What is the INFORM Consumers Act?
The Inform Consumers Act has garnered attention as it aims to establish stricter regulations for online marketplaces to enhance consumer protection and combat the sale of counterfeit goods. This proposed legislation has significant implications for eCommerce platforms and sellers. In this blog post, we will summarize the key points of the Inform Consumers Act, including which sellers it applies to and the proposed timeline for compliance.
Summary: The INFORM Consumers Act, which was signed into law on December 23, 2022, imposes new seller diligence and disclosure requirements on online marketplaces. The Act requires online marketplaces to require sellers with $20,000 or more in annual gross revenue to provide consumers with certain information, including the seller's name, physical address, contact information, and whether a different seller was used to supply the product purchased within 10 business days of being notified of such requirements. If information is not provided within that timeframe, the marketplace can suspend the account. The Act also prohibits online marketplaces from using information gathered solely to comply with its provisions for any other purpose than compliance with the Act, unless required by law.
1. Overview of the Inform Consumers Act:
The Inform Consumers Act, imposes diligence and disclosure requirements on online marketplaces, such as Amazon, eBay, and Walmart. Introduced in the United States Congress, this act intends to address issues related to counterfeit products and the disclosure of seller information on eCommerce platforms.
2. Which Sellers Does the Act Apply To?
The Inform Consumers Act is designed to cover a broad range of sellers operating on online marketplaces. It includes third-party sellers who utilize the platforms to sell products to consumers. This means that independent sellers, as well as businesses, are subject to the diligence and disclosure requirements. Disclosure is for sellers with $20,000 or more in annual revenue from marketplace sales.
3. Proposed Timeline for Compliance:
Online marketplaces were given a reasonable period to implement the necessary changes to adhere to the new regulations. Amazon specifically started asking in Mid May. Suspension of seller accounts if requested information, certifications, or disclosures are not provided within ten days of a marketplace’s request.
Collection of seller identification and bank account information within ten days of the seller qualifying as a “high-volume third party seller,” verification of the information within ten days of receipt, and collection of seller certifications regarding the accuracy of the information at least annually.
4. Strengthening Seller Diligence:
The Inform Consumers Act places responsibility on online marketplaces to implement more robust diligence procedures to ensure the legitimacy and authenticity of third-party sellers and their products. This includes verifying seller identities, contact information, and business registration details. By doing so, the act aims to protect consumers from purchasing counterfeit or unsafe products.
5. Disclosure of Seller Information:
The legislation also emphasizes the importance of disclosing relevant information about sellers to consumers. Online marketplaces are required to disclose seller names, business addresses, and contact details prominently on product listings. This increased transparency intends to enable consumers to make informed purchasing decisions and have recourse in case of any issues or disputes.
6. Impact on Online Marketplaces:
The Inform Consumers Act significantly impacts online marketplaces, as they are required to invest in enhanced verification processes and disclosure mechanisms. Compliance with these requirements involves implementing systems to authenticate sellers and facilitate the disclosure of their information. Non-compliance could result in penalties or legal consequences for eCommerce platforms.
7. Consumer Protection and Trust:
By imposing diligence and disclosure requirements, the Inform Consumers Act aims to bolster consumer protection and build trust in online marketplaces. The act's provisions intend to reduce the prevalence of counterfeit goods and provide consumers with accurate and reliable information about sellers. Ultimately, this legislation strives to enhance consumer confidence in eCommerce platforms.
8. Challenges and Considerations:
While the Inform Consumers Act seeks to protect consumers and create a more secure online shopping environment, there are challenges to consider. Compliance with the act may impose additional costs and administrative burdens on online marketplaces. Balancing the need for consumer protection with the sustainability and growth of eCommerce platforms will be an ongoing consideration during the legislative process.
The Inform Consumers Act requires crucial diligence and disclosure requirements for online marketplaces, aiming to safeguard consumers from counterfeit products and improve transparency. This legislation requires eCommerce platforms to implement more rigorous verification processes and disclose seller information prominently. While the act strives to enhance consumer protection and build trust, striking a balance between compliance and the operational needs of online marketplaces will be essential. We hope you understand this blog post helped you understand the Inform Consumers Act!
Thank you,
Commerce Canal Team
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