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Online liability bill will harm small businesses

SF Chronicle - August 25, 2020

Image of small shopping cart filled with boxes in front of a computer

SF Chronicle published version here

By Kyla Christoffersen Powell

Now more than ever, online marketplaces are a vital means for Californians to access and sell goods and services. They come in all types and sizes — some focusing on crafts, others produce, and still others travel. And at a time when many businesses have been forced to a standstill to slow the spread of COVID-19, online commerce is helping to keep jobs and our state economy afloat.

Unfortunately, AB3262, a bill sponsored by the plaintiffs’ attorney lobby and currently pending in the California Legislature, will jeopardize online commerce during this critical time. If passed, AB3262 will make online marketplaces strictly liable for products sold by retailers on their platforms.

AB3262’s proposal is unprecedented — no other state has passed such a law.

The proponents of AB3262 claim it will level the playing field between online and physical retailers, like your corner store. This is false. Under current law, both online and physical retailers are held accountable for defective products they sell — both are already strictly liable.

Marketplaces, however, whether on a street corner or on the internet, function differently, and existing law rightly does not impose blanket strict liability on either type.

Online marketplaces are the virtual equivalent of a physical shopping mall. Instead of a parking lot and large building filled with a variety of storefronts selling products, online marketplaces provide a website hosting a variety of storefronts.

Consider the example of visiting a shopping mall to purchase new shoes from a shoe store, and those shoes later cause you to slip and fall. It would not be fair for the mall automatically to be held responsible. The same goes for an online shoe store and the online marketplace — an online shoe store should be held responsible for selling slippery and unsafe shoes, not the marketplace.

AB3262 unfairly singles out online marketplaces for strict liability. Brick and mortar shopping malls are not all deemed strictly liable; online shopping malls should not be, either. If online marketplaces can be arbitrarily targeted in this way, which industry sector is next?

Importantly, by holding online marketplaces strictly liable, AB3262 opens them up to frivolous lawsuits. This will make some shut down entirely and, for others, drive up their expenses immensely. These costs must inevitably be passed down to the small businesses and consumers who use them. Every little bit burdens families whose budgets are already stretched tight.

AB3262 proponents overlook the fact that online marketplaces level the playing field for an overwhelming majority of retailers to sell their products, such as entrepreneurs, startups and other small, diverse businesses. They cannot afford the rent and overhead of a physical location and rely on online channels exclusively to sell a wide variety of products — from unique artwork to handcrafted clothing and housewares.

These small businesses, especially now, cannot sustain the increased costs that will surely come with the new litigation that AB3262 will unleash. Rather than creating harmful barriers to entry and chilling e-commerce, lawmakers should reject AB3262.

Kyla Christoffersen Powell is president and CEO of the Civil Justice Association of California. The Civil Justice Association of California confronts legislation and laws that create unfair litigation burdens on California businesses, employees and communities.

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