Ad trade groups say amended California consumer protection bill will ‘threaten online content and economy’

Advertising trade groups are condemning amendments to a California consumer protection bill, claiming it would “have a chilling effect on commercial speech, the availability of digital content, and online commerce during a time when the economy is already under significant strain.”

AB 3262, which seeks to hold “electronic retail marketplaces” to the same liability standards applied to brick-and-mortar retailers, has been the subject of opposition from Etsy, EBay‘s public policy arm and industry groups who say existing law already protects consumers and that it will stifle small businesses that sell products online. Lawmakers on Monday amended the bill to include online marketplaces that profit off of advertising fees collected by merchants. 

In a statement Thursday, advertising industry trade groups said they were urging the California legislature to remove amendments they say conflict with “the bill’s stated intent to exempt online advertising from new and unprecedented liability exposure.” The groups include the American Association of Advertising Agencies, the American Advertising Federation, the Association of National Advertisers, the Interactive Advertising Bureau and the Network Advertising Initiative, which represent major players in the industry. 

The groups said that the bill earlier this week was amended to expand its scope to cover businesses “placing or facilitating the placement of products into the stream of commerce in this state,” whereas originally it had only covered businesses engaged in “placing” products into the stream of commerce.

Ad groups argue the term “facilitating” is not defined and could potentially apply to any business that receives any direct or indirect financial benefit from the sale of products deemed to be defective. 

Alison Pepper, EVP of government relations for the 4A’s, said in a statement the amendment could broaden the law’s scope “beyond a merchant selling a good to cover a news organization or Mommy blogger than runs a single ad and a product reviewer who receives high traffic to an article reviewing a product that is later deemed to be defective.” 

Also removed in the amendments, the groups say, was a provision that fees received for advertising don’t constitute a “financial benefit from the sale of the defective product.” They say this flouts a stated intent of the bill to exempt online ads from its scope. 

“AB 3262 states the legislature’s intent to shield online advertising from unreasonable liability exposure, but the text of the bill removes all such protections,” Pepper said in the statement.

Dave Grimaldi, the IAB’s EVP for public policy, added in the statement that the bill could impair publishers’ ability to provide consumers access to informative content. 

“To avoid potential liability, a publisher would either need to test and evaluate each product for defects prior to allowing advertising for the product or significantly limit advertising on its site,” he said. “This would reduce resources for publishers to provide digital news, content, and online services.”

Earlier this week, Etsy CEO Josh Silverman accused Amazon of “taking bold steps to wipe out its competitors” by backing AB 3262, arguing that Amazon’s support of the bill is in bad faith and calling it an “abuse of power market play.” Amazon on Friday expressed conditional support for the bill.