On August 18, the FTC published guidance for third party sellers detailing how the INFORM Consumers Act, which took effect on June 27, may impact their businesses. The INFORM Act provides that online marketplaces where high-volume third party sellers offer new or unused consumer products must collect, verify, and disclose certain information about those sellers. Online marketplaces must also offer a clear mechanism for consumers to report suspicious activity.
The FTC guidance explains that the gating inquiry for sellers is whether they are impacted by the INFORM Act in the first place. This analysis involves answering three questions: (1) whether the seller offers products on a platform that meets the definition of an "online marketplace"; (2) whether the seller offers merchandise that meets the definition of "consumer product"; and (3) whether the seller meets the definition of "high-volume third party seller."
The FTC guidance further outlines how online marketplaces' obligations under the INFORM Act in turn impact affected sellers. For example, once a seller qualifies as a "high-volume third party seller," the online marketplace must collect and verify the seller's bank account information, tax ID information, and contact information. Online marketplaces must also ensure that such information is current, meaning affected sellers can expect follow up requests for information at least annually. For sellers with gross revenues of $20,000 or more on a particular online marketplace, the marketplace must, subject to certain limited exceptions, disclose specified seller information to consumers, including the seller's full name, physical address, and contact information. Finally, the INFORM Act requires that online marketplaces disclose to consumers, in a clear and conspicuous manner on the product listing of any affected seller, a reporting mechanism that allows for electronic and telephonic reporting of suspicious marketplace activity to the online marketplace.
Putting it into Practice: The recent FTC guidance for sellers follows previously issued FTC guidance regarding INFORM Act compliance that was targeted at online marketplaces (see previous blog post here). While the INFORM Act primarily governs online marketplaces, the FTC's newly issued guidance makes clear that the INFORM Act also places burdens and affirmative obligations on affected sellers. The guidance further highlights that the INFORM Act only sets a floor; online marketplaces can implement measures on collection, verification, and disclosure that go beyond what the INFORM Act requires. Third party sellers offering products on online marketplaces should therefore review the INFORM Act and the FTC's corresponding guidance to determine whether and to what extent their business falls within the scope of the INFORM Act and ensure compliance accordingly.
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