The INFORM Consumers Act as a Brand Protection Tool
Staff Attorney, Federal Trade Commission, Bureau of Consumer Protection
Staff Attorney, Federal Trade Commission, Bureau of Consumer Protection
Note from authors: Our views are our own and do not necessarily reflect those of the Commission or any Commissioner. This article is for informational purposes only and is not legal advice.
The INFORM Consumers Act was intended to help deter the anonymous online sale of counterfeit and stolen goods. As of June 27, 2023, it requires any “online marketplace” where “third party seller[s]” sell new or unused consumer products to collect, verify, and sometimes disclose contact information about “high-volume third party seller[s]” whose transactions the marketplaces process. This law sets a nationwide baseline for marketplaces to know their sellers, enhances transparency for online consumers, and should thwart many bad actors from selling goods on these platforms. It may also enhance brand protection efforts. Marketplaces that fail to meet their INFORM Act obligations may face civil law enforcement actions by the Federal Trade Commission and State Attorneys General, including steep civil penalties.
The Act Covers Marketplaces with High-Volume Third-Party Sellers
Importantly, the Act focuses responsibility – and potential liability – on marketplaces. In general, an “online marketplace” is a business that operates a consumer-directed platform that allows third party sellers to engage in the sale, purchase, payment, storage, shipping, or delivery of a consumer product in the United States. Marketplaces’ INFORM Act obligations specifically cover “high-volume” third party sellers: those with 200 or more sales of new or unused consumer products and $5,000 or more in gross revenues processed on the marketplace in a continuous 12-month period during the prior 24 months. As a practical matter, marketplaces that want to comply with the Act must either track all third-party sellers’ sales on the platform or apply the Act’s requirements to all third-party sellers of new or unused goods, whether or not the sellers meet the “high volume” definition.
Core Requirements: Collect, Verify, (usually) Disclose
The Act has three marquee requirements. First, marketplaces must collect bank account information, contact information, and a Tax ID number from high-volume third-party sellers. The Act spells out the particulars. Sellers must be asked to update and certify their information at least annually. Subject to grace periods, marketplaces must suspend noncompliant sellers. Second, marketplaces must verify the collected information through methods that enable them “to reliably determine that any information and documents provided are valid, corresponding to the seller or an individual acting on the seller’s behalf, not misappropriated, and not falsified.” Third, marketplaces must – usually – disclose high-volume third-party sellers’ contact information (i.e., name, physical address, and a working phone number, email address, or means of direct electronic messaging that the marketplace can monitor) if such sellers’ annual gross revenues on the marketplace are $20,000 or more.
Nuances of the Disclosure Obligation
The Act’s disclosure requirements should result in an address and other information about many sellers being more available and, in turn, aid brand owners and law enforcement agencies who need to track rogue sellers or take legal action against them. There are, however, some important nuances and exceptions to the Act’s disclosure requirements.
The Act does not treat marketplaces as “third-party sellers” when they are, themselves, the sellers. Similarly, when marketplaces’ vendors – business entities with whom they have contractual relationships – are sellers, the Act excludes vendors from the marketplaces’ disclosure obligations if their identifying information has been collected and verified as described above, and if they have made available to the public the entity’s name, address, and working contact information. For other sellers meeting the $20,000 threshold, the law allows marketplaces to exempt from disclosure a seller’s residential address where that is the seller’s only address, or a personal phone number where that is the seller’s only phone number. Any sellers over the $20,000 threshold, however, remain subject to the marketplaces’ obligations to disclose an email address or means of direct electronic messaging that can be used to contact the seller directly.
Marketplaces have two options for making disclosures: on each covered seller’s product listing pages (including by hyperlink); or in order confirmation messages and account transaction histories on that platform. The Act also permits an alternative disclosure when the seller on the product listing uses a different seller to supply the product to the consumer. A marketplace must tell the customer about the substitution and disclose the substitute seller’s contact information “upon the request of an authenticated purchaser.” Marketplaces’ compliance with the disclosure requirements, therefore, may not be evident until after a purchase is complete.
Data Security and Use Limitations
In addition to requiring marketplaces to disclose specific seller information to consumers, the Act limits the use of much of the information that sellers submit. Marketplaces must protect the collected information from unauthorized use, disclosure, access, destruction, or modification by implementing reasonable security procedures and practices appropriate to the data and its uses. Moreover, the Act limits use of data collected “solely” to comply with its requirements; such data may not be used for other purposes “unless required by law”. This may limit marketplaces from sharing some seller information with rightsholders or enforcers without a subpoena or other compulsory process.
Reporting Suspicious Activity to the Marketplace and the FTC
Marketplaces must also provide on high-volume third-party sellers’ product listings a clear way for consumers to electronically and telephonically report suspicious marketplace activity. These reporting mechanisms should enable consumers to directly notify marketplaces of potential counterfeit product listings or sellers engaged in unlawful activity. Ideally, such a notification will lead to a takedown or seller suspension more swiftly than could be accomplished through a lawsuit or enforcement action. To assist the FTC and states in enforcing the INFORM Act, consumers and brand owners can also report suspected violations to the FTC using this dedicated link (https://reportfraud.ftc.gov/#/?TC=ICA). (To enter URLs, select “Website or App” for the “How did it start?” field, then paste the URL into the “What website or app” field.) Although the FTC can’t resolve each individual report, the FTC and its law enforcement partners can use the reports to investigate and file law enforcement actions.
The FTC has published a variety of resources about the INFORM Act to help marketplaces understand their compliance obligations, and for third party sellers and consumers to understand how the law works. Learn more at www.ftc.gov/INFORMAct.
THE BRAND PROTECTION PROFESSIONAL | DECEMBER 2023 | VOLUME 8 NUMBER 4
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