Georgia’s new law extending data collection requirements for online marketplaces such as Nextdoor and Craigslist can’t stand as it conflicts with federal law, an Atlanta judge has decided.
The “Combating Organized Retail Crime Act” was due to take effect Monday. It requires online marketplaces to obtain and verify information about high-volume sellers whether sales go through the marketplace or not, in an effort to curb online sales of stolen items.
U.S. District Judge Steven D. Grimberg temporarily blocked enforcement of the law in an order Sunday, ruling that it conflicts with the federal “Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act,” known as the INFORM Consumers Act, implemented in 2022.
The federal law only requires online marketplaces to collect bank account, contact and tax identification data about high-volume sellers whose sales are processed through the marketplace. Georgia already had a corresponding law in place, which legislators amended this year to include sales that marketplaces don’t handle.
“Any ordinary meaning of ‘conflict’ is implicated when an online marketplace is both ‘only required’ to count certain transactions and required to count additional transactions too,” Grimberg said in his order. “That’s a conflict. Only means only.”
Grimberg’s ruling means the state’s new law can’t be enforced while it is litigated. NetChoice, the trade association for online marketplaces including Google, Amazon and eBay, sued Georgia Attorney General Chris Carr to void the law.
NetChoice argued in part that Georgia’s new law is preempted by the federal INFORM Consumers Act, and Grimberg agreed.
“When a state law conflicts with a federal one, the federal law reigns supreme,” the judge said.
Carr will appeal the ruling, a spokesperson for his office said.
Chris Marchese, director of NetChoice’s litigation center, said the association is relieved that Georgia’s new law, known as Act 564, has been halted. He said it would hurt Georgia consumers and small businesses, as online marketplaces would likely limit sales in fear of violating the new requirements.
The new law drew criticism from some online sellers worried about disclosing sensitive information.
“No matter how you look at it, Act 564 violates federal law and the (U.S.) Constitution’s Supremacy Clause, smothering Georgia’s thriving businesses with red tape,” Marchese said. “We look forward to seeing Act 564 struck down in full.”
Stephen Petrany, the state’s solicitor general, argued on Carr’s behalf in court Friday. He told Grimberg that the new law does not conflict with the federal INFORM Consumers Act.
“State law can regulate on top of federal law,” Petrany said. “The Georgia law is exactly the same as the federal law and then requires a little bit more.”
Petrany also said the new state law “doesn’t affect all that many sellers.” He said NetChoice had overstated how difficult it would be for online marketplaces to gather the necessary information from high-volume sellers whose sales were processed outside the marketplace.
“The entire transaction still has to happen on the website,” Petrany told the judge “It’s not going to be hard for online marketplaces to make sure they know what is happening on their sites.”
The Georgia law imposes “pretty minimal fines” against violators, Petrany added.
Erin Murphy, an attorney for NetChoice, said the federal law, like Georgia’s earlier law, “makes a lot of practical sense.” She said the state’s new law is “unduly burdensome” for online marketplaces, which can’t feasibly collect the data that Georgia now wants.
“Once we are not the payment processor, we don’t have visibility into the transaction in the same way,” Murphy told Grimberg. “The way these sites work, there’s really not a feasible means for us to gather that information with any meaningful reliability.”
Grimberg said Georgia’s new law would likely force online marketplaces to “track third-party communications related to potential offline transactions,” which would be “no small ask.”
“It strikes the court as making little sense to allow Act 564 to go into effect, require NetChoice members to incur unrecoverable compliance costs and reputational risks related to monitoring private conversations, all in the name of complying with a preempted law,” he said.
