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SAN JOSE, Calif. (CN) — Netchoice, a powerful tech lobbying group, filed a lawsuit in California on Wednesday to block a new state law governing stolen good sales online, claiming that it will impose a “unreasonable” burden on its member companies, which include Amazon, Google, Lyft, Meta, PayPal, Snap, Waymo and X, formerly Twitter.
The trade organization claims that Senate Bill 1144, which builds on regulations from the federal INFORM Consumers Act, will hurt online marketplaces, disproportionately impact small businesses and put them at a competitive disadvantage with the rest of the nation.
“If allowed to take effect, SB 1144 will impose unprecedented and unconstitutional burdens on widely used online services that serve as the modern-day analog of the classifieds section in print newspapers, enabling millions of prospective buyers and sellers to communicate about potential in-person, offline sales,” the group said in its lawsuit filed in the Northern District of California.
The new law, passed in August 2024 and set to take effect on July 1, 2025, was intended to make it more difficult to sell stolen goods online by expanding the number of parties that platforms are required to verify information from. It was proposed after lawmakers expressed concern that gaps in the existing law were allowing certain large online platforms to avoid these requirements.
The new law also requires online marketplaces to report suspected stolen goods to law enforcement.
NetChoice argues that the new regulations “blatantly violate” federal law and contradict the INFORM Act, which states that online marketplaces “shall only be required to count” on-platform transactions.
“In so doing, SB 1144 expands online marketplaces’ obligations well beyond what Congress permitted — vitiating Congress’ express intent to create a single, nationwide rule for online marketplaces,” the group argued in its lawsuit.
The organization also argued that it would be “extremely burdensome,” or even “virtually impossible” for its companies to gather accurate information about which third-party listings lead to offline** transactions between two private parties, where payment is often made in cash.
“It is one thing to regulate private companies by reference to information they already collect in the ordinary course of processing payment. It is quite another to require private companies to discover and maintain information about third parties that the companies would not otherwise possess,” NetChoice stated.
The tech group claims that the law is extraordinarily vague, arguing that Girl Scouts using Nextdoor to promote cookie sales in their neighborhood could fall within its scope and be mandated to report data to Nextdoor on pain of “massive penalties” to the tech company.
Existing law instructs online marketplaces to collect certain information from “high-volume third-party sellers” — like their identification, contact and payment information — to safeguard against fraud. Businesses are obligated to suspend sellers that do not comply.
Although the law currently only applies to transactions made through an online marketplace’s payment processor, SB 1144 would expand that scope, requiring businesses to collect information from any transactions made “utilizing” an online marketplace. This would include online services like Facebook Marketplace, Craigslist and OfferUp that operate in the space once dominated by classified advertisements in print newspapers.
The new law also expands the number of people who can hold companies accountable. Past lawsuits were limited to civil actions brought by the attorney general, but the new law permits any district attorney or city attorney statewide to bring their own civil suits of up to $10,000 for each violation.
In an emailed statement, the attorney general’s office said “We are aware of the lawsuit and look forward to defending California’s laws in court.”
NetChoice is a trade association that represents some of the largest interests in the tech world. Founded in 2001, the group has steadily gained influence over the last decade and currently has 16 active lawsuits over state-level internet regulations.
This is the third active lawsuit NetChoice has filed against California. The other two concern laws over social media addiction and collecting the information of minors.
The tech lobbyists took a thrashing from the Ninth Circuit in a similar lawsuit this month when a judge compared them to tobacco companies.
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