INFORM Consumer Act Sets New Requirements for Online Marketplaces

The Act defines online marketplaces to include consumer-directed platforms that facilitate or enable third-party sellers to engage in the sale, purchase, payment, storage, shipping, or delivery of a consumer product. Non-compliance with the Act poses a risk for such marketplaces.

INFORM Consumers Act Requirements

The INFORM Consumers Act targets high-volume third-party sellers, defined as vendors who have made 200 or more discrete sales in a 12-month period amounting to $5,000 or more. The Act directs online marketplaces to:

• Authenticate sellers by collecting their government-issued ID, tax ID, bank account numbers, and contact information within 10 days of a seller meeting the revenue and transaction thresholds qualifying them as a high-volume seller;
• Verify the collected information and annually certify any changes to it;
• Maintain data security measures to protect collected seller information;
• Suspend seller accounts that do not comply with requests for information or disclosure;
• Ensure that the sellers found on their marketplaces disclose their contact and identity information to consumers; and
• Provide clear and conspicuous reporting mechanisms for consumers to report suspicious marketplace activity.

These requirements are to be implemented by the Federal Trade Commission and violations will be subject to civil penalties.

Takeaways

Online marketplaces should be aware that compliance may require significant operational changes, as well as changes to their seller Terms of Service and Privacy Policies, to reflect the new requirements under the Act. Note that this Act concerns major marketplaces, as well as smaller websites that facilitate third-party sales. All e-commerce vendors should take notice as this may impact their practices.

The INFORM Consumers Act’s requirements take effect on June 27, 2023. If you have questions on how non-compliance could impact your business, please reach out to Anthony Lupo, Eva Pulliam, Thorne Maginnis, Helenka B. Mietka, or the ArentFox Schiff attorney with whom you generally work.