You may have missed it, but the Federal Trade Commission (FTC) hasn’t. On June 27, 2023, the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the INFORM Consumers Act) is live and enforceable. The FTC has been pulling out all of the stops to try to inform businesses of this sneaker wave so don’t turn your back to it and think the FTC isn’t going to follow with quick enforcement action.
The INFORM Consumers Act was passed by Congress six months ago and shares some similarities to portions of the EU’s Digital Services Act. The INFORM Consumers Act includes both consumer-facing requirements and back-end requirements.
Businesses affected by this Act
Online marketplaces that (1) operate an e-commerce platform used by third-party sellers to sell, purchase, pay for, store, ship, or deliver customer products in the United States and (2) have a relationship with consumers that governs the consumers’ use of the platform to purchase consumer products.
High-volume third-party sellers that (1) have made 200 sales of new or used consumer products (2) with an aggregate total of $5,000 or more in gross revenues (3) in any 12-month period during the previous 24 months (4) where payment was processed by a specific online marketplace, either directly or through a payment processor. A high-volume third-party seller does not include an online marketplace that makes its own sales.
Consumer-facing requirements
Under the Act, a high-volume third-party seller with $20,000 or more in annual gross revenues on a specific marketplace must disclose the following information to consumers, either (1) on the product listing page or (2) in an order confirmation and the consumer’s transaction history.
- The seller’s name.
- The seller’s address.
- Contact information for the seller (in addition to the seller’s address), such as a phone number, email address, or other electronic communication method.
- If applicable, disclosure that the seller is not the one providing the product to the purchaser. Upon a purchaser’s request, the seller must also disclose the name, address, and additional contact information of the business providing the product.
The online marketplace is responsible for ensuring that the seller complies.
If the high-volume third-party seller operates out of a residential address, it can request that the online marketplace not publicly disclose the street address, city, and zip code portions of the address and invite customers and prospective customers to contact the seller by phone, email, or other electronic communication method.
If the high-volume third-party seller has an ongoing contractual relationship with the online marketplace to manufacture, distribute, wholesale, or fulfill shipments of consumer products, the high-volume third-party seller does not need to disclose that it is not providing the product, so long as it provides its name, business address, and other contact information.
In addition to these disclosures by high-volume third-party sellers, online marketplaces must provide a reporting mechanism to consumers on the product listing page so they can report suspicious marketplace activity.
Back-end requirements
The Act requires online marketplaces to ensure that high-volume third-party sellers provide the following information to the online marketplace:
- A bank account number or other financial information.
- Contact information including an email address and phone number and either a primary contact’s name or a tax document that shows the business’ name and physical address.
- Tax ID information.
The online marketplace also needs to confirm the accuracy of this information at least once per year. If it cannot confirm the accuracy of this information, it must suspend that seller’s sales.
Enforcement
The INFORM Consumers Act can be enforced by the FTC and States Attorneys General as an unfair or deceptive act or practice. Violations can result in civil penalties of up to $50,120 per violation through an FTC enforcement action and an injunction, damages, restitution, and civil penalties through an Attorney General enforcement action.
For more information, see the FTC’s Business Guide.
If you would like more information about the INFORM Consumers Act and how it might affect your business, please contact our privacy & data security team.
This article is provided for informational purposes only—it does not constitute legal advice and does not create an attorney-client relationship between the firm and the reader. Readers should consult legal counsel before taking action relating to the subject matter of this article.
