Life synagogue massacre in Pittsburgh to the Buffalo supermarket shooting, to the documented and skyrocketing rates of hate crimes, we have seen the deadly link between online radicalization and real world violence. And that deadly link is social media. The algorithms amplify hate because hate drives clicks and clicks drive profits. Voluntary self regulation has failed.

As our report card shows, the profit motive guarantees that platforms will not act with urgency and consistency. Without legislation like this, there is no real recourse. For the American public chair and Members, the status quo is simply unacceptable. The platforms know exactly what they are doing. Shame doesn't work. Current laws do not work.

If we are serious about altering their behavior, then we have to prevent the profits that can be earned from knowingly serving as hate's helper. As the nation's tech capital, California has both the responsibility and the opportunity to set a new ethical standard for online accountability.

Members of the Assembly, your constituents are vulnerable and urgently need your leadership to protect Americans and defend our democracy. Democracy. Let's stop giving failing platforms a passing grade. Let's finally demand accountability. The Simon Wiesenthal center strongly urges you to pass this bill. Thank you very much. Thank you.

Thank you so much. Vlad, is this on? Yes. So, Chairman and Members, thank you so much for the opportunity to speak before you. My name is Maha Elgenaidi and I'm the Executive Director of the Islamic Networks Group, which is a national nonprofit that combats bigotry through education and community engagement.

I've worked with Vlad for about maybe 30 years or so. I strongly support SB771 because we have seen online how online hate fuels real world violence with devastating results. At ING in my organization where we receive hundreds of hateful online messages, many threatening physical harm.

I've told my family recently that if anything happens to me, they should begin by reviewing threats in our social media comments. So this, this is not hypothetical, it is reality. Social media algorithms are not neutral. They prioritize outrage and inflammatory content disproportionately targeting Muslims, Arabs, Jews, immigrants and other marginalized groups. The consequences are deadly.

Internationally, Facebook's algorithm helped incite the genocide of the Rohingya people in Myanmar. In Sri Lanka, online disinformation fueled anti Muslim riots.

And in here in California, a mosque in Escondido was set on fire by an arsonist inspired by the Christchurch, New Zealand shooter whose attack was live streamed and glorified online organized harassment of Muslim public figures, including threats against elected officials such as Haran Mamdani. The young man who's running for mayor in New York continues to rise.

Last year in the UK anti Muslim riots erupted after conspiracy theories spread rapidly on telegram sparking a spiking 270% increase in 10 days. The data is alarming. CARE the Council on American Islamic Relations reports a 56% increase in anti Muslim hate crimes and discrimination from 2022 to 2023 with another surge up to 68% in early 2024.

Muslim children face bullying at twice the national average. Women on hijab like myself are harassed. Communities live in fear while platforms profit. SB771 is a critical step forward toward accountability. So please vote yes. Our safety and democracy depend on it. Thank you.

Thank you so much. And I just want to note I concur with the Senator. It's so powerful to have you both here providing testimony together. Thank you. Are There any other #MeToos that wish to add on in support of SB771? Name and organization please.

Good afternoon Mr. Chair. Kathy Van Osten representing the American Association of University Women of California. In support we co sponsor.

Griselda Chavez, with Mesa Verde Group on behalf of the Consumer Federation of California. Strong support as co sponsor. Thank you.

Kim Stone, Stone Advocacy on behalf of the Children's Advocacy Institute of the University of San Diego School of Law and other co sponsor groups are the Consumer Federation of California Loma, LGBTQIA plus Alumni and Allies Coalition, Jewish Family and Children's Services of San Francisco, Rainbow Spaces and San Diego Democrats for Equality. Thank you.

Thank you so much. Are there any witnesses to testify in opposition of SB771? Vlad and Maha, would it be possible for you to slide down those two seats? Thank you so much. You may begin.

Good afternoon Chair Members. My name is Robert Boykin with TechNet here today in respectful opposition to SB771. We deeply appreciate the Legislator's commitment to to combat combating hate, discrimination and harassment. However, SB771 presents serious legal and practical challenges.

While the bill seeks to hold platforms accountable for egregious behavior, its structure risk sweeping in protected speech and imposing extraordinary penalties based on subjective judgments about user content, including content the platform did not create. SB771 would dramatically expand liability for third party speech, conflicting with Section 230 of the Communications Decency act and raising serious First Amendment concerns.

