Individuals or businesses that operate online marketplaces should be aware of a new law that went into effect Jun 27, 2023. The “Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act” (or “INFORM Consumers Act”, for short), was passed in December 2022 with bipartisan support, and it places various requirements upon online marketplaces designed to deter criminals who may use online marketplaces to sell counterfeit, stolen, defective, and dangerous products.
The INFORM Consumers Act gives the FTC rulemaking authority, charges the FTC, state attorneys general (AGs) and “other state officials” with enforcement, and authorizes substantial civil penalties of up to $50,120 per violation for noncompliance.
In letters sent out by the FTC to more than 50 online marketplaces nationwide, the FTC notified them of their obligation to comply “on day one”, as soon as the law went into effect on June 27.
An “online marketplace” is defined (under 15 USC 45f(4)) as “any person or entity that operates a consumer-directed electronically based or accessed platform that -
(A) includes features that allow for, facilitate, or enable third party sellers to engage in the sale, purchase, payment, storage, shipping, or delivery of a consumer product in the United States;
(B) is used by one or more third party sellers for such purposes; and
(C) has a contractual or similar relationship with consumers governing their use of the platform to purchase consumer products.
In its business guide, the FTC explains that the law takes the meaning of “consumer product” from the Magnuson-Moss Act, which defines it as “tangible personal property for sale and that is normally used for personal, family or household purposes.” The online marketplace also must have a contractual or similar relationship with consumers governing their use of the platform to buy products. Many companies that meet the definition of “online marketplace” are national names, but small niche platforms with “high-volume third party sellers” are covered, too.
A “high volume third party seller” is defined as a participant on the platform who is a third party seller and, in any continuous 12-month period during the previous 24 months, has entered into 200 or more discrete sales or transactions of new or unused consume products and an aggregate total of $5,000 or more in gross revenues.
Generally, the Act requires the following:
Online marketplaces that don’t comply may face FTC law enforcement that could result in civil penalties of $50,120 per violation. The statute also gives enforcement authority to State Attorneys General and “other officials authorized by the State”. They may file an action in federal court to enjoin further law violation, seek civil penalties and other remedies permitted under state law, and obtain damages, restitution, or other compensation for residents of that state.