NRF Says Online Auctions Drawing Amateurs into Organized Retail Crime
WASHINGTON, September 22, 2008 – The National Retail Federation told a congressional committee today that online auction sites have gone beyond being a convenient new fencing option for professional shoplifters and have begun to lure amateurs into the growing world of organized retail crime.
"The Internet seems to be contributing to the creation of a brand new type of retail thief – people who have never stolen before but are lured in by the convenience and anonymity of the Internet," NRF Vice President for Loss Prevention Joseph LaRocca said. "Thieves often tell the same disturbing story: they begin legitimately selling product on eBay and then become hooked by its addictive qualities, the anonymity it provides and the ease with which they gain exposure to millions of customers. When they run out of legitimate merchandise, they begin to steal intermittently, many times for the first time in their life, so they can continue selling online. The thefts then begin to spiral out of control and before they know it they quit their jobs, are recruiting accomplices and are crossing states lines to steal, all so they can support and perpetuate their online selling habit."
LaRocca said online "e-fencing" has become thieves’ preferred method for disposing of stolen retail merchandise because they can receive as much as 70 percent of an item’s retail value, compared with about 30 percent on a street corner or at a pawn shop. The anonymity of the Internet also reduces the chances of apprehension.
LaRocca’s comments came in testimony prepared for delivery this afternoon before the House Judiciary Committee’s Subcommittee on Crime, Terrorism and Homeland Security. The panel is scheduled to hold a hearing on three organized retail crime bills – H.R. 6713, the E-Fencing Enforcement Act of 2008, sponsored by subcommittee Chairman Bobby Scott, D-Va.; H.R. 6491, the Organized Retail Crime Act of 2008, sponsored by Representative Brad Ellsworth, D-Ind.; and S. 3434, the Combating Organized Retail Crime Act of 2008, sponsored by Senate Majority Whip Richard Durbin, D-Ill.
All three bills would address organized retail crime, in which groups of professional thieves steal merchandise from stores on a large scale and resell the goods in venues ranging from flea markets to the Internet. ORC rings typically target consumer items that are in high demand but easy to steal like infant formula, razor blades, cosmetics and gift cards, along with more expensive items such as DVDs, CDs, video games, electronics or designer clothing. In addition to the financial loss, ORC can present a public health hazard because items like infant formula or over-the-counter medications might be improperly stored or mislabeled.
The Ellsworth bill would make ORC – both online and offline – a federal crime for the first time while the Durbin bill would require enhanced sentencing guidelines for ORC, and both measures would address online fencing. Operation of auction sites could be considered "facilitation" of ORC unless the operator could show specific steps had been taken to ensure goods being sold were not obtained by theft, operators would be required to cooperate with retailers and police, and retailers could sue over the sale of stolen merchandise.
The Scott bill would focus exclusively on Internet fencing, requiring online auction operators to retain information about high-volume sellers and provide the information to police or retailers once a valid police report is filed.
LaRocca said the measures are necessary because online auction operators don’t do enough to cooperate with retailers to stop ORC. Auction operators cooperate with police when approached about a specific incident, but haven’t taken steps to keep stolen merchandise off their sites.
"We can’t keep addressing this issue by investigating and apprehending one seller at a time; we need a new approach," LaRocca said. "We need to have responsible Internet auction sites make modest changes to their businesses to help reduce the sale of stolen property in the first place. Goods that are known by an online marketplace to be stolen should no longer be on the site and, if they are, the marketplace should be liable for such behavior."
Retailers lose as much as $30 billion to ORC each year, according to the FBI and retail loss prevention experts, and an NRF survey found a record 85 percent of retailers were victims of ORC in the past year. LaRocca cited a series of high-profile arrests, including a Florida case involving $60 million to $100 million in stolen merchandise, a New Jersey case involving 23 reputed organized crime family members, and a California case involving hundreds of professional shoplifters. One Texas case was tied to the terrorist group Hamas, he said.
NRF is leading retailers’ efforts to fight ORC. NRF helped create the Law Enforcement Retail Partnership Network (LERPnet) database of ORC information, operates the Investigator’s Network of more than 1,200 retail loss prevention professionals, and conducts an annual ORC survey.
The National Retail Federation is the world's largest retail trade association, with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet, independent stores, chain restaurants, drug stores and grocery stores as well as the industry's key trading partners of retail goods and services. NRF represents an industry with more than 1.6 million U.S. retail companies, more than 25 million employees - about one in five American workers - and 2007 sales of $4.5 trillion. As the industry umbrella group, NRF also represents over 100 state, national and international retail associations. www.nrf.com