Courts have consistently held the platforms retain editorial discretion over how they curate and organize content. Exposing companies to multimillion dollar civil penalties could force the over removal of of lawful expression, chill free speech, and distort the online environment in ways that are less beneficial for all users.

Additionally, while recent cases have opened a narrow path for liability based on platform conduct, SB771 goes far beyond those rulings, creating untested and likely unconstitutional risk for platforms engaging in routine content moderation. For those reasons, we respectfully ask for a No vote on SB771.

Good afternoon, acting Chair Lowenthal, Members of the Privacy and Consumer Protection Committee. My name is Aidan Downey and I'm here on behalf of the Computer and Communications Industry Association to respectfully oppose Senate Bill 771.

Let me start by saying CCIA and its Members are dedicated to creating a safer online environment and look forward to working on legislation that will do so. Senate Bill 771 may not technically require platforms to take content down, but with the looming threat of severe liability, it might as well come with a giant delete everything button.

With that kind of pressure, platforms won't be erring on the side of caution. They will mute any speech that risks liability. This Bill would allow bad actors to use vague and subjective claims of harm to silence voices they disagree with. That's not accountability, that's censorship.

It risks turning platforms into battlegrounds where the loudest complaints win and legitimate speech loses. On a deeper level, Senate Bill 771 raises serious constitutional red flags. Social media platforms like newspapers and broadcasters have First Amendment rights to decide what content they host.

This bill threatens those rights by punishing platforms not for what they post, but for what they do not take down. It also likely runs afoul of Section 230 of the Communication Decency act, which prevents platforms from being held liable for third party content and for their good faith efforts to moderate federal law is clear here.

This kind of state regulation is preempted. SB 771 won't make anyone safer. What it will do is pressure platforms into overcorrecting, removing too much too quickly, and ultimately shrinking the space for open and lawful discourse. For these reasons, on behalf of CCIA and our stakeholder partners, I respectfully urge you to vote no on this Bill. Thank you.

Thank you so much. Any other witnesses to speak in opposition or add on to the opposition of this bill? Name an organization.

Good afternoon, Chair and Members.

Good afternoon, Chair and Members. Naomi Pedro and my colleague at the California Chamber of Commerce asked me to convey their opposition. Thank you.

Good afternoon. Brandon Knapp representing Chamber of Progress in respect of opposition. Thank you.

Cliff Berg in support for the Jewish Public Affairs Committee, representing over 40 Jewish organizations throughout California, both statewide and regional. Strongly support this measure. Thank you.

Okay. We, we passed support. We were in opposition, Cliff, but, but we will, we will take that into consideration. Thank you. We'll bring it back to the dais. Ms. Irwin.

Well, I will definitely be supporting the Bill. We know what accessible social media often is. But I was wondering if you could address the Section 230 issue, which we end up with so many bills that would do good and they get struck down in the court. So, wondering what you're thinking here.

Yeah. And I'll take a crack—and I may turn to one of our sponsors for a little more.

But it gets down to the 3rd Circuit precedent and really trying to use what space we've been given in that precedent where they found that you're not responsible for the third party speech itself, but that there's no sort of blanket immunity if your algorithm itself is operating sort of as a form of corporate speech.

In other words, that that's not, that's not—the algorithm design itself can be seen as a form of speech or as a form of action that actually facilitates potentially illegal conduct. And so, look, I'm not telling you we have precedent in every single circuit around this country and so, there could be litigation on this.

I'm not going to sit here and promise you that this will be untouched. But I do think that the structure, at least that we've got here, follows whatever existing precedent we do have. And so, this is really our best case. There's been some state precedent that we're also looking at, so, there's a but/for test that was rejected.

But, you know, within our jurisdiction, saying that just because the cause of action was related to third party content isn't sort of, again, blanket immunity for the platform. But I don't know if—yeah, Mr. Chair, or would help to have a little further insight if I botched that. Yeah.

You okay without it? Or for the Assemblymember?

Could you give a little further insight, please?

Sure. Through the Chair.

Absolutely. If you could keep it short, please.

Very short. Through the Chair, Ed Howard, Senior Counsel at the University of San Diego School of Law's Children's Advocacy Institute. It's really just a three-part analysis. The US Supreme Court in the Moody v. NetChoice Case held that the algorithmic distribution, very similar to as if the editor of a Reader's Digest decides what goes into the Reader's Digest or not.

The algorithmic distribution of who gets what is the platform's own conduct, its own speech. Section 230 only prevents a platform from being held liable for third party contact.

