California AB 3262, which I wrote about recently regarding marketplace liability for 3P sellers, will not move forward for now, amid intense industry criticism.

The money quote in the legislation itself is as follows:

"This bill would require an electronic retail marketplace, as defined, to be held strictly liable, subject to certain exceptions, for all damages caused by defective products placed into the stream of commerce to the same extent as a retailer."

This would effectively mean that any item on a marketplace would have to be tested and cleared by the marketplace as free from defects before it is advertised. Effectively, this could eliminate some marketplaces altogether.

Even if the law is not going forward right now, I view this as a step forward. There IS reasonable legislation that needs to be created on this topic. And the California legislature is wrestling with it.

I predict even in just 5 years, there may be robust legislation at the national level regarding the treatment of items online and on marketplaces in particular.

Rafael Zimberhoff weighed in with some insights and some, uh, stark examples:

Motion forward on this is long overdue. When marketplaces were peer to peer (think early eBay), it was simple: "Hey, this is a used Sony Playstation." We all can asses how dangerous such a thing is.

But now it is "Hey, this is a brand new, unknown-brand Lithium Ion Battery Pack from an untraceable source." That is a VERY DIFFERENT THING (your fire extinguisher won't work on that fire). The marketplaces can absolutely manage this (by verifying sellers, and requiring that sellers be legit businesses, with relevant insurance coverage, etc.). When you think about it, the marketplaces collect serious money from the transactions. Matching buyers and sellers isn't that hard (at this point). Actually adding value (by vetting sellers and/or products) makes all the sense in the world. In fact, many brand managers would want to do exactly that. (We build the brand by building trust, and that trust is not just that it will arrive in two days... that trust is also that the product won't burn down your house or poison your kids.)

Andrew March shared his thoughts and posed some of his own questions:

Do you think Amazon's support is because it knows it can leverage this regulation to support its competitive advantage? Amazon has the financial and legal resources to navigate the most complex regulatory environments whereas smaller companies could be disproportionately challenged. Do you think that companies can innovate in a way to circumvent the regulation (think Uber and Lyft in response to AB5 in California re independent contractor vs. employee status)? What are the private sector opportunities for resolving these issues and are consumer reviews insufficient for informing consumers? An earlier commenter posted about batteries, which is a good jumping-off point...the degree of caution and accuracy should be commensurate with the risk to the consumer. I don't think this regulation would be an apt approach for products that pose relatively little risk to consumers (but where does one draw the line)?

I am not sure what this will turn into or when, but I guess it’s a step. There will be another step. And another.