Retailers are shaping a wave of laws to crack down on organized theft — here’s how they do it

This is the final part of a three-part series on organized retail crime. The stories examine the claims retailers make about how theft is impacting their business and the actions companies and policymakers are taking in response to the issue. Read the first story here and the second here.

When Walmart’s CEO, Doug McMillon, was asked what will happen if shoplifters aren’t aggressively prosecuted, he warned it would have a massive impact on consumers.

“If that’s not corrected over time, prices will be higher, and/or stores will close,” the top executive of the country’s largest retailer said during a December interview with CNBC. 

The retail industry is the nation’s largest private sector employer, and it contributes $3.9 trillion to the country’s annual gross domestic product, according to the National Retail Federation. Shutting down a store as large as Walmart can deprive communities of both jobs and a place to buy everyday goods – and lawmakers are paying attention. 

Since 2022, at least nine states – six so far this year – have passed laws to impose harsher penalties for organized retail crime offenses. Similar bills are pending before legislatures across the country and in the U.S. Senate. 

Behind the sweep of legislation are retailers and trade associations, which are using their collective power to get the bills written and past the finish line. They have also seized on a moment when lawmakers in many parts of the country, and from both sides of the aisle, see a political benefit from appearing tough on crime.

The new and proposed laws aim to deter brazen retail crime and go after the so-called kingpins who lead organized theft groups. But critics say the measures may not actually reduce organized retail crime, and could disproportionately harm marginalized groups. 

“The organized interest groups, whether they’re business or organized labor or the NGO sector, have an insane amount of influence on our politics, and much of the policy agenda of these organizations is not driven by careful consideration of policy outcomes and whether they’re good for [the public],” said Adrian Hemond, CEO of political consulting firm Grassroots Midwest. “It’s focused on what’s good for the organization.”

The legislative efforts come as more retailers blame rising crime for higher inventory losses, also known as shrink. But they have not shared data that proves how much it is costing them, nor are they required to do so. Experts told CNBC some companies could be overstating theft’s impact on their profits to deflect from internal flaws. More references to retail crime could soon come as a string of major retailers gear up to report second-quarter results starting next week.

Throughout 2021 and 2022, retailers and their trade associations were laser-focused on garnering support for the Inform Act. The law requires online marketplaces to disclose the identities of certain high-volume sellers to deter the sale of stolen goods, and proponents said it would fight organized retail crime by making it harder to anonymously resell stolen merchandise.

The primary targets of the bill, which took effect in June, were Amazon and eBay. They are some of traditional retail’s biggest competitors. While the digital behemoths eventually backed the legislation after certain concessions were added, they will now face steep fines if they’re found in violation of the law.

Now that the Inform Act has become law, retail has set its sights on a new target: the Combating Organized Retail Crime Act (CORCA), introduced in January by Sens. Chuck Grassley, R-Iowa, and Catherine Cortez Masto, D-Nev. 

The NRF, the world’s largest industry trade association, helped write the bill, the group told CNBC. The NRF is funded by retailers and its board is comprised of top retail executives from Walmart, Target and Macy’s, among others, according to records and the association’s website. 

CORCA proposes stiffer penalties for theft offenses and calls for a change in the threshold prosecutors must meet before bringing federal theft cases. 

Currently, people can be charged with federal theft crimes only if the stolen goods are worth $5,000 or more in a single instance. CORCA would allow federal prosecutors to bring cases if the aggregate value of the goods reaches $5,000 or more over a 12-month period. 

Cortez Masto told CNBC the bill aims to provide investigators with more tools to take down organized theft groups and give the current laws on the books “more teeth.” 

It would also provide retailers with a formal venue to exchange information with each other and law enforcement through the proposed Organized Retail Crime Coordination Center, which would be required to track organized theft trends and release annual public reports to Congress. Both Cortez Masto and a spokesperson for Grassley said that could clear up some of the opacity surrounding organized retail crime and give the public a better understanding of the issue’s size and scope.

The proposal has 60 bipartisan co-sponsors in the House and five in the Senate, according to GovTrack.

Meanwhile, at least nine states have passed similar laws with the help of local retail associations. Other proposals are pending before legislatures across the country. 

Similar to CORCA, some of the new state laws and bills allow prosecutors to aggregate the total value of stolen goods over a given time period so they can charge repeat offenders with stiffer felonies instead of simple misdemeanors. 

For example, Florida changed its law so people can be charged with felonies after they steal an aggregate amount of goods over 30 days. It also added a provision that says a person who takes 20 or more items during five or more instances within a 30-day period can be charged with a second-degree felony.

That carries a maximum sentence of 15 years in jail.

