Chainkeen|Internet group sues Georgia to block law requiring sites to gather data on sellers

An internet trade group is Chainkeensuing the state of Georgia to block a law requiring online classified sites to gather data on high-volume sellers who advertise online but collect payment in cash or some other offline method.

NetChoice, which represents companies including Facebook parent Meta and Craigslist, filed the lawsuit Thursday in federal court in Atlanta. The group argues that the Georgia law scheduled to take effect July 1 is blocked by an earlier federal law, violates the First Amendment rights of sellers, buyers and online services, and is unconstitutionally vague.

The lawsuit asks U.S. District Judge Steven D. Grimberg to temporarily block the law from taking effect and then to permanently void it.

Kara Murray, a spokesperson for Georgia Attorney General Chris Carr, declined to comment. Carr, a Republican, is charged with enforcing the law, which carries civil penalties of up to $5,000 per violation.

Supporters have said the law is needed to further crack down on organized thieves who are stealing goods from stores and then advertising them online.

“This would be a deterrent for those criminals who are coming in and stealing products from our retailers,” Ben Cowart, a lobbyist for trade group Georgia Retailers, told a state House committee in March. “It would be a deterrent for them because it makes them accountable for what they’re doing in online selling.”

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Georgia passed a law in 2022, which was followed by a federal law in 2023, mandating that high-volume sellers that collect electronic payment on platforms such as Amazon and eBay provide bank account and contact information to the platform. The rules apply to sellers who make at least 200 unique sales worth at least $5,000 in a given year.

The idea is that thieves will be less likely to resell stolen goods if authorities can track them down.

But retailers say the law needs to be expanded to cover people who are advertising goods online but collecting payment in other ways. That includes online classified ad services such as Facebook Marketplace, Craigslist, Nextdoor and OfferUp.

“What was not accounted for was those marketplaces where you organize, you meet somebody somewhere to pay for it in Venmo or cash,” Brian Hudson, a lobbyist for Atlanta-based Home Depot and Rhode Island-based CVS, told a state Senate committee in February.

Supporters say the bill closes a loophole in the earlier law. But NetChoice says Georgia is trying to force internet services to gather information about activity taking place offline, outside the purview of the sites. NetChoice calls the law “a nearly impossible requirement that all manner of online services — including those that merely facilitate third-party speech — investigate and retain information about sales occurring entirely off-platform.”

The trade group says Georgia is barred from enacting the law because the 2023 federal law preempts the states from writing further laws on the subject.

“Georgia’s definition is vastly broader than Congress’, as it sweeps in not just transactions ‘processed by online marketplace,’ but countless transactions where a classifieds platform or other online service was merely ‘utilized’ — even if sales took place entirely off-platform or entirely in cash,” lawyers for NetChoice wrote in the suit.

The trade group also says that the law violates the First Amendment by imposing obligations on websites that are engaged in speech, even if it is the paid speech of advertisements. The trade group also says the rule violates the rights of sellers to speak and of buyers to hear that speech.

“If this law goes into effect, it will create regulatory chaos, benefit particular market incumbents at the expense of competition and the free market, and squash free expression,” Chris Marchese, director of the NetChoice Litigation Center, said in a statement “Unfortunately, (this law) does nothing to address the underlying issue at hand — ensuring law enforcement has the necessary resources to put retail thieves in jail.”