Commentary Addressing Risks and Opportunities Through the Lifecycle of Data, Technology, Advertising and Innovation

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Seeking to increase transparency and, consequently, fairness in the marketplace/marketplace seller commercial relationship, the California State Senate approved <a href="https://leginfo.legislature.ca.gov/faces/billCompareClient.xhtml?bill_id=201920200AB1790">AB-1790</a> Marketplaces: marketplace seller on Sept. 12, 2019. AB-1790 aims to achieve this transparency by imposing certain obligations on a marketplace. These obligations will in turn provide a marketplace seller with more insight into the terms and conditions of its commercial relationship with that marketplace. AB-1790 defines “marketplace” as a physical or electronic place that sells or offers for sale services or personal property for delivery in California and has an agreement with the marketplace seller to make such sales through the marketplace. Commonly known marketplaces include Amazon, eBay, and online destinations of brick-and-mortar stores like Walmart and Target. A “marketplace seller” under AB-1790 is a person residing in California who has an agreement with a marketplace and makes sales through the marketplace. The governor has until Oct. 13, 2019, to sign or veto AB-1790.

Marketplace Requirements

AB-1790 requires a marketplace to ensure that its terms and conditions regarding its commercial relationships with marketplace sellers (1) are plainly and intelligibly drafted; (2) are easily available online for marketplace sellers at all stages of their commercial relationship, including at the relationship’s outset; and (3) identify the dispute resolution process and grounds for terminating the marketplace/marketplace seller commercial relationship.

AB-1790 also requires the marketplace to describe the possibilities and effects of a marketplace seller paying the marketplace to influence search results or otherwise obtain preferential placements within the marketplace. While AB-1790 does not require the marketplace to disclose the price of that ranking or preferential treatment, it must describe how a marketplace seller may obtain a written price.

AB-1790’s Origins

AB-1790 originated in response to the growth of mega-marketplaces, specifically Amazon. It was intended to equalize the marketplace/marketplace seller relationship by making the relationship more transparent, not only by requiring the marketplace to disclose the terms and conditions of the marketplace/marketplace seller relationship but also by requiring the marketplace to identify the process by which one marketplace seller can achieve preferential ranking or placement over another.

AB-1790 in its current form differs sharply from the initially proposed version. In April 2019, when the Assembly Committee on Privacy and Consumer Protection introduced this bill, it focused on limiting Amazon’s access to consumer information, principally to reduce its influence. It sought to prohibit Amazon from (1) requiring third party companies that sell goods and services on the e-commerce marketplace to disclose to the e-commerce marketplace customer information as a condition of permitting these companies to offer goods for sale, and (2) using customer information or providing it to another company for marketing purposes.

Opponents of the bill criticized both its singular focus and its effect on competition; thousands of midsize businesses rely on marketplace recommendation tools to reach new customers. These recommendation tools suggest new products to a customer based on that customer’s prior purchase history and customer data. AB-1790 does not limit a marketplace’s access to customer data.

Conclusion

AB-1790’s evolution to its current form exemplifies how important customer information is in today’s marketplace. Achieving a workable balance between limiting the disclosure of customer information and promoting market competition is difficult to achieve.

AB-1790 Seeks to Add Transparency to the Marketplace/Marketplace Seller Relationship