Beginning June 27, online marketplaces covered by the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the “INFORM Consumers Act”), which was signed into law last December, will be required to collect, verify, and disclose certain information to consumers regarding high-volume third party sellers of consumer products.
Intended to combat the online sale of stolen and counterfeit goods, the INFORM Consumers Act applies to “online marketplaces” (broadly defined) where third parties sell “consumer products,” defined, by reference to the Magnuson-Moss Warranty Act, as “any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes.”
The Act generally requires online marketplaces to collect and verify the following information from “high-volume third party sellers”—defined as those who, in any continuous 12-month period during the previous 24 months, have entered into 200 or more discrete sales of new or unused consumer products resulting in an aggregate total of $5,000 or more in gross revenues—on their platforms:
- A bank account number (or, if such seller does not have a bank account, the name of the payee for payments issued by the online marketplace to the seller);
- A tax identification number; and
- Contact information, including a current working email address and phone number.
Such information must be collected within 10 days after the seller qualifies as a “high-volume third party seller,” verified no later than 10 days after such collection, and is subject to annual certification.
The Act’s disclosure requirements apply only to high-volume third party sellers that have at least $20,000 in annual gross revenues on the marketplace. With respect to such sellers, the marketplace must disclose, in a clear and conspicuous manner on the product listing page (including via hyperlink) or in the order confirmation, information including:
- The seller’s name;
- The seller’s physical address;
- The seller’s contact information, including a current working email address, phone number or “other means of direct electronic messaging;”
- Whether the seller used a different seller to supply the consumer product to the purchaser.
The Act carves out several exceptions to these disclosure requirements, including, for example, that an online marketplace may disclose a seller’s physical address for product returns.
Additionally, online marketplaces must clearly and conspicuously provide, on the product listing of any high-volume third party seller, a mechanism that allows for the reporting by consumers of suspicious marketplace activity.
Failure to comply with the Act’s requirements may result in an enforcement action by the Federal Trade Commission or a state attorney general. Violations shall be treated by the FTC as an unfair or deceptive act or practice under the FTC Act, which imposes a statutory civil penalty of $46,517 per violation. State attorneys general may bring civil actions in district court, which may, among other things, seek to enjoin further violations, enforce compliance, obtain civil penalties under the Act, and obtain damages, restitution or other compensation on behalf of the state’s residents. It is worth noting that several states have passed similar laws.
Given the upcoming effective date, online marketplaces covered by the Act should work quickly to identify their high-volume third party sellers, collect and verify the relevant information, and amend their policies and procedures to ensure compliance.