If you sell products via online platforms, the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – or the INFORM Consumers Act – may impact you. The law requires online marketplaces to obtain information from certain “high-volume third party sellers” and to ensure that information about those sellers is clearly disclosed. The FTC has advice for third party sellers about how the law could impact their businesses.
INFORM Consumers Act: The Fundamentals
Congress passed the INFORM Consumers Act to make online transactions more transparent and to deter the online sale of stolen, counterfeit, or unsafe merchandise. Under the law, “online marketplaces” where “high-volume third party sellers” offer new or unused “consumer products” must collect, verify, and disclose certain information about those sellers. In addition, online marketplaces must offer a clear way for people to report suspicious activity. Informing Businesses about the INFORM Consumers Act offers an overview of the law with an emphasis on what’s required of online marketplaces. But what does the INFORM Consumers Act mean for sellers? You’ll want to read the law for the specifics, but here are some general principles to keep in mind.
How to determine if you’re covered by the INFORM Consumers Act
The first inquiry is whether the INFORM Consumers Act impacts you as a seller. That depends on your answers to three questions.
- Do you sell on a platform that meets the law’s definition of an “online marketplace”? The law defines an “online marketplace” as a person or 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.” Many of the companies that meet the definition of “online marketplace” are national names, but smaller niche platforms may be covered, too.
- Do you sell merchandise that meets the law’s definition of “consumer product”? The law defines “consumer product” to include “tangible personal property for sale and that is normally used for personal, family, or household purposes.”
- Do you meet the definition of a ‘‘high-volume third party seller’’? The law defines a “high-volume third party seller” as a seller in an online marketplace that doesn’t operate the online marketplace and that, in any continuous 12-month period during the past 24 months, has had 200 or more separate sales or transactions of new or unused consumer products, and $5,000 or more in gross revenues. In calculating the number of sales or amount of gross revenues for the “high-volume” threshold on a given online marketplace, the only sales that count are ones made though that online marketplace and for which payment was processed by the online marketplace, either directly or through its payment processor. The law specifically exempts businesses that have a contractual relationship with the marketplace to manufacture, distribute, wholesale, or fulfill shipments of consumer products; that have made their name, business address, and contact information available to the general public; and that provide the marketplace with identifying information that the marketplace has verified.
That means the INFORM Consumers Act impacts you if you sell consumer products in an online marketplace, if you meet the minimum sales thresholds in the law, and if you don’t meet all the factors required for an exemption. Furthermore, marketplaces can implement measures on collection, verification, and disclosure that go beyond what the Act requires. The Act specifies a floor, not a ceiling, on what marketplaces must do.
How online marketplaces’ obligations under the INFORM Consumers Act may impact you
Assuming you meet the definition of a “high-volume third party seller,” the online marketplace has obligations related to collecting and verifying information from you; in many cases, disclosing information about you; and providing a mechanism for reporting suspicious activity.
Collecting and verifying information from you. Once you meet the definition of a “high-volume third party seller,” the online marketplace has 10 days to collect the following information from you:
- Bank account information. The online marketplace must collect your bank account number, or, if you don’t have a bank account, the name of the payee for payments the online marketplace issues to you. The online marketplace may have you provide that information either directly to it or to a payment processor or other third party designated by the online marketplace.
- Tax ID information. The online marketplace must collect your business tax identification number – or if you don’t have one, a taxpayer identification number.
- Contact information. If you sell in the online marketplace as an individual, the online marketplace must get your name and a working email address and phone number. For legal entities, corporations, partnerships, etc., that are high-volume third party sellers, the online marketplace must collect a working email address and phone number and one of the following forms of ID: a copy of a valid government-issued identification for an individual acting on behalf of the seller or a copy of a valid government-issued record or tax document that includes the business name and physical address of the seller.
Once you provide that information, the online marketplace has 10 days to verify it. Although the law doesn’t list particular verification steps, the methods the online marketplace chooses must allow it “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.”
In addition, online marketplaces must keep information from high-volume third party sellers current. At least once a year, the marketplace must require you to electronically certify that your information hasn’t changed or that you have updated your information with the marketplace. The marketplace will require you to respond to their request for certification within 10 days.
