Earlier this month, the Federal Trade Commission (FTC) and the Department of Justice (DOJ) together announced a settlement with Whaleco, Inc., the operator of Temu, over allegations that the online marketplace violated the INFORM Act. According to the complaint, Temu failed to provide consumers with required information about sellers or reporting tools to help consumers identify and avoid potentially fraudulent or unsafe products. Under the settlement, Temu will pay $2 million in civil penalties and must put measures in place to bring its practices in line with the law.
The INFORM Act requires online marketplaces to include a mechanism for consumers to report suspicious activity on listings from high-volume third-party sellers. Among other requirements, it obligates platforms to disclose identifying information for these sellers, including the name of the seller, physical address, and contact information, so consumers can reach them directly.
While the INFORM Act took effect in June 2023, this settlement marks the first enforcement of the law.
Link to FTC Alleged Violations of Reporting Mechanism Requirements FTC Alleged Violations of Reporting Mechanism Requirements
According to the FTC, Temu failed to implement the reporting tools required by the INFORM Act in a timely and accessible way. The law requires marketplaces to offer both electronic and phone-based reporting for suspicious or unsafe product listings. The complaint alleges that Temu did not initially provide a phone option and that once it was introduced in January 2024, the option was difficult for consumers to find and use.
Additionally, Temu’s “gamified” experiences (such as spin-the-wheel or reward-based shopping games) allegedly did not provide any reporting mechanism until November 2024. Even after reporting functions were added, the FTC alleges they were not displayed in the required clear and conspicuous manner.
Link to FTC Alleged Inadequate Disclosure of Seller Information FTC Alleged Inadequate Disclosure of Seller Information
The FTC further alleged that Temu failed to make required seller information clear and accessible, falling short of the INFORM Act’s requirements.
The complaint alleges that, in many instances, Temu did not clearly and conspicuously disclose the required information for high-volume third-party sellers—such as the seller’s name, physical address, and contact information. These failures were particularly noticeable in its mobile website interface and gamified product listings.
When seller information was available, the complaint states it was difficult for consumers to locate. For example, disclosures were hidden behind vague links like “See all,” were embedded in small icons, or required scrolling through multiple screens to find.
Link to Enforcement and Compliance Implications Enforcement and Compliance Implications
Under the settlement, Temu must pay a $2 million civil penalty and implement corrective measures, including maintaining a telephonic reporting system that allows callers to listen to and approve their report and providing clear seller disclosures across all interfaces. The company must submit annual compliance reports and notify authorities of material changes for the next 10 years, with regulators retaining authority to verify compliance. The order also compels Temu to offer and clearly show ways for consumers to report suspicious listings and see key seller information.
With the expansion of online marketplaces and gamified shopping experiences, this case serves as an important reminder of the need for compliance with the INFORM Act. Companies selling through high-volume third-party platforms should implement compliance features immediately and know that any delay–even by months–can trigger enforcement. Properly designing these tools and disclosures helps prevent consumer confusion and reduces the risk of enforcement action.
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