Both CORCA and the state measures rely on a crime-fighting strategy long used to thwart drug trafficking rings: start with the little fish, the boosters who steal repeatedly from retailers, and then bring in the big fish, the kingpins controlling organized crime rings.

“With the shoplifters and the boosters being the publicly visible criminals, you work through them in order to find out who [the larger players are],” said David Johnston, vice president of asset protection and retail operations at the NRF. “Let’s relate it to drugs, right? Very similar. Who are the people on the street, to who are the people supplying the drugs, to who are the people getting the drugs into the country?”

While the measures are a sure way to hold repeat boosters accountable, they may not actually reduce organized retail crime, said Jake Horowitz, a senior director with the nonpartisan, nonprofit The Pew Charitable Trust. 

“If the question for policymakers is, ‘how do I reduce organized retail crime?’ The answer is unlikely to be through the threat of stiff sanctions to boosters,” said Horowitz, who oversees Pew’s safety and justice portfolio. 

That’s because the same strategy has had little impact on dismantling the illegal drug trade. 

The drug trade is a different market than retail theft. But it’s well studied and offers lessons that can be applied to organized retail crime, which has been researched little, numerous policy experts and criminologists told CNBC. 

In the 1980s and 1990s, Congress enacted sentencing laws that created far stiffer penalties for drug trafficking. But decades later, it hasn’t significantly reduced drug availability or use, research shows.

“If we apply the same drug market lessons, [boosters are] unlikely to be deterred because the probability of being detected or arrested is very low for any given theft,” said Horowitz. “And then when you apply it and sentence people to prison terms, it has almost no incapacitation effect because street-level dealers are instantly replaced. It’s a market. It recruits replacements.” 

Plus, dozens of states already have organized theft laws on the books and the crime is still increasing, according to trade associations.

Many boosters who get caught stealing face misdemeanor charges. They carry less severe penalties and fewer long-term implications than felony charges, which can limit employment and housing opportunities for years after they serve their time.

Retailers and lawmakers say the misdemeanor charges have emboldened theft groups and allowed organized retail crime to spread. They contend the threat of the harsher penalties with felony charges will better deter theft.

While boosters are stealing for their own personal gain, they can come from marginalized groups and many face mental illness, poverty or drug addiction, law enforcement agents previously told CNBC. 

JC Hendrickson, the congressional affairs director for the Justice Action Network, said lawmakers need to consider those factors when proposing policy solutions for organized theft. 

“A police response is only going to get you so far, right? Even if you have the most responsive police department in the country,” said Hendrickson, who advocates for bipartisan criminal justice reform. “When there’s an underlying [drug] misuse problem, you’re still going to have that out there and it’s still going to be something you have to tackle. So in a case like that, a public health response is also really important.” 

Grassley’s office said it is confident CORCA will go a long way in reducing organized retail crime.

While it’s too early to tell how effective the measures will be, the decision to propose aggregating thefts versus lowering the felony theft threshold should help prosecutors weed out petty shoplifters from those involved in organized theft. 

“It seems more like changing laws with a scalpel than with a cleaver,” said Horowitz. “And I think that’s good. We should be more focused, different types of crime are very different, and we shouldn’t use blanket approaches to very different types of crimes.” 

Despite the uncertainty surrounding the claims retailers make about organized theft, they have influenced public policy in large part because of the critical role the industry plays in the economy. 

When retailers that provide jobs and essential goods come under threat, public officials act quickly because store closures can lower employment, tax revenue and the general health of a community.

“If the Walgreens shuts down and this grocery store shuts down, that’s going to decrease property values in the neighborhood because you’re going to have to drive further to go pick up your groceries or your sundries that you would normally get at the Walgreens,” said Hemond from Grassroots Midwest.

“So people are less likely to want to move into these neighborhoods, they are less likely to pay top dollar for the real estate, and other commercial businesses are less likely to move there because they’re not getting the benefits of colocation with popular retail locations.”

Voters also care, and elected officials believe they’ll be rewarded for cracking down on issues that receive a lot of media attention and complaints from the public, said Molly Gill, vice president of policy at the nonpartisan nonprofit Families Against Mandatory Minimums.

However, the solutions they propose don’t always work, said Gill, a former prosecutor who now advocates for sentencing and prison reform. When lawmakers are presented with problems involving crime, they tend to jack up penalties for the offenses instead of addressing the root causes of an issue. She’s concerned the same approach is being used to target organized retail crime.

“When all you have is a hammer, everything looks like a nail,” said Gill. “It doesn’t really matter [if it] doesn’t actually solve the problem. They get to say, ‘look, we solved it, I did something, aren’t we great?’ And move on and the problem persists.”