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June 29, 2023 : The Inform Consumers Act, a new law designed to combat organized retail theft and the sale of counterfeit and harmful goods on online platforms, will go into effect on Tuesday. As retailers increasingly attribute lower profits to theft, this legislation aims to hold online marketplaces accountable by requiring them to verify and share information about high-volume third-party sellers. Failure to comply could result in fines exceeding $50,000 per violation.
The bipartisan legislation, also known as the Integrity, Notification, and Fairness in Online Retail Marketplaces Act, was passed in December as part of an omnibus spending bill. It was introduced by Representatives Jan Schakowsky (D-Ill.) and Gus Bilirakis (R-Fla.). The Federal Trade Commission (FTC), in conjunction with state attorneys general, will enforce the law to increase transparency in online transactions and discourage criminals from selling stolen, counterfeit, or unsafe items on digital marketplaces.
Retail theft has surged in recent years, largely attributed to lenient regulations governing third-party sellers and verification processes on online platforms. Organized crime groups have capitalized on this by stealing merchandise from physical stores and reselling it online, often at discounted prices. The rise of online shopping, accelerated by the COVID-19 pandemic, has contributed to the growth of organized retail theft.
According to Census data, e-commerce sales in the U.S. accounted for 16.1% of total retail sales, reaching $211.5 billion during the second quarter of 2020, representing a 44.5% increase from the previous year. While stolen or counterfeit goods constitute only a small fraction of these transactions, retailers and law enforcement agencies, have pushed for legislation to address the issue, citing the difficulty in identifying and apprehending criminals operating under false identities.
The Inform Act addresses these challenges by requiring online marketplaces to collect, verify, and disclose specific information about high-volume third-party sellers. This information includes contact details, bank account information, tax identification numbers, and other relevant records. Marketplaces must suspend sellers who fail to comply and provide a clear reporting mechanism for consumers to flag suspicious activity. The FTC and state attorneys general will share enforcement authority, with penalties of up to $50,120 per violation for non-compliant marketplaces.
The Buy Safe America Coalition, comprising major retailers such as Gap, Home Depot, Walgreens, and Best Buy, has urged the FTC to vigorously enforce the law. The FTC recently sent a letter to 50 online marketplaces outlining their obligations and warning about the penalties for violations. eBay and Meta (Facebook’s parent company) are committed to complying with the new law.
As the Inform Consumers Act takes effect, online marketplaces must take proactive steps to meet the requirements and prevent the sale of stolen or counterfeit goods. The law’s enforcement mechanisms, including the extent of proactive investigations by the FTC, remain to be seen. However, industry stakeholders and consumer advocacy groups have stressed the importance of swift and robust enforcement to protect consumers, businesses, and the integrity of the online marketplace.
