New Georgia law affecting online sales unconstitutional, lawsuit claims

‘Combating Organized Retail Crime Act’ takes effect July 1
FILE - The trade association for online marketplaces including eBay has brought a federal lawsuit challenging Georgia's new law that extends existing requirements for online marketplaces to collect seller information. (AP Photo/Wilfredo Lee, File)

Credit: AP

Credit: AP

FILE - The trade association for online marketplaces including eBay has brought a federal lawsuit challenging Georgia's new law that extends existing requirements for online marketplaces to collect seller information. (AP Photo/Wilfredo Lee, File)

The trade association for online marketplaces including Google, Amazon and eBay is trying to void a new Georgia law that extends requirements for collecting seller information, alleging it will hurt Georgia businesses.

NetChoice filed a lawsuit Thursday against Georgia Attorney General Chris Carr, claiming Georgia’s “Combating Organized Retail Crime Act” is unconstitutional and conflicts with a federal law that already requires online marketplaces to obtain and verify information from certain sellers.

“Georgia is now radically out of step with the uniform federal standards,” Chris Marchese, director of NetChoice’s litigation center, told The Atlanta Journal-Constitution. “It’s unclear to us why Georgia decided to go down this path.”

Gov. Brian Kemp signed Senate Bill 472 into law in early May, after it passed through the Georgia General Assembly unopposed. A representative for Kemp said the law, which takes effect July 1, furthers the governor’s priority to crack down on organized crime. A spokesperson for Carr declined to comment on the lawsuit.

Sen. John Albers (R-Roswell), who championed the legislation, said it extends existing practices to promote fairness and integrity, ensuring that all online marketplaces are held to the same standards of accountability and transparency.

“I am disappointed the lawsuit is fighting against this important law impacting businesses and consumers rather than helping solve the crisis of organized retail crime,” he told the AJC.

Sen. John Albers (R-Roswell) speaks in the Senate chambers on day 16 of the legislative session on Thursday, February 9, 2023. (Natrice Miller/ Natrice.miller@ajc.com)

Credit: Natrice Miller/AJC

icon to expand image

Credit: Natrice Miller/AJC

NetChoice says the act can’t be enforced as it is preempted by the federal “Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act,” known as the INFORM Consumers Act, implemented in 2022.

Both the Georgia and federal laws aim to curb online sales of stolen items by requiring those that facilitate internet transactions to collect and verify seller’s bank account, contact and tax identification data.

NetChoice says it supports the federal law, which applies to online marketplaces that process sales.

It says Georgia’s new legislation goes too far by requiring online marketplaces to get information from the third-party sellers they interact with which do at least 200 sales of new products worth at least $5,000 annually, whether the sales go through the marketplace or not. In that way, the law ensnares entities like Craigslist, Facebook Marketplace and Nextdoor, which “merely serve as forums for classified advertisements,” according to the lawsuit.

“If you are a small business and you use online ads to reach potential consumers throughout the state of Georgia, the platform that hosts your advertising would then potentially have the obligation of verifying all of your in-person or off-platform transactions,” Marchese said. “It is impossible for those websites to comply with that requirement. And as a result, they would probably just shut down the opportunities to advertise.”

Like the federal law, Georgia’s earlier Inform Consumers Act, implemented in 2022, only required online marketplaces to gather data from the high-volume sellers whose sales they processed.

Ben Cowart, vice president of government affairs at Georgia Retailers, said the new law simply closes a loophole in the earlier statute. He said the federal law “applies a floor, not a ceiling,” allowing states to expand requirements.

“The original intent of (Georgia’s legislation) was to apply to all online marketplaces,” Cowart told the AJC.

Cowart said a similar law was implemented by Arkansas in 2019 and that there are efforts in other states, as well as federally, to follow suit. He said the seller information collected by online marketplaces is typically disclosed when obtaining a business license.

“This is just a requirement on the online marketplace to verify they have correct information,” he said. “They don’t share that information with anybody.”

The new law drew criticism from online sellers worried about disclosing sensitive information. Marchese said some business owners use their Social Security numbers for tax identification purposes and would have to share that with online marketplaces under the new law.

“This is going to drive a lot of people away from online marketplaces,” he said.

Hunter Loggins, the Georgia director of the National Federation of Independent Business, said the new law won’t burden small businesses as it only applies to online marketplaces and high-volume sellers.

“Our concerns were alleviated relatively early in the (legislative) process,” he told the AJC.

NetChoice sent a letter to Kemp in late March, asking him to veto the law as an improper attempt to “reopen a major, national policy debate.” Its lawsuit, filed in the federal trial court in Atlanta, seeks to bar any enforcement of the act, which it says creates confusion.

“If this law is allowed to take effect, it really will eviscerate the national framework that Congress sought to create, and it will create a patchwork system for regulating online marketplaces,” Marchese said. “Nothing in this amended law is going to actually target retail crime.”