Critical Step to Disable Gangs That Commit Organized Retail Crime

ARLINGTON, VA — August 1, 2008 — The Food Marketing Institute (FMI) hailed the introduction of legislation yesterday evening to combat “e-fencing” — reselling stolen goods over the Internet. FMI praised U.S. Rep. Bobby Scott (D-IN), chairman of the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security, for introducing the bill, which is titled the E-Fencing Enforcement Act of 2008 (H.R. 6713).

     “The Scott bill attacks a chief driver of organized retail crime. It is a critical step to help disable the sophisticated gangs that commit these crimes. The measure will help protect the safety of American consumers from gangs that adulterate products before reselling them,” said John J. Motley III, FMI senior vice president of government and public affairs.

     “The rings that commit these crimes receive a much higher return when fencing goods over internet auction sites rather than using pawn shops and flea markets. They can sell their pilfered products to a global marketplace, and do it anonymously,” he said. “The Scott bill would unmask these thieves and hold internet auctioneers accountable for failing to help identify criminals who exploit their sites.”

Organized retail crime gangs steal more than $30 billion in products each year, according to the FBI. They target infant formula, cold medicines, razors, DVDs, teeth-whitening strips, smoking cessation kits and many other high-cost items. These crime rings sweep shelves of products, bypass security devices and hit many retailers in a single trip.

Reselling these products through internet auction sites, they receive an average of 70 cents on each dollar of the retail price, compared with 30 cents for items fenced through pawn shops and flea markets, according to loss prevention experts.

How the Bill Combats E-Fencing

The Scott legislation makes e-fencing a much riskier criminal enterprise. It requires internet auction sites to:

  • Disclose the name and contact information of high-volume resellers, defined as those with sales of at least $12,000 in 12 months or $5,000 from a single item.

  • Block their access to the site if there is good reason to believe the items being sold were stolen.

The legislation calls upon the Justice Department to “vigorously prosecute” these thieves under the federal criminal code, along with internet auctioneers that fail to gather the contact information required or are aware of high-volume users of their site that are reselling stolen goods.

     Retailers victimized by e-fencers could also bring civil actions against the criminals and internet auctioneers that do not meet their obligations under the law.
     The Scott measure is somewhat similar to provisions in the Organized Retail Crime Act of 2008 (H.R. 6491), a broader measure to make these crimes a federal felony. This legislation was introduced on July 15 by U.S. Reps. Brad Ellsworth (D-IN) and Jim Jordan (R-OH).

     Organized retail crime is a growing problem among food retailers. Six in 10 retailers (59.6 percent) reported increases in the survey for FMI’s Supermarket Security and Loss Prevention 2007 report. Companies of all sizes are dedicating more resources to combat the problem, and many large retailers have loss prevention units focusing exclusively on it.

     States are victims as well, losing about $1.6 billion each year in sales taxes not collected on transactions involving goods stolen by these organized gangs.

     As the leader of the 31-member Coalition Against Organized Retail Crime, FMI has been spearheading efforts to combat this illegal activity for years at the state and federal levels.