By  on October 26, 2007

WASHINGTON — Target Corp. and other retailers squared off against eBay Thursday when the online marketplace's role in policing itself for stolen goods came under Congressional scrutiny at a hearing on organized retail crime, which costs merchants as much as $40 billion annually.

The House Judiciary Committee's Subcommittee on Crime, Terrorism & Homeland Security explored the issues as lawmakers consider introducing legislation to combat organized crime, which stores say has increased significantly with the success of eBay and other Internet auction sites.

"The problem of organized retail crime is growing in dimension," said Rep. Robert Scott (D., Va.), chairman of the subcommittee. "With organized theft rings that employ numerous individuals and cross state lines, state and local enforcement of the laws is inadequate."

The Coalition Against Organized Retail Crime, with members such as Target, Macy's Inc., Wal-Mart Stores Inc., the National Retail Federation and the Retail Industry Leaders Association, is lobbying for legislation that would clearly define organized retail crime, make it a federal felony and hold online auction sites more accountable for the sale of stolen merchandise.

The coalition is pressing for a provision in the bill requiring more disclosure of information on "high-volume" sellers and posting the serial numbers of products, similar to what eBay requires for the sale of motor vehicles. In addition, the retail group said it is seeking language in the bill that would require sellers to disclose in their listings if they offer merchandise that is "exclusively available only through a certain retail source" and require Internet sites to make that disclosure.

"For years, retailers have vigorously worked to reduce organized retail crime, and as the problem grows, the industry has invested more than $10 billion annually to improve security," said Brad Brekke, vice president of assets protection for Target.

Brekke noted that Target tries to assist law enforcement and said the solution must involve deterrence.

"Sending more people into the criminal justice system is not the answer and not what we are proposing," Brekke said. "We need Internet auction sites to make simple changes as a deterrent to selling stolen property. The simple step of requiring Internet sellers to identify themselves, as well as requiring product identifiers such as serial numbers" to be posted on the site, would help facilitate tracing stolen property.Brekke said a collaborative database, called the Law Enforcement Retail Partnership Network, or LERPnet, launched in April that connects retailers with each other and law enforcement officials sharing statistics on suspected thieves and criminal activity, might be used to track serial numbers.

Robert Chesnut, senior vice president of rules, trust and safety for eBay, defended the company's collaborative efforts with retailers and law enforcement. He told lawmakers that eBay has trading platforms in 38 countries with 240 million registered users and employs 2,000 employees around the world to combat online fraud, including the sale of stolen goods.

In addition, the company has a fraud investigations team that trained some 3,000 law enforcement personnel in North America last year about online fraud, he said.

"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, including sharing information about a targeted seller with the appropriate enforcement agency," Chesnut said.

But under questioning from lawmakers about whether eBay would consider taking steps to disclose information about "high volume" sellers and posting serial numbers of products, Chesnut said the company has to "balance the privacy of an individual concerned about having their information posted on the Internet versus the need of the retailer."

The number of law enforcement inquiries regarding possible stolen merchandise on eBay average 1,000 a year, Chesnut said, adding, "We have not seen a significant increase in stolen property reports over the last several years."

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