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AB-1790 Marketplaces: marketplace sellers.(2019-2020)

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Date Published: 05/07/2019 09:00 PM
AB1790:v96#DOCUMENT

Amended  IN  Assembly  May 07, 2019
Amended  IN  Assembly  April 12, 2019
Amended  IN  Assembly  March 25, 2019

CALIFORNIA LEGISLATURE— 2019–2020 REGULAR SESSION

Assembly Bill No. 1790


Introduced by Assembly Member Wicks
(Coauthor: Assembly Member Cunningham)

February 22, 2019


An act to add Title 1.4C (commencing with Section 1749.7) to Part 4 of Division 3 of the Civil Code, relating to e-commerce. business.


LEGISLATIVE COUNSEL'S DIGEST


AB 1790, as amended, Wicks. Online e-commerce marketplaces. Marketplaces: marketplace sellers.
Existing law, the Uniform Commercial Code—Sales, generally regulates transactions in goods, as defined. Existing law also generally prescribes obligations arising from particular transactions.

This bill would prohibit an online e-commerce marketplace with more than 200,000,000 active customer accounts that, in whole or in part, offers to customers for sale goods or services sold by companies that are not owned by the online e-commerce marketplace from, as a condition of permitting a company not owned by the online e-commerce marketplace to offer for sale goods or services, requiring the disclosure of certain customer information from those companies. The bill would prohibit an online e-commerce marketplace from retaining or using customer information required to complete those transactions for marketing purposes or providing that information to another company for marketing purposes. The bill would additionally prohibit an online e-commerce marketplace from retaining or refusing to disburse funds to certain companies in connection with those sales for more than 90 days without paying specified interest on those withheld funds.

This bill would require a marketplace, as defined, to ensure that their terms and conditions regarding commercial relationships with marketplace sellers meet specified requirements, including that the terms and conditions are drafted in plain and intelligible language. The bill would define “marketplace seller” for these purposes as a person residing in the state who has an agreement with a marketplace and makes retail sales of services or tangible personal property through a marketplace owned, operated, or controlled by that marketplace.
The bill would make legislative findings in support of these provisions and state that its provisions are severable.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: NO   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

The Legislature finds and declares all of the following:

(a)E-commerce retail companies such as Amazon that have obtained a vast share of online retail sales have, as a result, accumulated a vast amount of valuable consumer marketing data. Concentration of valuable customer data in the hands of a small number of corporations, each of which already dominates a substantial sphere of internet-based activity, creates de facto barriers to competitive innovation. This may happen for a variety of reasons, including that a corporation’s deeply entrenched knowledge of individual consumers’ habits can make it nearly impossible for a rival or potential rival to target advertisements with comparable efficiency or accuracy, or recruit third-party online advertisers based on a dramatically thinner accumulation of historical data. Additionally, companies with an asymmetric advantage in consumer data might simply be able to identify competitive rivals at a very early stage and eliminate competition by preemptively acquiring them.

(b)By some estimates, one company, Amazon, will capture more than 50 percent of the e-commerce retail market by the end of 2019. This is akin to a single brick-and-mortar store in a city capturing half of all retail activity in the city. As of 2018, Amazon has captured more than 40 percent of the e-commerce retail market, selling more than $200,000,000,000 worth of goods in 2018.

(c)The next largest e-commerce retail seller is eBay, which holds 6.6 percent of the market. Walmart holds 3.7 percent of the market.

(d)For a manufacturer of goods to be able to profitably do business nationally, the manufacturer has no choice but to sell its products through Amazon.

(e)When a company begins to sell through Amazon, the company is also required to provide Amazon with customer information that offers Amazon a blueprint for how to put the company out of business in the future.

(f)When a company lists products on Amazon, that leads to a lot of customer information on exactly what is sold and to whom. Amazon, as a condition of a company being able to sell through it, has required companies to share this customer information with Amazon. With this customer information, and with its enormous capital and e-commerce dominance, Amazon has the means to easily compete directly with the companies that are forced to sell through it by using a company’s own consumer data to market Amazon’s competing products to their customers.

