Legislation Would Hurt Small Businesses That Have Turned to Online Sales

Over the past six months, online commerce has exploded, as more and more brick and mortar businesses turn to online venues to sell their goods and services in a safe, socially distanced way.

As consumers shift their purchasing power online, businesses will embrace a new normal with online commerce which is important to keep businesses open and get consumers the goods they need.

A key driver of online commerce is the growth of small and large business sales through online marketplaces, which create and facilitate millions of jobs and billions of dollars in economic activity. Especially for small businesses that do not have the capital to build, own, operate and manage their own website or physical storefront; having access to a marketplace can be the difference between thriving and having to close shop.

Unfortunately, a bill currently moving through the Legislature would jeopardize how these businesses reach consumers and sell their goods online. Assembly Bill 3262,  introduced by Assemblymember Mark Stone, a Democrat from Santa Cruz, will effectively strangle the only pathway that small businesses currently can pursue to sell goods and earn revenues online, by extending strict liability to the online marketplaces where their goods are offered for sale.

AB 3262 could kill online commerce for these businesses at exactly the wrong time – at the start of an economic depression caused by a pandemic that has effectively closed their physical locations and hurt sales revenues. AB 3262 makes it easier to bring frivolous lawsuits against all online marketplaces, driving up expenses that are passed to the businesses and consumers who use them.

Threatening This Long-Standing and Critical Law Is Not the Right Move for Our Golden State

The misconception that online marketplaces are only big businesses, overlooks the fact that all types and sizes exist to support a variety of small business industries – like sites selling used farm equipment and those connecting consumers with handmade, artisan goods. These marketplaces provide a platform for smaller sellers to reach a worldwide market of interested buyers.

Smaller, niche marketplaces will not survive the litigation storm that will follow AB 3262 and will close their virtual doors, shuttered to consumers and unavailable to small businesses as revenue generators. Small businesses that want to continue to sell online will be required to invest thousands of dollars annually on complex online platforms, new staff or costly outside vendors to manage technology. And they will need more money to attract online consumers to their websites.

The proponents of AB 3262 claim the bill will protect consumers against “fly-by-night” sellers from overseas, but this is simply not true. California is a national leader in consumer protections for products and services, and current law already holds businesses accountable for making safe products and marketplaces accountable for allowing responsible businesses on their platforms.

Threatening this long-standing and critical law is not the right move for our Golden State. If AB 3262 becomes law, everyone should expect to pay an increased service charge every time you order a package online or have groceries delivered.

In a time of increasing automation and big-box stores, online marketplaces enable smaller businesses to compete and survive in a competitive economy without having to build and operate an entire e-commerce platform. As a birthplace for innovation, California should promote and encourage this, not stifle it. AB 3262 is bad policy and the Legislature should reject it.

About the Author

State Sen. Anna Caballero, a Democrat from Salinas, represents the 12th State Senate District, Senator.Caballero@sen.ca.gov. She wrote this commentary for CalMatters, a public interest journalism venture committed to explaining how California’s Capitol works and why it matters.