Retailers, manufacturers, and online marketplaces – are you ready to INFORM your customers?  On June 27, 2023, online marketplaces and “high-volume third party sellers” must comply with the new federal statute – the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the “INFORM Consumers Act”).  Designed to combat fraud and the sale of counterfeit goods, the INFORM Consumers Act imposes certain obligations on high-volume third-party sellers and the online marketplaces on which they sell.  The INFORM Consumers Act requires (1) the collection and verification of information and (2) the disclosure of certain information. Continue reading to learn more about whether your business qualifies as a high-volume third-party seller and the obligations imposed.

Are you a high-volume third party seller?

Under the INFORM Consumers Act, online marketplaces are required to collect and verify information from “high-volume third party sellers” which are defined under the Act as participant in online marketplaces that have entered into 200 or more discrete transactions and an aggregate of $5,000 or more in gross revenues in any continuous 12-month period within the prior 24 months (a “high-volume seller”) on that marketplace.  High-volume third-party sellers include manufacturers and retailers that sell on online marketplaces in addition to their own websites or bricks-and-mortar location.  If you are a high-volume third-party seller, the online marketplace must collect certain information from you.

What does the online marketplace need to collect?

The online marketplace must collect and verify the following information from the high-volume seller: (1) bank account information; (2) contact information, including a working email and phone number; and (3) tax identification number. The information must be certified annually by each high-volume third-party seller. If the high-volume third-party seller does not provide or certify the information, then the online marketplace must suspend any future sales activity.

The online marketplace must verify the information within 10 days.  If the information is not verified, then the seller’s account will be suspended.

What information must be disclosed?

If you are a high-volume third-party seller with an aggregate total of $20,000 or more in annual revenue in an online marketplace, then you have additional information disclosure requirements.  These high-volume third-party sellers must disclose the following information the clearly and conspicuously (a) on the product the product listing page, or (b) in the order confirmation or other document made to the consumer after the purchase is final:

1. the full name of the seller;
2. the principal physical address of the seller;
3. the contact information for the seller “to allow for the direct, unhindered communication” with the high-volume third-party sellers including:
   1. a current, working phone number;
   2. a current, working email address; or
   3. other means of direct election messaging; and
4. whether the seller uses a different business to supply the product that is being purchased.

Failure to comply can be expensive.  For manufacturers and retailers, violations can mean the suspension of your account and lost sales.  For online marketplaces, a violation can subject the marketplace to enforcement action by the Federal Trade Commission or an action by a state attorney general.

What does this mean for manufacturers and retailers?

In short, if you are a high-volume third-party seller on an online marketplace, then you will have some compliance obligations.  A high-volume third-party seller with more than $5,000 in gross revenue but less than $20,000 will only have information collection obligations; those with more than $20,000 per year in gross revenue on the marketplace  will have additional disclosure obligations.  Businesses may also have to update product listing pages or online marketplace “storefronts.”  While the information collection and disclosure obligations may come with certain expenses and costs, there is a benefit to manufacturers and retailers.  Brands and retailers will have more transparency regarding certain sellers and may help streamline the enforcement of unauthorized reseller policies.  The INFORM Consumers Act is designed to help protect consumers from fraud and counterfeit goods, but  it will also help manufacturers and retailers protect their brands and legitimate goods and sales.  To further combat unauthorized resellers, manufacturers and retailers may report false or misleading seller information in an attempt to remove anonymous unauthorized resellers.