So, the third circuit looked at those two things and said, oh, in a case where a mother was suing on behalf of a daughter who had died from one of those choking challenges that to the extent that the harm was caused by the platform's own conduct—well, that's not Section 230.

But to the extent that there may be some part of the harm that is caused by the underlying content, indeed the parent through the child could not recover for that. So, the question is a factual one, not one where the law is facially invalid on its face.

But in a particular case, it very well might be, based on the facts of that case, that the court would conclude that really all of the harm here is being caused by the content and not the platform, in which case Section 230 would very clearly apply.

However, if part of the harm came from the fact of the distribution, well, under the Supreme Court precedent of Moody, that's the platform's own speech, and the platform could be liable. Thank you.

Thank you. Okay. Assemblymember Wilson.

And I really appreciate that the question and the dialogue—very helpful to me as well. And I tend to—and thank you to the author for trying to address this. You know, what happens online, I think my colleague said it too, that it's, you know, online can be Accessible and there's lots of hate and some of that stuff is allowed as a part of free speech.

And some of that stuff then borders into where it is, you know, criminal or unlawful, I'll say that, because some of that is civic.

So, I was, so I had—one was addressed with the comments by the witness, and I really appreciate that. The other I just want to clarify. You had noted something in your opening speech. This was existing law but expanding it for greater, what did—I was trying to understand what you meant by that.

And maybe and again, I'll get saved by my experts here, but essentially, we're leaning on both the Tom Bain Civil Rights Act and at least in civil law areas, there's no expansion of the types of infractions, either a civil rights or a crime.

You're including kind of offline, what happens in offline world to online. Is that what you're?

Making clear that aiding and abetting law applies equally to both online and offline. Can you bail me out? Does that sound—did I say that right?

You're a Senator, so you get an A. If I may, friendly amendment. So, in the Bill in Section 3 to propose Section 3273.73, you'll see some cross references there. So, those cross references are to Civil Code Section 51.751.9 and 52 and 52.1.

Those are California laws that already apply to every human being and every corporation when it comes to protecting Californians from hate, from intimidation, and from harassment, wherever. That includes online now. So, the platforms are subject to these individual statutes now, but in order—but these laws were all written for a world where the Internet didn't exist and social media didn't exist.

So, what we're attempting to do in this Bill is clarify that those existing statutes, each of which, by the way, right now, allows individual victims to sue—that's current law—allows individual victims to sue to protect their own rights.

How do those apply to a platform? And when you're talking about platforms of such enormous wealth, what should the penalties be? So, for example, let's talk about the penalties.

The penalties for violating those law, what victims can get now under existing law is a maximum, I believe, of $25,000 that in no way, shape or form will dissuade, for example, Meta, that earned, I think, a gross profit of over $150 billion last year, up 22%, by the way. So, the penalties are raised for intentional violations, for reckless violations.

They're raised if the platform knew or should have known that the victim was a child, to something roughly that we hope might self-interestedly motivate them to comply with the law without being sued.

Mr. Howard, I think we got to wrap it.

Okay. And the other, the only other point is that that all of those laws already exist. The parts of the statute that talk about algorithmic platforms are just clarifying how those existing statutes would apply to platforms.

Through the Chair, one follow up question. So, because it already exists, so those platforms that make less than $100 billion, they would be, they would still be liable to this, they would just be—the 25,000—and the ones that make more would get the higher amount?

The enhanced limit. That was a better version of presenting my Bill than I did. Yeah, that's a tight way to say.

Okay. Assemblymember Bryan.

First, I just want to thank the Senator for bringing expert witnesses. Past two presentations did not have that, and it's been useful for this discussion. And good to see the Simon Wiesenthal Center here, as the Member who represents the Simon Wiesenthal Center.

I think this is an important Bill and I think threading the needle to hold companies accountable for hate speech is incredibly important right now. One of the things that your proponents wrote is these companies have not failed to provide safeguards. They have intentionally turned away from providing safeguards they previously provided.

And I think if you use these platforms, like myself and perhaps Mr. Patterson on this dais too, you've noticed slight changes, both from the Administration taking place or changes in ownership. In fact, I had an instance this year in January, where the owner of the largest platform tweeted at me directly and we exchanged barbs.

And then I got the most vile, racist, you know, at times threatening content I'd ever experienced online at all. And, and I've responded to him, is the algorithm working or is this just a thing? And I think your Bill kind of strikes exactly at that.

