The SHOP SAFE Act Would Entrench Amazon's Dominance

An ill-conceived proposal to increase liability for online marketplaces could effectively outlaw all but the biggest players.

The SHOP SAFE Act is a typical piece of safety-themed legislation, in that it would accomplish something much more sinister than what its name promises. Far from protecting online shoppers from harmful products, this legislation—sponsored by Rep. Jerry Nadler (D–N.Y.) in the House and by Sen. Chris Coons (D–Del.) in the Senate—threatens to obliterate online marketplaces by subjecting them to increased liability.

Democrats are currently plotting to add the SHOP SAFE Act to the bipartisan Endless Frontier Act, a technology infrastructure bill that already passed in the Senate and could certainly become law sometime in the future. This would be a disaster; the SHOP SAFE Act has massive problems that would make it very difficult for smaller online marketplaces to survive. While the bill is undoubtedly intended to seize on Congress's anti–Big Tech fervor, the likely outcome of its passage would be the solidification of Amazon's dominance.

That's because the bill would raise the liability threshold for online marketplaces: not just Amazon and eBay, but also Etsy, Facebook, and virtually any internet platform where goods can be sold—even Gmail.

"The current bill language could be interpreted to cover anything from Craigslist to Gmail—basically any online service that can play a role in advertising, selling, or delivering goods," argues the Electronic Frontier Foundation (EFF). "This isn't just some reach reading that we came up with; at least two anti-counterfeiting organizations supporting SHOP SAFE have urged Congress to make sure it applies even to Facebook Messenger and WhatsApp."

Any online platform where goods can theoretically be exchanged could be liable if those goods were counterfeit and "implicate health and safety," per the bill's wording. Needless to say, this is extremely broad language that could scare the big platforms' would-be competitors out of the market entirely. One of the easiest ways to entrench Amazon as the default online marketplace would be for regulators to add a crippling liability burden that only Amazon is wealthy enough to survive.

If that weren't bad enough, the SHOP SAFE Act also raises serious digital privacy concerns, by requiring platforms to collect information from their vendors. Given how vast the coverage is here, EFF worries about a world in which users have to "provide a copy of your driver's license to Craigslist just to advertise your garage sale or sell a used bike."

Eric Goldman, a professor of law at Santa Clara University, describes the bill as a massive invasion of privacy that could inadvertently help hackers obtain damaging information on buyers and sellers.

"This bill will kill online marketplaces and make markets less efficient," he writes. "The net competitive effects, then, are that consumers will pay higher prices, consumers will lose their ability to find long-tail items and incur higher search costs to do so, existing market leaders will consolidate their dominant positions, and hundreds of thousands of people will lose their jobs."

Goldman also suspects the bill would drive most if not all online marketplaces out of business, with the possible exception of Amazon.

"Another possibility is that Amazon will be the only player able to comply with the law, in which case the law entrenches an insurmountable competitive moat around Amazon's marketplace," he writes.

And for what? The law doesn't accomplish anything that's urgently needed by the public. Online marketplaces already have incentives to remove counterfeit merchandise and ensure that vendors are representing their products correctly. The SHOP SAFE Act is a heavy-handed government intervention that will make matters much, much worse.

"Mitigating retail crime is incredibly important but SHOP SAFE intentionally targets e-commerce companies and the sellers that use them in ways that harm their businesses and fail to solve the real underlying problems of fraud and retail crime," says Jennifer Huddleston, policy counsel at NetChoice, a trade association for tech groups.

It has been all too common for political figures on both sides of the ideological spectrum to rail against the Big Tech menace, proposing solutions that would worsen the very problems they purport to solve. The SHOP SAFE Act falls squarely into this category; frighteningly, it could very well become law.