Georgia defends e-commerce stolen goods law at 11th Circuit

ATLANTA (CN) — An attorney for Georgia asked an 11th Circuit panel on Wednesday to toss out an injunction blocking enforcement of an anti-retail-theft state law, which would have required online sales platforms to collect more information about sellers in an effort to stymie fraud.

NetChoice, a powerful tech industry trade association and lobbying group, sued in 2024 to prevent Georgia Act 564 from going into effect. A Georgia federal judge ruled the law — which would have amended the Georgia Inform Consumers Act to regulate high-volume, third-party sellers using online marketplaces like Craigslist for offline transactions — was preempted by the federal INFORM Act.

Georgia Solicitor General Stephen Petrany urged the appellate panel on Wednesday to overturn the injunction, arguing federal law does not prevent states from requiring “slightly more” from online marketplaces.

An attorney for NetChoice argued that Georgia’s regulations would contradict the INFORM Act, which says online marketplaces “shall only be required to count” sales for which payment was processed by the platform.

U.S. Circuit Judge Barbara Lagoa asked Petrany to address the language in the federal law directly.

“The particular provision at issue here has that language about ‘only’ counting this. So when the state is asking a company to do something more than just count only those things, doesn’t that conflict with the federal provision?” the Donald Trump appointee asked.

“No. That’s 99.9999% of state regulations,” Petrany said. The attorney insisted websites could comply with both laws simultaneously.

“If the federal government wanted states banished from this area, it easily could’ve done so,” Petrany said. “Congress does that all the time. It knows how to do field preemption, and it didn’t do that here. … The default background rule is that states can regulate outside of, beyond federal regulations.”

Federal law instructs online marketplaces to collect information from “high-volume third-party sellers” — like their identification, contact and payment information — to safeguard against sales of dangerous products and stolen goods. High-volume sellers are people who make 200 or more sales of new or used consumer products and have a total of $5,000 or more in gross revenues.

Sales that count toward “high-volume” status under federal law are those made through the online marketplace and for which payment was processed by the online marketplace.

Georgia’s law would have required businesses to collect information from any transactions made using an online marketplace. That would include online platforms like Facebook Marketplace, Nextdoor and Craigslist, which facilitate sales but do not process exchanges of money.

U.S. District Judge Steven Grimberg blocked the state law, finding that the federal law “provides a ceiling on the recordkeeping requirements of online marketplaces” by including a clause prohibiting states from establishing conflicting regulations.

Arguing on behalf of NetChoice, attorney Erin Murphy of Clement & Murphy asked the panel to uphold Grimberg’s decision.

“If you were looking for intent in a provision of the INFORM Act that Congress wanted to make clear it was setting a ceiling, not a floor, I don’t know how much more directly Congress says that than saying states should only be required to count a certain subset of transactions,” Murphy said.

U.S. Circuit Judge Adalberto Jordan appeared sympathetic to NetChoice’s position. The Barack Obama appointee pointed out that a California federal court blocked enforcement of a similar state law in July.

Jordan questioned whether the panel could overturn the Georgia decision without evidence that other courts have ruled differently or that Grimberg abused his discretion in ruling against the state.

“One other district court in the country has ruled against the position you’re taking here,” Jordan told Petrany. “It’s not like the district court went wild here.”

But Petrany told the panel there are “clear errors of law” in both the Georgia and California decisions. The attorney also argued that the “equities” at stake in the case do not make it a slam dunk for NetChoice.

“There’s really nothing on the equities other than this might cost NetChoice’s members some money. That’s not nothing, but it’s not the most irreparable harm in the world,” Petrany said.

Murphy disagreed, pointing out that complying with Georgia’s law would force NetChoice’s member companies — which include Amazon, Google, Lyft, Meta and PayPal — to investigate private communications about off-platform transactions.

“In these transactions, people communicate over a direct messaging system or e-mail or whatever it is, decide what they’re going to do offline when they’re going to meet up somewhere else to exchange money for goods. We don’t — our clients, members are not in the business of monitoring people’s direct communications, e-mails, all that, to figure out what they plan to do off-site,” Murphy said.

U.S. District Judge Virginia Covington, a George W. Bush appointee sitting by designation from the Middle District Court of Florida, rounded out the panel. The panel did not indicate when it would issue a decision in the appeal.

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