The New INFORM Consumers Act Could Significantly Impact Online Marketplace Operations
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the "INFORM Consumers Act" or "Act") (https://www.congress.gov/117/bills/s936/BILLS-117s936is.pdf ) which passed on December 29, 2022 will come into effect on June 27, 2023. Originally intended to address increasing consumer complaints about online marketplace purchases of counterfeit or defective products from third party sellers, the Act requires both collection, verification and, in certain cases, disclosure of third party seller information to combat this perceived marketplace unaccountability.
Specifically, the Act generally requires online marketplaces to police high volume sellers (third party sellers with 200+ discrete sales of consumer products in a 12-month period resulting in $5,000+ in gross revenues) in the following ways:
- Obtaining bank account, tax ID, and other contact information for all high-volume third-party sellers;
- Ensuring that such information is subject to annual verification and certification requirements;
- Including on the product listing page for such sellers a reporting mechanism allowing for consumer reporting of suspicious activity to the marketplaces; and
- For certain high volume third party sellers (with $200,000+ in gross annual revenue), also ensuring that certain information is disclosed to consumers in a clear and conspicuous manner.
Of course, numerous exceptions also apply. Interestingly, not all online marketplaces are subject to these new requirements. The Act defines an Online Marketplace as:
An electronically based or accessed platform that
(A) includes features that allow for, facilitate, or enable third
party sellers to engage in the sale, purchase, payment, storage,
shipping, or delivery of a consumer product in the United States;
and
(B) is used by one or more third party sellers for such
purposes.
As for the definition of consumer product, the Act defines that term by reference to the Magnuson Moss Warranty Act, which in turn defines consumer product as "any tangible property which is distributed in commerce and which is normally used for personal, family, or household purposes..." (Emphasis added.) That would suggest that consumer goods which are entirely digital are outside the scope of coverage. There has been no formal acknowledgement of such limitation by the FTC as of this date, however.
In any event, online marketplaces which ARE subject to the Act should act quickly to identify their high-volume third-party sellers, to obtain and verify the necessary information, to amend their procedures and reporting mechanisms, and when applicable, to clearly and conspicuously display such information to their customers prior to the effective date. We would anticipate that in many instances, the new requirements will also necessitate amendments to existing contracts between the marketplaces and their third-party sellers.
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