INFORM Consumers Act Introduced to Target Online Counterfeiters

Gibney Anthony & Flaherty, LLP

The INFORM (Integrity, Notification, and Fairness in Online Retail Marketplaces) Consumers Act was introduced on the Senate floor on March 23, 2021.

This bill would require greater accountability and transparency from the e-commerce marketplaces that act as intermediaries between buyers and sellers.

The legislation requires online marketplaces to disclose to consumers basic information about high-volume third-party sellers, including the seller’s name and address, email address, telephone number. Violators would be subject to civil penalties.

High-volume third-party sellers are defined in the Act as vendors who have made at least 200 sales totaling at least $5,000 over a 1-year period.

In addition, the proposed legislation requires online marketplaces to provide customers with a hotline to report spurious activity i.e.: the sale of counterfeit, stolen or otherwise dangerous merchandise.

The Federal Trade Commission is charged with implementing the requirements of the legislation.

The Act is supported by the brand-owner community and viewed as a positive step in the fight against counterfeiting.

What’s On the Horizon for Brand Owners

The INFORM Act is the latest in a series of efforts to combat online counterfeiting. Bipartisan bills have been introduced in both the House and the Senate. As we previously reported, the SHOP SAFE Act of 2020 also incentivizes e-commerce platforms to adopt best practices to reduce the presence of counterfeit products on their sites. E-commerce sites that fail to adhere to the steps would be held liable.

As more brands increasingly transition from traditional brick and mortar to online retail, we will continue to see an increase in the sale of counterfeits goods online. Combating counterfeit sales is timely and costly for brand owners. While e-commerce platforms have started to implement policies to manage counterfeit sales, contributory liability puts the burden of responsibility on the both the counterfeit seller and the platform. These practices will begin to create incentives for online retailers to be more diligent and proactive.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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