Dive Brief:

• The season's hottest toys — along with other in-demand merchandise like gaming equipment and high-end sneakers — are being scooped up at discounted online prices and sold at significant markups on marketplaces, U.S. Senator Charles Schumer (D-NY) said this week. 

• In a letter to the National Retail Federation and the Retail Industry Leaders Association, Schumer urged the organizations to investigate the prevalence of bots on their members' websites and help institute best practices to combat them, according to a press release from the senator's office. A request to RILA for its response wasn't immediately returned to Retail Dive. 

• The NRF, for its part, agrees with the senator's effort. “NRF and the retail industry share Senator Schumer’s concerns, and we look forward to working with him and all interested parties to strengthen enforcement against bad actors and take away the tools being used against innocent consumers, particularly during the holiday season,” David French, NRF senior vice president for government relations, said in an email to Retail Dive

Dive Insight:

Schumer has been one of the most active lawmakers when it comes to scrutiny and regulation of e-commerce — wary of privacy encroachment as well as fraud. For years he has worked with the Future of Privacy Forum to develop codes of conduct for retailers using potentially invasive technology, as well as on issues like opt-out provisions and advocacy information for consumers.

Bots have introduced a new level of speed and access in e-commerce, potentially allowing unscrupulous actors to take advantage of retail promotions. Congress has already passed Schumer's BOTS Act, aimed at thwarting such activities by scalpers in the ticket-purchasing industry. But that law doesn't apply to other consumer products.

"Grinch bots cannot be allowed to steal Christmas, or dollars, from the wallets of New Yorkers," Schumer said in a statement. "It's time we help restore an even playing field by blocking the bots."  

As just one example noted by Schumer, Fingerlings, one of the hottest toys this year, typically sell for $14.99. While some were out of stock online at Toy R Us, Walmart and Target, yet Schumer's office found them for sale on Amazon and eBay for as much as $1,000 each. 

Of course, the very items snagged by bot-based scalpers are those that retailers have turned to in order to entice customers to their stores or sites and help them finish up the year in the black. That gives the retail organizations ample reason to join Schumer in the fight, according to the senator's letter.

Retail arbitrage — as the practice of scooping up merchandise at one retailer and reselling it on marketplaces like eBay or Amazon is known — is actually a mixed bag for consumers. While it can be a way to find otherwise sold-out merchandise or items at a discount, savvy shoppers will often find that an item on eBay or Amazon listed at full price or higher can be found at the original retailer (if it's still in stock) for much less.

The problem is acute for retailers, too, especially for the likes of Target, which has seen highly anticipated limited edition fashion collaborations swiftly sell out, only to find the merchandise for sale on eBay for more than its own full prices. But retailers like Walmart and Amazon, which also run their own marketplaces, likely benefit from the practice.

In his letter, Schumer requested that the NRF and RILA "share with my staff all of the steps your members are currently taking to confront this behavior and how they plan to prevent bots from infiltrating their payment platforms in the future." He also urged the organizations to establish "industry-wide best practice standards to ensure consumers are fully protected from sophisticated computer programs."