I suspect it is probably like this story from Seattle (where I used to live).
My wife went into Seattle, and her car was stolen.
The police told her that they don't investigate car theft anymore because, when they arrest car thieves, the courts don't prosecute. So the police don't bother wasting their time on it anymore.
Thus, car theft in Seattle is technically illegal. But allowed in practice.
This, I suspect, is the dynamic of shoplifting in California.