(g)The immense advantages Amazon has in leveraging its e-commerce dominance to obtain customer information effectively blocks startup innovators and entries into the e-commerce market and impedes the expansion of competing companies, thereby limiting consumer choice and, in some cases, harming competition and innovation.

(h)Amazon also leverages its vast e-commerce dominance to impose policies stating that it may, in its sole discretion, hold the money a company has earned from the sale of its product interest free for 90 days, and requires disputes to be decided exclusively in arbitration. When a company’s money is withheld by Amazon for three months, other aspects of the company’s business are put on hold with it, often causing a hardship, especially for small to mid-size businesses. Such hardships include the inability to purchase new inventory, make payroll, pay bills, or pay debts.

(i)In contrast, by holding onto and aggregating this daily cash flow for only a few days or weeks across many companies, Amazon is able to profitably invest this money in money market funds, marketable securities, and other investments, and utilize the cash as working capital in the operation of its business.

(j)Numerous articles, web posts, blogs, and online sources reveal widespread complaints from companies selling though Amazon about its practices related to holding funds intended for other companies and its procedures for resolving disputes. Small to mid-size businesses that cannot afford to hire hourly attorneys or where the amounts in dispute are insufficiently large to attract contingency fee counsel have little recourse under current law against one of the world’s largest corporations that can also ruin a business by denying it access to its marketplace.

SEC. 2.SECTION 1.

 Title 1.4C (commencing with Section 1749.7) is added to Part 4 of Division 3 of the Civil Code, to read:

TITLE 1.4C. Online E-commerce Marketplaces Clarity of Marketplace Terms and Conditions

1749.7.

(a)An online e-commerce marketplace with more than 200,000,000 active customer accounts that, in whole or in part, offers to customers for sale goods or services sold by companies that are not owned by the online e-commerce marketplace, shall not do the following:

(1)As a condition of permitting a company not owned by the online e-commerce marketplace to offer for sale goods or services, require a company to share or disclose information about a customer that purchased the goods or services, except as required to complete the transaction.

(2)Retain or use customer information required to complete the transaction described in paragraph (1) for marketing purposes or provide that information to another company for marketing purposes.

(3)Retain or refuse to disburse funds in its possession, custody, or control, to a company with gross revenues of less than five million dollars ($5,000,000) annually that has sold and caused to be delivered goods or services, through the online e-commerce marketplace, to a customer for more than 90 days without paying 10 percent interest per day, compounded.

(b)For purposes of this section, “online e-commerce marketplace” means an internet-based platform that offers for sale goods or services provided by third-party companies.

1749.7.
 (a) Every marketplace shall ensure that their terms and conditions regarding commercial relationships with marketplace sellers meet all of the following requirements:
(1) Are drafted in plain and intelligible language.
(2) Are easily available online for marketplace sellers at all stages of their commercial relationship with the marketplace, including, but not limited to, during the stage prior to the formation of a contract.
(3) Set out the grounds for decisions to retain, or refuse to disburse, funds in its possession belonging to a marketplace seller pending investigation or resolution of a dispute between the marketplace and the marketplace seller.
(b) For purposes of this section, “marketplace” means a physical or electronic place, including, but not limited to, a store, booth, internet website, catalog, television or radio broadcast, or a dedicated sales software application, where a marketplace seller sells or offers for sale services or tangible personal property for delivery in this state, regardless of whether the tangible personal property or the marketplace has a physical presence in the state.
(c) For purposes of this section, “marketplace seller” means a person residing in the state who has an agreement with a marketplace and makes retail sales of services or tangible personal property through a marketplace owned, operated, or controlled by that marketplace.

SEC. 3.SEC. 2.

 The provisions of this act are severable. If any provision of this act or its application is held invalid, that invalidity shall not affect other provisions or applications that can be given effect without the invalid provision or application.