On June 27, 2023, the INFORM Consumers Act (“the Act”) became effective, which requires online marketplaces to collect, verify, and disclose certain information from high-volume, third-party sellers.
What is the Intent of the Act?
The Act is intended to add more transparency to online transactions by requiring the disclosure of these sellers’ identities and contact information, and to allow consumers to report suspicious behavior from high-volume, third-party sellers. The Act is also intended to deter the use of online marketplaces for criminal conduct, counterfeiting, the sale of stolen goods or unsafe items, and intellectual property infringement.
Who is a “High-Volume, Third-Party Seller”?
The Act defines high-volume, third-party sellers to include sellers that conduct 200 or more transactions resulting in total revenues of $5,000 or more during a twelve-month period.
How it Works:
Online marketplaces must obtain information from these sellers such as (1) bank account numbers, (2) government-issued identification, (3) tax identification numbers, and (4) contact information. Online marketplaces must verify this information at least once a year and require sellers to certify the accuracy of their information and whether there have been any changes. If a seller fails to provide this information, the online platform will be required to suspend the seller’s sales activity until the seller provides such information or certification.
Online marketplaces must also make certain information, such as sellers’ names and contact information, available in the sellers’ product listings for sellers with at least $20,000 in annual gross revenues through the marketplace. Online marketplaces must also provide consumers with methods to report suspicious activity to the platforms, electronically and by telephone. Before this Act, it was difficult to discern the identity of sellers on online marketplaces and to obtain the contact information of the seller. This requirement will help provide consumers with relevant information when making purchases and sellers’ contact information if there are issues after the sale.
Who Will Enforce the Act?
The Federal Trade Commission and the State attorneys general have authority to enforce the Act. Online marketplaces that do not comply may face FTC law enforcement that could result in civil penalties of $50,120 per violation. There are no private rights of action, but State attorney generals can file an action in federal court to enjoin violation of the law, seek civil penalties, obtain damages, restitution, or other compensation for residents of that state.
Benefits of the Act:
For brand owners, the Act will be helpful in policing and curbing intellectual property infringements on online marketplaces. The seller’s identity will now be disclosed, making it easier to enforce intellectual property rights directly against the seller. Brand owners can also report suspicious activity to online marketplaces, which could result in sellers’ accounts being suspended, preventing further sales from their accounts. This reporting mechanism will be a useful tool to prevent further infringement by these sellers.
For consumers, the Act will provide more transparency in an online marketplace’s sales process. Consumers will have access to the seller’s information and will be able to determine whether they want to buy from that seller before proceeding. Consumers will also be able to contact the seller if there are any issues. This is especially useful for contacting sellers outside the U.S., where it can be near impossible to reach sellers. The Act will make sellers more accountable to their consumers about their company and products since they will no longer be able to hide behind the shield of an online marketplace to transact sales in the U.S.
About Knobbe Martens
Knobbe Martens is one of the most highly respected intellectual property law firms, offering all aspects of intellectual property and technology law. The firm’s litigation group handles cases throughout the U.S. and coordinates strategy for disputes worldwide. Founded in California in 1962, the firm has about 300 lawyers and scientists based in offices located in Orange County, Los Angeles, New York, San Diego, San Francisco, Seattle and Washington D.C. Knobbe Martens serves a diverse international client base, from multinational corporations to emerging businesses of all stages. More information about the firm can be found at www.knobbe.com.