Disclosing information about you. If a high-volume third party seller has annual gross revenues of $20,000 or more on a particular online marketplace, the INFORM Consumers Act requires that marketplace to disclose certain information about the seller on each of the seller’s product listing pages, or in order confirmation messages and account transaction histories on that platform. Here’s what must be disclosed:
- The seller’s full name, which may include the business name or the name the seller uses on the online marketplace;
- The seller’s physical address and contact information that will allow consumers to have what the law calls “direct, unhindered communication” with you. That could include a working phone number, a working email address, or other means of direct electronic messaging. If the listing includes a physical address for product returns, that’s sufficient under this part of the law. Furthermore, if you used a different business to supply the product a consumer bought, the online marketplace must disclose that and also provide, at the consumer’s request, the name, address, and contact information for that business.
The law includes a limited exception that high-volume third party sellers that operate only out of their homes can ask for. In that case, upon your request, the online marketplace may disclose only the country and, if applicable, the state where you live and provide consumers with a phone number, email address, or other means of electronic messaging where consumers can contact you. If your only phone number is a personal phone, the online marketplace may provide an email address or other form of electronic messaging where consumers can contact you.
Furthermore, when consumers contact you with inquiries by phone, email, or other electronic means, the law requires that you respond “within a reasonable time frame” for you to qualify for the limited exception to disclosure of your contact information.
Providing a mechanism for reporting suspicious activity. A key provision of the INFORM Consumers Act requires online marketplaces to give people a way to report questionable conduct. Here’s what the law says: “An online marketplace shall disclose to consumers in a clear and conspicuous manner on the product listing of any high-volume third party seller a reporting mechanism that allows for electronic and telephonic reporting of suspicious marketplace activity to the online marketplace.”
Consequences for violating the INFORM Consumers Act
The cost of not complying with the INFORM Consumers Act can be high both for online marketplaces and for your business. For example, if online marketplaces don’t get required information from high-volume third party sellers, fail to verify it and update it, or fail to make necessary disclosures, the online marketplace faces civil penalties of $50,120 per violation of the law. Both the FTC and states have authority to enforce the INFORM Consumers Act.
Furthermore, the law requires online marketplaces to suspend a high-volume third party seller if the seller doesn’t provide the marketplace with the information the marketplace needs to comply with the law within 10 days or doesn’t respond within 10 days to the marketplace’s request for updated information. As the law specifies, the marketplace must give the seller written or electronic notice of non-compliance. If the seller doesn’t provide the information within 10 days of that notice, the marketplace must “suspend any future sales activity” of the seller until the seller complies with the requirements of the law. Online marketplaces also may have to suspend high volume third-party sellers if they make false statements in an effort to qualify for the limited exception for businesses that operate only out of a person’s home or if the seller doesn’t respond to consumers within a “reasonable time frame.”
Answers to questions you might have
How must online marketplaces protect confidential information – for example, my bank account or Tax ID number? The INFORM Consumers Act requires online marketplaces to “implement and maintain reasonable security procedures and practices.” That includes putting administrative, physical, and technical safeguards in place that are appropriate to the nature of the data and the purposes for which the data is used. What’s more, data collected solely to comply with the INFORM Consumers Act “may not be used for any other purpose unless required by law.”
I got an email from someone asking for my account information and claiming it was for INFORM Consumers Act compliance. How should I respond? Take steps to ensure you’re giving your information to the online marketplace where you do business, and not to an imposter. If anything strikes you as suspicious, take a step back and don’t respond immediately. To verify if the message is legitimate, contact the online marketer using an email or phone number you know to be genuine. If you suspect a scam, report it to the FTC.
How do I file a complaint about a competitor who isn’t complying with the INFORM Consumers Act? And what if an online marketplace may be violating the law? If you spot a possible law violation by a competitor, use the link on the product page to report suspicious conduct to the online marketplace. Also let the FTC know about it by reporting it on a special portal for potential INFORM Consumer Act violations. Use that same FTC link to let us know about online marketplaces that may not be complying with the law.
About the FTC
The FTC works to prevent fraudulent, deceptive, and unfair practices that target businesses and consumers. Report scams and bad business practices at ReportFraud.ftc.gov. We also provide guidance at business.ftc.gov to help companies comply with the law. Regardless of the size of your organization or the industry you’re in, knowing – and fulfilling – your compliance responsibilities is smart, sound business. Looking for a quick take on recent cases and other initiatives? Subscribe to the FTC’s Business Blog.
Your Opportunity to Comment
The National Small Business Ombudsman and 10 Regional Fairness Boards collect comments from small businesses about federal compliance and enforcement activities. Each year, the Ombudsman evaluates the conduct of these activities and rates each agency’s responsiveness to small businesses. Small businesses can comment to the Ombudsman without fear of reprisal. To comment, call toll-free 1-888-REGFAIR (1-888-734-3247) or go to www.sba.gov/ombudsman.