What Brand Owners and Platforms Need to Know for Compliance with the INFORM Consumers Act

For any brand owner with an anti-counterfeiting program in place, one of the biggest complaints about online policing is that the information online marketplaces hold about third-party sellers is consistently accurate or complete. I would say that it is not always the case.

Counterfeit sellers often provide fake names, addresses, and other contact information in their online marketplace profiles and do everything they can to stay under the radar online. Therefore, it is common for brand owners to literally find themselves in a dead end with third-party seller surveys.

The Act on Integrity, Notice, and Fairness in the Online Retail Marketplace for Consumers (“INFORM Consumer Act”) was recently enacted as part of the Consolidated Appropriations Act of 2023. and is intended to make it more difficult for counterfeiters to fly under the law. Stay off the radar by requiring online marketplaces to collect, verify, and disclose certain information to consumers from mass third-party sellers.

New requirements for online marketplaces will go into effect on June 27, 2023, and penalties for non-compliance will be severe. The law authorizes the Federal Trade Commission (FTC) to impose penalties of $46,517 per violation (that is, each time an online marketplace fails to collect, verify, or disclose required information), and also allows states to Allows the Attorney General to bring civil lawsuits for violations. action.

With just five months before the effective date, online marketplaces and brand owners should understand all the requirements and nuances of the new law.

What does this law require?

The INFORM Consumer Law includes the following requirements:

• For all Third Party Sellers with more than 200 transactions and more than $5,000 in annual revenue (“High Volume Third Party Sellers”), the Online Marketplace must: collection Government-issued records or tax documents, including Seller’s name, bank account number, tax identification number, business email address and phone number, and government-issued identification of Seller’s agent or business name and address of Seller Entity.
• the online marketplace confirmation (and confirm annually) information and documentation provided by the seller.
• Online marketplaces must implement data security measures. protect Merchant Information.
• the online marketplace Disclosure Certain information about merchants with $20,000 or more in annual revenue to consumers, including merchant name, address, phone number, and email address, or other message options). Online marketplaces are also required to notify consumers when “mixing” occurs (i.e., the product purchased is provided by another seller).
• the online marketplace Hanging Sellers who do not provide the required information within 10 days of Marketplace request.
• Online marketplaces have a large number of seller listing pages where consumers report suspicious activity.

The law contains some significant carve-outs and exceptions, including:

• Since this requirement does not apply to low-volume sellers, some brand owners have expressed concerns that sellers may register multiple accounts to operate below legal standards. .
• The law does not require unbanked sellers to collect bank account numbers.
• The law does not require disclosure of addresses or phone numbers for sellers who prove they only have addresses and personal phone numbers. This is a big exception for online marketplaces like Etsy, which consist primarily of home-based sellers.
• The law does not require disclosure of the seller’s phone number and email address if the marketplace offers direct messaging functionality. Most online marketplaces offer direct message functionality, so phone number and email disclosure requirements are of little use.

How does this law help brand owners?

The law is not intended to help brand owners crack down on counterfeit goods. In fact, the Act does not contain a provision for disclosure of information to brand owners (disclosure to consumers only) and gives private action rights to accuse brand owners of non-compliance with online marketplaces. not created.

That said, the law does provide some indirect benefits for brand owners.

Under this law, brand owners will have easier access to seller information. Brand Owners may make test purchases and collect Merchant Information from order confirmations or account transaction history if Merchant Information is not exposed on the Product Listing Page.

Brand owners may also continue to submit voluntary disclosure requests to online marketplaces following a report of counterfeit listings by a brand owner (although the Act does not require such disclosures). I have not). post-law credibility (considering new requirements for online marketplaces to verify such information);

Brand owners can also provide subpoenas in online marketplaces seeking information about counterfeit sellers that are kept in online marketplaces.

What Should Online Marketplaces Do Now?

By June 27th, online marketplaces must:

• Conduct a thorough review and update of all policies, procedures, and agreements currently in place, including cybersecurity measures, merchant agreements, and privacy policies, including disclosure provisions.
• Determine a mechanism for tracking seller earnings and imposing new requirements when sellers reach the $5,000 and $20,000 thresholds. Or, instead, consider enforcing measures for all sellers (rather than just bulk sellers).
• Choose and implement information verification methods.
  • For example, does the marketplace outsource identity and document verification to a third party?
  • Will the marketplace require a large number of sellers to participate in a video conference and allow marketplace staff to compare the seller’s government-issued ID with the seller’s face in real-time video?
  • Does Marketplace test emails and phone numbers to ensure they are working?
• Review the adequacy of current staffing and determine if additional staff is needed to collect and verify information from sellers, conduct annual certification procedures, and review reports submitted by consumers .
• Add a reporting mechanism to all professional seller product list pages (or all product list pages).

Some online marketplaces have already taken certain steps in anticipation of the new law (especially Amazon, which began requiring US sellers to list their name and address on their public profiles in 2020). ), implementing new requirements will be a daunting task for many. market.

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Author: tang90246