Is there, you know, an intentional design feature or propagation of things that can turn violent in the outside world? And that's not just the sharing of content, but by the way you're moving, especially for young people, this kind of content, through various forms of amplification.

I'm curious to know more, and I suspect that that is the case, and in which case we should be cognizant of how we hold folks liable for that, because whatever we can do to curb the rise in antisemitism, the rise in hate, the rise in what's happening to our undocumented communities, our LGBTQ communities, our black communities, like we have to help vulnerable people from being victimized in our country, where it seems to be so common and at historic levels for all vulnerable communities.

So, I want to thank the author for bringing this Bill forward. I know we're late in the process, but if you're looking for coauthors, sign me up.

Come on, come on. We'll take it. Thank you.

Thank you, Assemblymember. Assemblymember Ortega.

Kind of similar echo, similar comments as my colleague. I think, you know, in this Committee, I've seen many bills that attempt to get to the safeguarding—guarding—of some of the algorithms and some of the real-life impacts that are happening, particularly to our youth.

And in this Committee, time and time again, we've heard the opposition talk about the barriers or the things that keep them from, you know, implementing some of these safeguards, or they talk about the safeguards, but in ways that are really are not making a difference.

Because we've had many mothers come in here talk about how online bullying or algorithms were sending their children to suicide websites. And so, you know, in the State of California, we're the fourth largest economy in the world, having a Bill that actually gets to the core of the ability to make money off of people's debt is a core fundamental thing that has not been discussed.

And I am, you know, again, would love to be a coauthor. And I think it, it's not even enough. There's no price tag on someone's life.

Amen.

Thank you, Assemblymember. Assemblymember Patterson.

Great. Well, thanks, Senator, for bringing this Bill. I'm actually joint author on Assemblymember Lowenthal's AB 2. I think, you know, this issue is generally pretty important to me. I'll tell you just some concerns that I have that maybe will be addressed, maybe they won't, but might cause me to just lay off today, and I'll kind of explain those.

The first one is more the direct communication from a person to a person, which the platform isn't really, you know, conspiring in. And actually, one of my colleagues up here, well, he tweeted about it, but he—pretty disgusting post that somebody sent to him today, which I would consider to be pretty hateful.

But, you know, the platform, based on why you got that, you know, maybe the platform was involved, but, but that was more of a direct, you know, direct communication, right. Definitely hateful speech. You know, last week, the Governor's Comms Director called me a little bald man, so.

Huh? Yeah, you know, which I identify as that coincidentally, but, you know, those are direct communications, which is a platform, you know, facilitated just by being there, right, and the legal definition of a social media platform, you know, excludes direct communication if the platform itself is only intended for direct communications.

But actually, I think you mentioned—one of your witnesses mentioned Telegram, which doesn't have any algorithms or anything like that. You know, it's really just kind of a messaging, like a forum, you know. But this Bill would still apply to them based on the definition of social media platform.

So, I think if this Bill was maybe limited to algorithms, because I have seen those stories and I've talked about it before where, where, you know, there was a story was in CalMatters about this, during COVID, this young lady looked up, you know, how to basically get in shape and she was fed how to basically become anorexic, you know, over time, and kind of lost her health as a result of what the algorithm was feeding her.

I think that's—I think we would agree, you know, demonstrably different than, you know, something. So, just because of the broad definition of social media.

And I do have some concerns a little bit just about—I agree, hateful speech is, is despicable, and I see it online, I get it as an elected official, we all get it. You know, as a normal person, you might get it too if you have any opinions. But, but I also, I don't want to discourage.

You know, I do get some concerns about it and you can address that like, fine, either. Any point you want to address, please feel free to. But I think my main issue is really the legal definition of social media and how it applies to really non-algorithmic applications.

Appreciate the question—both questions. I'll look into that, in terms of definition.

I mean, the other thing I would just note is the way it's structured is it's—that it assigns liability or clarifies that there is liability for a social media platform that violates those sections that Ed had mentioned, including through its algorithms, but including as sort of a broad term, versus only or through its algorithm. So, it's an interesting question we can look at with the Committee going forward.

Yeah, I just pulled it. I just, I think it's section—the Business and Professions Code 22675, I believe, which defines what social media platform is, but it's much more expansive than the algorithms. And I think that's what you're trying to address at the end of the day.

You know, people are going to say hateful and harmful items anyways, and they're just kind of there. They might say that in the public square, but it's different than sort of being fed that information, right?