With a new law on the books aiming to protect consumers from fraudulent online sales, it’s a good time for online marketplaces, third-party sellers and retailers to reexamine their compliance programs and relationships with state attorneys general.
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the “INFORM Consumers Act”) became law on Dec. 29, 2022, and creates new responsibilities for online marketplaces and provides new authority for state attorneys general to initiate enforcement actions. The law requires online marketplaces with third-party sellers to collect and verify the following information from high-volume third-party sellers:
- bank account number
- contact information
- tax ID
- a working email address and phone number.
Online marketplaces are also required to disclose certain information to consumers in a clear and conspicuous manner on the product listing page (including via hyperlink) or in the order confirmation message for high-volume third-party sellers with an aggregate total of $20,000 or more in annual gross revenues on the online marketplace. These requirements go into effect on June 27, so now is the time to implement compliance measures.
Pursuant to the INFORM Consumers Act, state attorneys general (and the Federal Trade Commission) may file suit against online marketplaces for failing to collect and disclose the foregoing information about high-volume sellers. State attorneys general may seek the following remedies:
- an injunction to prohibit future violations;
- a court order mandating compliance with the Act;
- per violation civil penalties (likely in the amount of $46,517);
- any other remedy permitted by state law for state attorneys general; and
- damages, restitution or other compensation.
If a state attorney general brings a civil action under the law, prior written notice must be given to the FTC. If prior notice is not feasible, notice has to be given immediately upon filing.
