Inform Act Cracks Down on Organized Retail Theft

A new law aims to tackle organized retail theft and the trade of counterfeit and hazardous items on digital platforms.

The Integrity, Notification and Fairness in Online Retail Marketplaces for Consumers Act — or the INFORM Consumers Act — went into effect Tuesday (June 27).

Under the rule, online marketplaces like Amazon and eBay must verify and exchange information regarding third-party sellers that handle a significant number of transactions on their platforms, CNBC reported. Failure to comply with the regulations outlined in the new law may result in companies facing fines exceeding $50,000 for each violation.

The bipartisan legislation was approved in December as a component of an all-inclusive spending bill, per the report.

“The INFORM Consumers Act requires online marketplaces to protect consumers from counterfeit, unsafe and stolen goods by verifying their high-volume third-party sellers’ identities, and making it easier for consumers to report suspicious marketplace activity,” Samuel Levine, director of the Bureau of Consumer Protection at the Federal Trade Commission (FTC) said June 20 in anticipation of the law coming into effect. “The commission will enforce the act to the fullest extent possible and will collaborate with our state partners to hold online marketplaces accountable.”

The FTC will be tasked with enforcing the law along with state attorneys general, CNBC reported.

The legislation comes as a result of collaborative endeavors by trade associations and retailers who actively lobbied Congress, according to the report. Their concerns revolved around a notable surge in retail theft, which they attributed to inadequate regulations surrounding third-party sellers and verification procedures on online platforms.

As per their assertions, organized criminal groups partake in pilfering goods from brick-and-mortar stores and subsequently reselling them on digital marketplaces, often at prices below the original retail value, the report stated.

Some companies have already begun their own campaigns against fake goods. In April, Amazon launched its Anti-Counterfeiting Exchange, which lets participating stores share information about counterfeiters to help all industry participants identify and stop fraudsters who might try to use their services.

Amazon reported earlier this year that it had prevented 6 million counterfeit products from entering the ecosystem in 2022, making some headway in beating back the tide of counterfeit merchandise that has bedeviled online marketplaces for years.

PYMNTS reported in November that counterfeiters were enjoying a boom, with counterfeit and pirated goods making up $500 billion per year in global trade.

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