Even with perfect compliance, startups will be subject to greater litigation – large platforms will use liability to drive them out

The host of new regulations and increased liability created by SHOP SAFE would be catastrophic for competition in e-commerce. This regime would devastate smaller online platforms like Etsy, OfferUp, and other small platforms that allow third-party sellers because it applies to any platform with just $500,000 in sales in the past year—for comparison, Amazon had $364.38 billion in sales in the U.S. last year. So, while this bill seems to target tech giants like Amazon, their ample resources for regulatory compliance and deep pockets to fight lawsuits, really makes SHOP SAFE an opportunity to eliminate many of their smaller competitors through legislative games instead of offering better products or services.

Any site with “features that allow for arranging the sale or purchase of goods” qualifies as an “electronic commerce platform” and this could include messaging apps, forums, and any small-scale online seller. Even the $500,000 threshold is entirely undermined by a provision that applies the requirements in the bill to platforms of any size if they are served with 10 notices of trademark infringement—with no time frame limitation specified. Anyone familiar with the rampant copyright takedown notice abuse enabled by the Digital Millennium Copyright Act will recognize that aggressive rightsholders will easily be able to extend SHOP SAFE to any platform under this law.

The law includes an onerous suite of regulations that sites must comply with, making its broad applicability particularly concerning. Many of the requirements will be difficult and expensive to implement for most smaller platforms, and perhaps impossible for others. For example, one requirement is that platforms implement “reasonable proactive measures for screening goods before displaying the goods to the public.” To operate at any scale, such measures would require automated content filtering systems that are both expensive and difficult to design and implement. Similarly, the bill also requires platforms to ensure that third-party sellers “use images that accurately depict the goods sold, offered for sale, distributed, or advertised on the platform.” Again, analysis and approval of images, and verification that said images are accurately linked to the third-party seller’s wares, pose significant technical and content moderation challenges for smaller platforms.

These kinds of regulations, combined with the broad definition of applicable platforms, conspire to make many online platforms—even those not specifically designed for e-commerce—responsible for undertaking costly and complex new systems to remain compliant with SHOP SAFE’s requirements. And even with total compliance, platforms still remain open to litigation—the statutory obligations, if followed, merely create an affirmative defense from the contributory liability claims. This expensive and extensive set of requirements will functionally doom smaller competitor platforms and further cement the dominance of large firms like Amazon and Facebook.