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Is Your Online Market Place Ready for the INFORM Consumers Act?

Legal Developments

On June 27th the Federal Trade Commission (FTC) began enforcing a new law aimed at providing “…more transparency to online transactions and to deter criminals from acquiring stolen, counterfeit, or unsafe items and selling them through those marketplaces.” The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (INFORM Consumers Act) requires online marketplaces like Amazon and eBay to implement due diligence and disclosure measures to help protect consumers from bad actors. The INFORM Act requires online marketplaces to collect, verify, and disclose certain information about “high-volume third-party sellers” that offer new or unused consumer products. 

What Are the Requirements of the Act?

In general, the Act requires online marketplaces – a term defined in statute – to do the following:

  1. Collect the seller identification and bank account information within ten days of the seller qualifying as a “high-volume third-party seller”- a term also defined in statute; verify the information or change in information within ten days of receipt; and periodically, but not less than annual notify high-volume third-party sellers of their obligations under the act and have said sellers electronically certify the truth and currentness of any provided information.

  2. Maintain data security measures to protect seller information that the online marketplace collects.

  3. Disclose specific information about high-volume third-party sellers in the sellers’ product listings or order confirmations.

  4. Suspend seller accounts if any requested information, certifications, or disclosures are not provided within ten days of the marketplace’s request.

  5. Implement a system on product listing pages for high-volume third-party sellers that allows for suspicious marketplace activity to be reported via telephone or electronically to the online marketplace.

What Are the Penalties?

While the FTC is the federal enforcer, the Act allows any attorney general who has reason to believe that an online marketplace is violating the act to bring a civil action in any appropriate district court in the country. Violation of the Act is treated “as a violation of a rule defining an unfair or deceptive act or practice prescribed under section 18(a)(1)(B) of the Federal Trade Commission Act (15 U.S.C. 57a(a)(1)(B)),” subjecting the offending party to a civil penalty of $50,120 per violation.

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