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February 16, 2023

Regulatory Update: INFORM Consumers Act

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The INFORM Consumers Act was included in the 2023 omnibus spending bill passed by Congress late last year and signed into law by President Biden on Dec. 29, 2022.

INFORM stands for Integrity, Notification, and Fairness in Online Retail Marketplaces.

The act will require online marketplaces to implement higher levels of seller verification and offer reporting mechanisms for consumers to report suspicious seller activity. Enforcement of the bill will be left to the Federal Trade Commission (FTC), and non-compliance could result in civil penalties as high as $46,517 per violation.

Online marketplaces will have until June 27, 2023, to implement the necessary changes and comply with the new law.

New regulatory requirements for marketplaces

Under the new law, marketplaces must:
  • Authenticate high-volume sellers using their government ID, tax identification, bank account information, and contact information. The bill defines high-volume sellers as “vendors who have made 200 or more discrete sales in a 12-month period that total $5,000 or more.”
  • Display information about the seller to consumers either on a product listing page via a hyperlink or in the order confirmation email if the high-volume seller earns an aggregate total of $20,000 or more in annual gross revenue on an online marketplace. This information includes the seller’s full name, physical address, and contact information. The bill does include several exceptions; for example, certain sellers without a physical address may be exempt from disclosing their personal street address or personal phone number if they agree to respond to consumers’ questions over email within a reasonable time frame.

  • Set up a hotline for consumers to report suspicious seller activity such as the listing of suspected dangerous, counterfeit, or stolen products.
Marketplaces must act fast and verify information annually

Not only must marketplaces verify the identity of high-volume third-party sellers, they must do it quickly, while protecting seller data. According to JD Supra, the law gives marketplaces only 10 days to verify seller information after collecting it.

Once a year, marketplaces must also send a notice to these sellers asking them to electronically certify that their information is still accurate, or they must update it within 10 days. For sellers that don’t respond, marketplaces must try communicating with the seller again, providing another 10 days. If the seller doesn’t respond within that time period, the marketplace must suspend the seller until the information is received or they certify their information is correct.

Under the law, marketplaces must also ensure that data collected from sellers is not used for other purposes, and that reasonable security measures are taken to protect the data.

How the INFORM Consumers Act came to be

The INFORM Consumers Act was originally introduced in the U.S. Senate in March of 2021; however, Congress later introduced a version with minimized requirements. While there were supporters of both versions, some tech companies opposed the stricter version which would have required marketplaces to disclose information about third-party sellers with sales below the $20,000 threshold.

Support for the INFORM Consumers Act

An article on eBay Main Street, which applauded the new law, said that “while the original version of the INFORM Consumers Act would have imposed burdensome information, collection and disclosure requirements for small businesses and individuals, eBay led efforts to vastly improve the bill to provide a nationwide standard that strikes an appropriate balance to increase transparency and safety for consumers online while also protecting seller privacy. This compromise legislation avoids a patchwork of state laws and has broad support from consumer groups, retailers and law enforcement.”

Among organizations supporting the bill were the AFL-CIO, U.S. Chamber of Commerce, the National Association of Manufacturers, the Fraternal Order of Police, the Buy Safe Coalition, the Retail Industry Leaders Association (RILA), and others.

Michael Hanson, Senior Executive Vice President, Public Affairs, for RILA said when the bill was passed that it “will establish transparency and accountability on online third-party marketplaces, making it more difficult for domestic criminals or foreign con artists to hide behind fake screennames to mislead consumers with fake or stolen products.”

A signal of increasing enforcement

The bill represents another step for marketplaces collaborating to operate in a safe and fair online economy which protects consumers, brands, and rightsholders.

Criminals are developing more sophisticated methods to sell counterfeit and fake products online, and as the economy continues to cool, the sale of counterfeit products will become more prevalent. Regulators are taking notice of these factors, so we expect to see even more of this type of legislation. We will continue to track these changes.

As criminal activity and the ensuing regulatory scrutiny intensifies, marketplaces will need to have ongoing intelligence on their merchants and products. EverC solutions are built by experts in the industry and powered by artificial intelligence. Within minutes, MarketView scans and analyzes billions of data points, empowering marketplaces to detect and quickly remove questionable and harmful products before they can cause irreversible harm.

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