Report from Courthouse News Service
In Brief – US District Judge Beth Labson Freeman is blocking enforcement of California’s SB 1144, a new state law that requires online platforms to take stronger actions against the sale of stolen goods. At a hearing, Judge Freeman said the law likely conflicts with Section 230 of the federal Communications Decency Act, which shields internet companies from liability for user-posted content. Although NetChoice, a tech company trade group, requested that the judge rule against the law on other grounds as well, including First Amendment claims, Freeman said that she would base her decision on federal preemption and avoid taking on First Amendment issues. The law, enacted last year with an effective date of July 1, 2025, expands requirements for online platforms to collect seller data and report suspected stolen goods to law enforcement. NetChoice argues that it burdens platforms with enforcement duties akin to those of law enforcement and risks penalizing companies even when they are acting in good faith. Judge Freeman had indicated she would issue a preliminary injunction and asked the state to stay enforcement until she did so.
Context – Traditional retailers accusing Internet marketplaces of facilitating the sale of stolen goods is a drama as old as the commercial internet. Following two decades of lobbying for federal and state laws to make online marketplaces liable for the independent sellers who use their platforms, a handful of states, including California, enacted retailer legislation requiring online marketplaces to collect information from “high-volume third-party sellers”. Congress then enacted its bipartisan INFORM Act at the end of 2022 to set a national standard that was supported by the online companies and the large traditional retailers, many of whom were increasingly active in online commerce as well. However, the momentum of the long-running retail industry lobbying campaigns, as well as highly publicized mass shoplifting events in a number of large cities, led to additional state legislation like California’s SB 1144 and a similar Georgia law that was also eventually blocked by a federal judge.