Are All Online Sales Governed Under Federal Law?

Navigating the differences between federal and state laws can get tricky, especially in the area of commerce and online sales. While it is well understood that each state has its own laws governing how and what people can buy and sell products or services, things get tricky when the internet is involved. Despite all the ways your internet browsing attempts to localize your activity, the internet and online shopping world is still a global market. While the federal government does not get involved in transaction crimes that are of a truly local nature, they do get involved when the crime is considered part of “interstate commerce”. For internet sales that truly involve items being sold and delivered across states or even countries, it makes sense for them to be considered interstate commerce, but what about using local sales platforms?

Judges across the United States have largely ruled that a crime stemming from an online ad on these platforms can constitute a violation in interstate commerce, and hence a federal crime, even when the defendant and victim were in the same state. The reason for this is rather complicated, so we will have to look at case studies where such violations were ruled as federal violations or not. 

yard sign for a garage sale

Case Study on Local Ads as Interstate Commerce - US v. Luong

An interesting case study on local ads as interstate commerce is US v. Tuan Ngoc Luong. Luong advertised a used car on Craigslist in part of the San Francisco Bay Area. Another man from the Bay area responded to the ad and they decided to meet at a transit station in the area. Luong let the man take a test drive, but then decided to rob him at gunpoint. The federal Department of Justice prosecuted Luong for a Hobbs Act Robbery, a federal offense, and he was convicted by the jury. The Ninth circuit said that the Craigslist ad affected interstate commerce sufficiently enough to support federal instead of state charges.

This was all in spite of the fact that Craigslist does do a great deal to make its market local. It breaks down its database geographically and does not allow visitors to do a global search across the entire database. Essentially, consumers can only access and view one local version of Craigslist at a time. However, consumers are not locked into only searching in the local databases of their area, as the platform does not do anything to verify that your location search is actually in the state you live in. Craigslist will even promote other nearby local versions of its database. To provide an example, if you live in Raleigh and want to search the Raleigh Craiglist database, it will not show you ads from Greensboro. However, there is nothing stopping you from opening a separate tab to browse the Greensboro Craigslist, and while viewing either version of Craigslist you may see recommendations for other nearby cities and localities.

None of this is part of an unusual use case, as many people looking to buy something may start their search local, but then search other areas that are further away until they find what they are looking for, even sometimes making a purchase from a Craigslist database in a different state.In Luong’s case, the court cited that the victim made his own motorcycle sale in California to a buyer who was living in Nevada, and received inquiries on other vehicles he posted on the Bay Area Craigslist from people in Nevada, Texas, and even Florida.

Essentially, the court argued that even though this crime involved a transaction between two people in the same state, the crime was facilitated on a platform that could just as easily have involved a victim from out of state.

Can an Online Sales Platform Exist Without Affecting Interstate Commerce?

While online sale platforms like Craigslist and Facebook Marketplace do not do enough to localize transactions to avoid being part of interstate commerce, it is possible for a commercial sales platform to sufficiently localize transactions to avoid possible interstate involvement. This is a fairly standard matter for actual businesses that need to be compliant with varying local laws when delivering certain products. For example, alcohol retailers like Total Wine will enable or disable their shipping options depending on the product and shipping address, due to different local regulations. 

A more interesting and recent legal frontier is online marijuana sales, where some developers have devised ways to allow online sales of marijuana in states where it is legal while not affecting interstate commerce. For example, Eaze, a California-based marijuana delivery service, discovered that they can have dispensary employees deliver marijuana to people within California, so long as various marijuana handling regulations are strictly followed. As this service does not work outside of the state or in any Californian municipality that has banned marijuana delivery, it does not violate state or federal laws. Unlike Craigslist, while it would be possible to download and view Eaze outside of California, there is no way to facilitate a delivery to a different state using the platform.

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