On June 20, the FTC announced that it has sent letters to 50 online marketplaces nationwide notifying them about their obligations to comply with the new Integrity, Notification, and Fairness in Online Retail Marketplaces (“INFORM”) for Consumers Act, which is set to take effect on June 27, 2023. A template sample of the FTC’s letter can be accessed here.
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. Specifically, the INFORM Consumers Act places certain diligence and disclosure requirements on covered businesses, including the following:
- Collect seller identification and bank account information within ten days of the seller qualifying as a “high-volume third party seller,” verify the information within ten days of receipt, and collect seller certifications regarding the accuracy of the information at least annually.
- Maintain data security measures to protect seller information that the marketplace collects.
- Disclose to buyers the identification information for sellers with $20,000 or more in annual revenue from marketplace sales.
- Suspend seller accounts if requested information, certifications, or disclosures are not provided within ten days of a marketplace’s request.
- Implement a reporting feature on product listing pages for high-volume third party sellers that allows for electronic and telephonic reports.
Previously, on June 8, the FTC issued guidance materials to help online marketplaces and other covered businesses comply with the INFORM Consumers Act.
Putting it into Practice: The INFORM Consumers Act is an example of a “chokepoint” style approach to policing online marketplaces. “Operation Chokepoint,” which formally ended in 2017, required banks and payment processors to police merchants potentially engaged in fraud and prevent access to payment systems by such merchants. The INFORM Consumers Act mimics the chokepoint approach in requiring online marketplaces to vet and monitor the activities of sellers on their platforms. As explained by Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, the FTC intends to enforce the INFORM Consumers Act to the fullest extent of the law and will collaborate with state agencies to pursue penalties against online marketplaces that fail to comply. Accordingly, online marketplaces and retail platforms should review the INFORM Consumers Act and the FTC’s corresponding guidance to ensure compliance and avoid becoming the target of an enforcement action.