In-Depth: Rep. Paul Tonko (D-NY) introduced this bill to crack down on the use of grinch bots to snatch up large batches of toys in order to resell them to parents at unfair, inflated prices:

“The American people should be able to spend the holidays with their loved ones, not forced to camp out at store openings or race against an automated buying algorithm just to get an affordable gift for their kids. Letting these grinch bots continue to rig the retail market and squeeze consumers doesn’t just hurt families during the holidays, it hurts small business owners, entrepreneurs, innovative product creators and all legitimate retailers throughout the year. We have a duty to stand up for these folks, and not allow this kind of market manipulation to go unchecked.”

Sen. Tom Udall (D-NM), who helped introduce a Senate companion bill to this legislation, says grinch bots add unnecessary stress to the holidays:

“We can’t let ‘Grinch bots’ steal our hard-earned money—or the holidays. Each holiday season, New Mexicans work day in and day out, saving up and looking for the best deals to surprise friends and family with thoughtful gifts. But when resellers use automated ‘Grinch bots’ to cheat the system, they can snatch up beloved toys and highly discounted items to sell at outrageously inflated markups—all with a few keystrokes. Holiday shopping can be stressful enough without having to compete with an army of ‘Grinch bots’ that don’t even have to sneak down the chimney to steal presents. Our legislation would help protect consumers from getting squeezed by scammers and ensure these ‘Grinch bots’ don’t spoil the holidays for our loved ones. This year, let’s hope Congress’s heart will grow three sizes so we can come together to stop Grinch bots from stealing the holidays.”

Sen. Chuck Schumer, one of the cosponsors of the Senate version of this bill, argues that grinch bots hurt the middle class:

“Grinch bots cannot be allowed to steal Christmas, or dollars, from the wallets of countless consumers. Middle class folks save up — a little here, a little there — working to afford the hottest gifts of the season for their kids but ever-changing technology and its challenges are making that very difficult. It’s time we help restore an even playing field by blocking the bots.”

Barry Brownstein, professor emeritus of economics and leadership at the University of Baltimore, argues that grinch bots are a non-issue, and not worth regulating. Drawing a parallel between resellers and commodities speculators, Brownstein argues that resellers may play a valuable role in stabilizing toy prices:

“Speculators, such as the fictitious Randolph and Mortimer Duke in Trading Places, are often reviled. What few people understand is the role that speculators play in stabilizing prices. If it wasn’t for speculators, the supermarket price of a loaf of bread would occasionally swing wildly. Suppose speculation was banned. Now suppose there was a drought in wheat producing states. With a smaller wheat harvest, the price of wheat would spike, and so would the price of your loaf of bread. Thankfully, speculation is legal. Expecting a higher price, due to drought, speculators buy contracts for future deliveries of wheat. Their actions bid up the price of the new wheat crop, before its harvest. Then if the drought arrives and the supply of wheat drops, the speculator will sell those futures contracts. In the process, the sales of futures smooth out price fluctuations by transferring supply to a period of relatively lower supply.”

There are no House cosponsors of this bill. A companion bill in the Senate, co-sponsored by Sens. Tom Udall (D-NM), Richard Blumenthal (D-CT), and Chuck Schumer (D-NY), was introduced at the same time as this bill.

Of Note: So-called “grinch bots” are bots used by resellers, particularly during the holiday shopping season, to purchase popular items online. They can often buy out an entire inventory before any humans get a chance to place an order. Then, the resellers resell the items they’ve bot at inflated prices. In totality, this dynamic makes it nearly impossible for customers to purchase certain hot toys online or in stores at retail prices, forcing them to pay significant markups to obtain these popular gifts.

Covering this phenomenon last year, The Atlantic described an unfair fight between parents seeking to buy toys for their kids and profit-motivated bot operators:

“Every holiday season has its must-have gizmo, like Cabbage Patch Kids or Tickle Me Elmo. This year’s sensation is the Fingerling, a plastic five-inch-tall baby monkey. Many years ago, in the days when malls ruled the world, adoring mothers and fathers fearing the wrath of a wanting child would storm into stores and shove each other across aisles to grab a toy like the Fingerling. These days, however, the battle royale over popular toys has shifted online, where the dangers are more exotic than a mother’s flying elbow. The new holiday showdown pits humans against software. It’s not a fair fight. A fleet of bots—software programs that can automate activities like search, chat, and online ordering—have been dispatched by anonymous online scalpers to buy up the most popular children’s toys on the internet. These bots overwhelm retail sites with bulk orders from multiple IP addresses and autofill payment and address information faster than humanly possible. Hence, the apt nickname: Grinch bots. Fingerlings are currently sold out at the websites of Toys “R” Us, Walmart, and Target. Where did the toys go? To sites like Amazon and eBay, where the bots’ owners are listing the $15 playthings for $1,000, or more. (It’s not clear who these people are, but they evidently possess programming chops, yet no soul.) Cyber scalpers have used the same methods to deplete online retailers of other toys, like Barbie Hello Dreamhouse and L.O.L. Surprise! Doll, which they can resell at exorbitant prices."

The Atlantic observed that retailers and reselling platforms alike have not taken proactive measure to prevent this phenomenon:

“Retailers have failed to block the bots, and platforms have refused to stop the sellers. For example, eBay has claimed that there’s little it can do to halt the legal exchange of toys. ‘As an open marketplace, eBay is a global indicator of trends in which supply and demand dictate the pricing of items,’ the company said in a statement. ‘As long as the item is legal to sell and complies with our policies, it can be sold on eBay.’ The Grinch bots are not technically stealing or defrauding. They are practicing a form of legally sanctioned ransom.”

Sen. Schumer summarizes the situation, “When it comes to speed-of-purchase of hot holiday gifts, your average consumer is bringing a knife to a gun fight.” Sen. Schumer’s office found highly inflated prices for 2017’s hottest toys, attributable to grinch bots’ influence:

• Fingerling ($14.99 retail), out of stock at Toys-R-Us, Walmart, and Target, sold on Amazon and eBay for as much as $1,000 each — an increase of 6,571% over retail

• NES Classic Edition (retail $79.99), out of stock at BestBuy, Game Stop, and Target, sold on Amazon and eBay for as much as $13,000 — an increase of 16,152% over its retail price

• L.O.L. Surprise! Dolls ($9.99 retail), out of stock at Toys-R-Us, Target, and Walmart, were available on Amazon and eBay for as much as $500 each – a 4,905 percent increase over their retail price.

• Barbie Hello Dreamhouse ($300 retail), out of stock at Toys-R-Us, sold on Amazon and eBay for as much as $1,500 — a 400 percent increase over its retail price.

During Black Friday and Cyber Monday 2017, bot usage spiked 20% on both days. Security researchers also note that bots designed to buy rare sneakers are a persistent issue, as developers will create AI to buy shoes from companies like Nike and Adidas as quickly as possible. In March, researchers from Akamai saw that a botnet was sending over 473 million requests to purchase sneakers in a single day.

There is precedent for regulating bots: In 2016, President Barack Obama signed the Better Online Ticket Sales Act (BOTS Act) to ban “ticket bots” that intentionally bypass security measures on online ticketing websites to unfairly outprice individual fans. This bill applies the BOTS Acts’ structure to e-commerce sites to ban bots bypassing security measures on online retail sites.

Media:

• Senate Co-Sponsor Sen. Tom Udall (D-NM) Press Release

• Barry Brownstein Op-Ed (Opposed)

• The Hill

• CNet

• The Atlantic (Context)

• Distil Networks (Context)