A Closer Look at the INFORM Consumers Act: Tackling Online Fraud in 2023
September 14, 2023
Privacy Plus+
Privacy, Technology and Perspective
A Closer Look at the INFORM Consumers Act: Tackling Online Fraud in 2023.This week, let’s look at this summer’s new “INFORM Consumers Act,” requiring “online marketplaces” used by high-volume, third-party sellers to collect, verify, and disclose information about their sellers.
Overview: Counterfeit products have been a pestilence (or worse) for at least fifty years. Now they proliferate online, along with stolen goods. The new “Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act,” which was passed in late 2022 and took effect in late June of this year, places more responsibility on online marketplaces to address these scourges by requiring disclosure of the ultimate sellers.
What it Requires: Like many regulations, the INFORM Consumers Act follows the view that disclosure – its own form of “sunlight” – is the best disinfectant. So it requires that “online marketplaces” require each “high-volume, third party seller” (which makes at least 200 sales, totaling at least $5,000 in any continuous 12 of the past 24 months) (an “HV3PS”) to provide the marketplace with its name, bank account information, tax ID, and a working email address and telephone number; physical address, and real-time contact information. The marketplace must verify this information, use the data only for proper purposes, and keep the data secure. But then:
…from the Online Marketplace: For each of its HV3PSs who sell at least $20,000 of products annually, the online marketplace must:
· Disclose to consumers the name, real-time contact information, and physical address of the HV3PS (with certain exceptions, e.g. and HV3PS who genuinely works out of their home;
· Give consumers a “clear and conspicuous way” to report suspicious activity; and
· Kick out HV3PSs who don’t comply.
Who can Enforce: Enforcement is entrusted to the Federal Trade Commission (FTC) as if this were part of the FTC Act, and any state Attorney General or other state official which is empowered to enforce matters of this type. There appears to be no private right of action, though some states do permit suit under their “Little FTC Acts” for violations of the FTC Act. The INFORM Consumers Act does not apply to businesses that have already provided the public with their true names, contact information, and so on.
Our Thoughts: We sense that online marketplaces relying on third-party, high-volume sellers extend far beyond the obvious ones, like Facebook Marketplace, Amazon, and Ebay, so the INFORM Consumers act may apply to many more businesses than appear at first glance. For those to whom it does apply, “Verification” of information given by their HV3PSs seems to be the key issue. How this would be done, exactly, must depend on circumstances; and our own experience is that sellers who would knowingly sell counterfeits would knowingly disguise their identities as well. But the Act may be helpful for stopping “middlemen” sellers who have been “taken in” themselves, and not realize that some of the products being sold on their online marketplaces are counterfeit, fake, or stolen.
You can read the INFORM Consumer Act by clicking on the following link:
https://uscode.house.gov/view.xhtml?req=granuleid:USC-prelim-title15-section45f&num=0&edition=prelim
You can read how some of the most significant online marketplaces are requiring sellers to comply by reading the following:
Facebook:
https://www.facebook.com/business/help/330763671765280
Amazon:
https://www.aboutamazon.com/news/policy-news-views/inform-consumers-act-takes-effect-on-june-27
eBay:
https://www.ebay.com/sellercenter/resources/inform-consumers-act
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Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.