The SHOP SAFE Act Would Entrench Amazon’s Dominance

In that the SHOP SAFE Act would achieve something far more dangerous than its title promises, it is typical of safety-themed legislation. 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 plan to include the SHOP SAFE Act in their bipartisan Endless Frontier Act. This technology infrastructure bill has already been passed by the Senate. It could become law in the near future. It would be disastrous. The SHOP SAFE act has huge problems and would make it difficult for small online marketplaces. 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 is not a reach-reading exercise that we did; SHOP SAFE has at least two anticounterfeiting groups asking Congress to ensure it covers WhatsApp and Facebook Messenger.

All An online marketplace where goods could theoretically be traded might be held liable for counterfeit goods and unsafe safety, according to the bill. This is a very broad language and could make it difficult for potential competitors to enter the market. The best way to make Amazon the default online marketplace is for regulators and to impose a severe liability burden on Amazon, which only Amazon has the financial resources to sustain.

The SHOP SAFE act, which requires vendors to provide information, raises grave digital privacy concerns. EFF is concerned about the possibility that users will have to provide a copy their driver’s licence to Craigslist in order to sell or advertise a garage sale.

Santa Clara University professor Eric Goldman describes the bill to be a huge invasion of privacy. It could allow hackers to obtain sensitive information about buyers or sellers.

He wrote that “this bill will destroy online marketplaces” and reduce efficiency in markets. “The net competitive results are that consumers will pay more, their search costs will rise, their ability to locate long-tail goods will decrease, the market leaders will retain their dominance, and many thousands will lose work.”

Goldman suspects that this bill could drive virtually all of the online marketplaces out business. Amazon is a possible exception.

He also writes, “Another possibility” is that Amazon may be the only company to follow the law. This would mean the law creates an insurmountable competitor moat around Amazon’s market.

What is the law used for? But the law does not accomplish what is urgently required by the public. Online sellers already receive incentives to stop selling counterfeit products and guarantee that their product descriptions are correct. SHOP SAFE Act will be a very heavy-handed intervention by the government that will only make it worse.

SHOP SAFE is committed to reducing retail crime, but it targets both e-commerce sellers and companies that sell them. This harms their businesses, and fails to address the root problems. Jennifer Huddleston, Policy Counsel at NetChoice (a trade association of tech organizations), says that SHOP SAFE has a policy.

Political figures from both the left and right have been known to rail against Big Tech, offering solutions that only make the problem worse. This is exactly what the SHOP SAFE Act does; it may very well be law.