Quick Guide: Wrangling Acronyms: SAGs, ORC and AI

Organized retail crime or ORC is one of the few bipartisan issues that lawmakers at both the federal and state levels agree has no upside for consumers or retailers, and regulators are stepping up.  Artificial intelligence or AI, on the other hand, has the potential to do a great deal of good, provided it can be harnessed and regulated appropriately. Listen to Episode 10 of State AG Pulse to hear Lori Kalani, Siran Faulders and Maria Colsey Heard talk about the actions being taken by state AGs in these emerging areas and how businesses can respond.


(00:44) Lori, Siran and Maria introduce themselves and the emerging hot consumer protection topics (and acronyms) of ORC and AI.

(01:45) Siran explains that when ORC or organized retail crime first began to come to the attention of attorneys general, there were some who were unfamiliar with what it meant, and skeptical that it was an issue in their state, but that is no longer the case. She defines ORC as systemic and sophisticated large scale theft of retail goods sold for a financial gain to wholesalers, retailers, or individual consumers for a fraction of the retail cost.

(04:21) Maria makes the point that even human trafficking can be implicated, with people who are vulnerable acting as the shoplifters.

(04:54) Lori notes that every single AG conference or meeting she goes to at the moment has some discussion of ORC. She asks Siran for her view on why there is increased scrutiny by state AGs. Siran responds that state AGs on both sides of the aisle are working hand-in-hand with both state and federal law enforcement, and in partnership with retailers themselves to fight this criminal activity. On the federal side, Congress has passed the INFORM Consumers Act to take effect June 27, which applies to all online marketplaces, and requires retailers to collect, verify, and disclose certain information about “high volume” third-party sellers. It also gives state AGs and the FTC authority to enforce if online marketplaces have failed to collect and disclose this information.

(09:56) On the state side, AGs have been active over the last two years, with Republicans and Democrats alike agreeing that it is a serious problem. The Attorney General Alliance has set up a bipartisan working group that meets regularly and includes private sector companies.

(10:33) Lori interrupts to make the point that there’s not just coordination between local law enforcement and federal law enforcement, and state law enforcement, but also over state lines, since products are frequently bought in one state but sold in another.

(11:13) Maria notes that it’s a place for national associations to get involved and speak to regulators on behalf of smaller and local business.

(12:06) Siran reiterates that a total of 13 states, including both red and blue states, have passed their own INFORM laws in the last six months, and highlights the work of Kwame Raoul as one of the first AGs to highlight and take on this issue in a big way.

(13:21) Lori turns the conversation towards the future and where this is going now that these various pieces of legislation are in place. Siran expects more states to introduce and debate the need for a state-level INFORM Acts, while some AGs continue to address the problem using their existing prosecution tools under the federal INFORM Act.

(14:35) The conversation turns to AI, which Maria defines as a computer system that can perform tasks that typically a human would perform, including human brain functions like decision-making. She further defines the algorithms used by artificial intelligence technology as lists of instructions for specific actions, step by step, to get to the answer to a question or solve a problem. AI is a marketing term, and marketing claims are traditional areas for state AG and FTC investigation and oversight; thus AI is of growing interest to AGs and the FTC.

(16:53) Recently a bill was introduced in the US Congress to establish a federal commission to regulate AI, the need for which is questioned given the plethora of regulators in this space. State legislatures, including California which has been a leader in the privacy space, have already passed laws to regulate some aspects of AI as used by nonprofit and for-profit organizations. One of the key challenges for regulators is trying to balance the good with what they see as a potential marketing, privacy, civil rights and other issues of concern.

(19:15) Lori references the White House’s blueprint for an AI bill of rights and its 5 core principles and asks why AGs are concerned about AI beyond the regular privacy legislation and regulation that already exists.

(20:47) Maria responds that she thinks the regulators are still playing catch up in a rapidly progressing technology field, and continuing to explore issues around the reliability and currency of data and objectivity of algorithms in the battle against “garbage in, garbage out”. AGs and federal agencies are also focused on false and deceptive marketing claims for goods and services to ensure that they are truthful and clear to the average consumer, and that any claims made about AI can be substantiated.

(23:34) Maria presents an example that demonstrates a good use of AI. A publishing company used AI to write more inclusive job postings that resulted in a spike in women recruits from 10% to 57%. She emphasizes that now is the time for businesses using AI to help AGs understand the technology and its benefits.

(25:33) Lori raises the importance of self-regulation and exhorts businesses to develop privacy policies that account for AI.

(26:42) Maria adds that as the technology becomes more embedded in business processes, issues will arise about the kinds of data businesses are collecting from consumers and how that data is stored and protected, especially in the healthcare arena.

(28:40) The discussion wraps up on a note of warning, that regulators’ interest in these issues is not going away any time soon, and that businesses need to be able to provide support for any AI-related marketing claims, and ensure that their data policies directly address AI.

To listen to the full podcast, click here. To listen to a particular section, open the recording and use the time stamps provided above to navigate to the desired part.