The Shop Safe Act board coverage and application leaves small business vulnerable to overregulation

[Eric, 9-28-21, Technology & Marketing Law Blog, “The SHOP SAFE Act Is a Terrible Bill That Will Eliminate Online Marketplaces”, https://blog.ericgoldman.org/archives/2021/09/the-shop-safe-act-is-a-terrible-bill-that-will-eliminate-online-marketplaces.htm, accessed 7/9/2024, LR]

Who’s Covered by the Bill

The bill defines “electronic commerce platform” as “any electronically accessed platform that includes publicly interactive features that allow for arranging the sale or purchase of goods, or that enables a person other than an operator of the platform to sell or offer to sell physical goods to consumers located in the United States.”

Clearly, the second part of that definition targets Amazon and other major marketplaces, such as eBay, Walmart Marketplace, and Etsy. I presume it also includes print-on-demand vendors, such as CafePress, Zazzle, and Redbubble, that enable users to upload images (unless those vendors are considered to be retailers, not online marketplaces).

The first part of the definition includes services with “publicly interactive features that allow for arranging the sale or purchase of goods.” This is a bizarre way to describe any online marketplace, and it covers something other than enabling third-party sellers (that’s the second part of the definition), so what services does this describe? Read literally, all advertising “allow[s] for arranging the sale or purchase of goods,” so this law potentially obligates EVERY ad-supported publisher to undertake the content moderation obligations the bill imposes on online marketplaces. That doesn’t make sense because the bill uses the undefined term “listing” 11 times, and display advertising isn’t normally considered to be a listing. Still, this wording is unusual and broad–and you better believe trademark owners like its breadth. If the bill wasn’t meant to regulate all ads, the bill drafters should make that clear.

Like most Internet regulations nowadays, the bill distinguishes entities based on size. See my article with Jess Miers on how legislatures should do that properly. The bill applies to services that have “sales on the platform in the previous calendar year of not less than $500,000.” Some problems with this distinction:

the bill doesn’t define “platform,” so it’s unclear what revenues count. In Amazon’s case, is it only revenues from the marketplace or does it also include the revenues from Amazon’s retailing function? If the latter, then the definition will pick up smallish online retailers that have small marketplace components.

the bill also doesn’t distinguish between gross and net revenue. So, for example, assume a site takes a 10% commission on sales. If a service has $500k in merchandise sales (gross revenue), but only keeps $50k in commissions (net revenue), is it covered by the law or not? I think the bill covers gross revenue, which means the bill reaches companies with small net revenues.

as usual, the bill doesn’t provide a phase-in period. A service may not know its revenues until some time after the calendar year closed, but it would be obligated to comply with the law from the beginning of the calendar year. As usual, then, this forces services below the revenue threshold to comply anticipatorily in case they clear the threshold. How hard is it for bills to include a phase-in period?

I’d fret more about the $500k threshold, but it’s likely to be irrelevant anyways. The bill also applies to smaller services once they receive 10 NOCIs over their lifetimes from all sources. (Unlike the other services, these services get a 6 month phase-in period).

To qualify as a NOCI, the notice must (1) refer to the SHOP SAFE Act, (2) “include an explicit notification of the 10-notice limit and the requirement of the platform to publish” the NOCI disclosures below [I have no idea what this element means], and (3) “identify a listing on the platform that reasonably could be determined to have used a counterfeit mark in connection with the sale, offering for sale, distribution, or advertising of goods that implicate health and safety.” [So, a NOCI counts against the 10 threshold if it “reasonably could be determined” that the listing was counterfeit, even if the NOCI is actually wrong.]

A month after getting its first NOCI, the service must publicly post an attestation that it has less than $500k in revenue and a running tally of the number of NOCIs received…I guess for shits and giggles so that trademark owners can compete to be the one to put the service over the 10 NOCI threshold? I mean, even tiny services will quickly accrue 10 NOCIs. Indeed, I imagine rightsowners will coordinate their NOCIs to ensure that small services clear this threshold and are obligated to comply with the law. Thus, the 10 lifetime NOCIs threshold is a ruse to mislead people that smaller services aren’t governed by the law, when of course they will be.