Starting on June 27, 2023, online marketplaces will have to comply with a new federal law called the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the “INFORM Consumers Act”).1 The Act aims to increase transparency of third-party sellers in online retail marketplaces.
Some global online marketplaces may already have systems in place to comply with similar provisions in global laws, such as the EU Digital Services Act. Others may need to stand up entirely new programs. This alert summarizes the key provisions.
Who Does the INFORM Consumers Act Apply To?
The Act applies to online marketplaces, defined as consumer-directed electronic platforms that:
Consumer products are defined as tangible products that are distributed in commerce and are normally used for personal, family, or household purposes. A “third party seller” is defined as any seller other than the marketplace who sells, offers, to sell, or contracts to sell consumer products in the United States through an online marketplace platform, subject to certain exclusions.
What Does the INFORM Consumers Act Require?
Collection and Verification of Information
The Act requires online marketplaces to collect and verify certain information about “high-volume third party sellers,” defined as sellers who enter into 200 or more transactions and make $5,000 or more in gross revenue through the marketplace during a continuous 12-month period during the previous 24 months. Online marketplaces must collect the following information within 10 days of a seller being qualified as a “high-volume third party seller”:
The marketplace must verify that the information collected is accurate within 10 days of receiving it.
Online marketplaces must send a notice to these high-volume sellers at least once a year, asking them to electronically certify their information is accurate, or otherwise update their information within 10 days. If the seller does not provide this information within the specified time period, the marketplace must issue another notice to the seller and provide an opportunity to respond. If the seller has still not provided the information within 10 days, the marketplace must suspend the seller from any future sales activity, until the information or certification is provided. To the extent the seller has provided any changes to its information, the marketplace must verify the information within 10 days.
Data collected solely to comply with the Act can be used for no other purpose, unless required by law. The marketplace must implement and maintain reasonable security procedures to protect the data collected.2
Disclosure of Information
If a “high-volume third party seller” earns an aggregate total of $20,000 or more in annual gross revenue on the online marketplace, the marketplace must display certain information to consumers in a “clear and conspicuous manner,” either on the product listing page via hyperlink or in the order confirmation message sent to the consumer and in the consumer’s account transaction history.
The posted information must include:
If the “high-volume third party seller” uses a different seller to supply the product, information about that seller must also be disclosed to an “authenticated purchaser” upon request. If a seller certifies that they only have a residential address (or combined business and residential address), the marketplace may disclose only the country and, if applicable, state, and tell consumers that there is no business address available, and consumers should contact the business via the other contact information provided. If the seller certifies that they do not have a phone number other than a personal phone number, the online marketplace shall inform the consumer that there is no phone number available for the seller and that consumer inquiries should be directed to the seller’s email address or other electronic messaging. If the marketplace learns that the seller made a misrepresentation in order to justify a partial disclosure or that the seller is not responding within a reasonable time to consumer inquiries via the limited means provided, the marketplace must provide notice to the seller and an opportunity to respond. Unless the seller consents to the full disclosure of identity information, the marketplace must suspend future sales no later than 10 days after the notice is issued.3
Finally, online marketplaces must disclose to consumers clearly and conspicuously on the product listing of any high-volume seller a reporting mechanism that allows for electronic and telephonic reporting of suspicious activity.
How Is the INFORM Consumers Act Enforced and What Are Penalties for Noncompliance?
The Federal Trade Commission (FTC) has explicit authority to enforce this Act and seek civil penalties in the amount of $46,517 per violation.4 The FTC may also, in its discretion, promulgate rules under the Act about collection, verification, and disclosure. In addition to FTC enforcement, state attorneys general have the right to bring a civil action in district court if they have reason to believe that their residents are affected by a violation of this Act or its regulations.5
Online marketplaces should start evaluating their existing protocols in order to determine how they plan to comply with this Act. Even if a marketplace does not currently have any “high-volume third party sellers,” online marketplaces may need to implement procedures to track their sellers’ volumes, so that they can start to comply with the Act when their sellers hit the 200 transaction or $5,000 revenue thresholds.
For the text of the law, see Consolidated Appropriations Act of 2023, H.R. 2617, 117th Cong. Div. BB, Title III (2022), https://www.govinfo.gov/content/pkg/BILLS-117hr2617enr/pdf/BILLS-117hr2617enr.pdf. The law goes into effect 180 days after the Act’s enactment, which is June 27, 2023. Id. at § 301(h).