5 Key Things You Need to Know About the INFORM Act

There’s a new law in town and it’s taking on organized retail theft and the trade of counterfeit and hazardous goods on digital platforms.

The act follows the prevalence of sellers in China and other countries outside the United States offering counterfeit and stolen merchandise at discounted prices and the persistent need for Washington to intervene and address this issue.

To tackle consumer safety concerns within online marketplaces, the bipartisan INFORM Act — the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act — has been implemented. This legislation, signed into law in December, took effect on Tuesday, June 27.

“People deserve to know basic information about those who sell them consumer products online. By providing appropriate verification and transparency of high-volume third-party sellers, the INFORM Consumers Act will deter online sales of stolen, counterfeit, and unsafe goods and protect consumers,” said U.S. Sens. Bill Cassidy, R-La., and Dick Durbin, D-Ill., in a statement.

“The bill is crucial to protecting Americans from scammers on the internet.”

But what does the INFORM Act actually do? Here are five key things you need to know about the INFORM Act:

Its focus

The INFORM Act is focused on combating the sale of illegal and counterfeit products in eCommerce. It aims to increase transparency and seller verification standards to protect consumers and ensure the integrity of online retail marketplaces.

The act seeks to establish national standards for marketplaces and sellers to follow, requiring marketplaces to collect information on high-volume sellers.

Sellers verification and identification

The act requires high-volume third-party sellers, those who make 200 sales or more in a year totaling more than $5,000, such as on eBay and Amazon, to provide identification and contact information to large marketplace platforms.

Third-party sellers are required to complete the legal identification process within 10 days, and failure to comply within this period will result in the suspension of their seller account.

Protocols and penalties

Sellers who fail to comply with the act’s requirements may face suspension.

According to CNBC, the responsibility of enforcing the law will be assigned to the Federal Trade Commission (FTC) in conjunction with state attorneys general.

Enforcement authorities can pursue civil penalties of up to $50,120 for each violation, along with seeking injunctive relief. It’s important to note that the act does not establish a private right of action, meaning individuals cannot take legal action based on this legislation.

Impact small businesses

While the INFORM Act primarily targets fraudulent sellers, small businesses may face challenges due to documentation requirements. Efforts have been made to avoid burdening small businesses or individuals with excessive disclosure requirements.

The act aims to strike a balance between consumer protection and supporting small businesses.

Support and stakeholders

The INFORM Act has garnered support from various stakeholders, including law enforcement agencies, manufacturers, consumer groups, retailers and sellers.

In response to the act, Amazon said in an email to Inc.: “Amazon has a zero-tolerance policy for counterfeit products. We have proactive measures in place to prevent counterfeit products from being listed and continuously monitor our store. If we identify an issue, we act quickly to protect customers and brands, including removing counterfeit listings and blocking accounts. We applaud the new Inform regulation in establishing a baseline expectation for the entire industry.”

Amazon said it thwarted the entry of 6 million counterfeit products into its ecosystem in 2022 through its Anti-Counterfeiting Exchange, which lets participating stores exchange information regarding counterfeiters, fostering collaboration among industry participants to identify and stop to fraudulent sellers.

The takeaway

For brands and retailers who are selling on third-party marketplaces, particularly on platforms like Amazon, simply operate with transparency, honesty, and integrity, as it not only fosters trust among consumers but also contributes to a sustainable and successful online business.