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The House Judiciary Committee's subcommittee on crime, terrorism and homeland security recently held a hearing, in preparation for new legislation aimed at cracking down on organized retail crime. Among those testifying were representatives of Target, Safeway, eBay and law enforcement.

While executives of Target and Safeway cited the Internet as a primary contributor to the spike in organized retail theft, Robert Chestnut, senior VP of rules, trust and safety for eBay Inc., noted, "There are many avenues for this illicit process." He said, "Sensible solutions should address the entire range of distribution methods and not place disproportionate focus on less popular methods."

Yet, referring to recent news stories on CNN and CNBC, Brad Brekke, VP of assets protection for Target Corp., cited technology in general and the Internet specifically, "as fueling an explosion in eFencing. The Internet has created a worldwide market for stolen goods in which the sellers are anonymous, and there is an enormous universe of buyers who are generally unaware of the nature of the goods sold," he said.

According to Brekke, Internet buyers typically pay 70 cents on the dollar, compared with what was previously available to fences in the brick and mortar world, where it was more difficult to operate anonymously. Internet fencing has reached such a scale, he continued, that, "Retail and law enforcement cannot successfully fight this problem, one booster and one fence at a time."

Karl Langhorst, director of loss prevention for Randall's/Tom Thumb, a Safeway company, testified, "Fences have quickly learned that the anonymity of the Internet presents an extremely low risk way to sell stolen goods, and are abandoning the previous model of brick and mortar locations and flea markets. Online marketplaces, such as eBay, are being used as Internet pawn shops, and are largely unregulated."

Brekke urged that, "Responsible Internet auction sites make modest changes to their sites to help reduce sales of stolen property in the first place." He suggested that traditional models of stolen property regulation be applied to the Internet and urged that Internet auction sites, "inject some needed transparency to these transactions."

As evidence that transparency works, he noted that, "Every vehicle listed for sale on eBay Motors is accompanied by a Vehicle Identification Number," which can be verified through Carfax. This, "has virtually eliminated the sale of stolen vehicles through this service. It could have the same effect in preventing sales of stolen iPods and vacuum cleaners," he concluded.

While Chestnut acknowledged, "some tech savvy criminals are finding ways to use the Internet," he told the committee, "fighting fraud and keeping bad sellers off of our site are vital to our success as a business." He summarized the myriad of efforts eBay has adopted to detect and prevent fraud.

"When any retailer has concrete evidence to the effect that stolen property is on our site, we will work with them and law enforcement to address the problem," he said. That includes sharing information about a targeted seller and quickly providing agencies' requests to support enforcement actions.

He went on to say, "Many large manufacturers and retailers have a negative view of the eBay marketplace, because we provide an incredibly efficient secondary market for their goods. One way to attack efficient secondary market competitors is to suggest that there is something shady about those sales, when in reality they are completely legitimate."

One legislative solution, according to Chestnut, "is simple. Increase the criminal penalties for this conduct. If these crimes are currently classified as misdemeanors, upgrade them to felonies. If the jail sentences are too short, lengthen them. If these thieves make their way to eBay, we don't just want them off of eBay, we want to see them inside of a jail cell."

The National Retail Federation (NRF) estimates that organized retail theft, regardless of where stolen goods are sold, costs retailers and consumers as much as $30 billion a year. "This hearing shows that Congress recognizes the seriousness of organized retail crime and is ready to do something about it," said Joseph LaRocca, NRF's vice president of loss prevention.

Article ID: 489