With growing concerns about the safety, quality, and authenticity of products being sold on online marketplaces and the third-party sellers that sell them, Congress is stepping in with a new law. Called the INFORM Act, it's designed to create more transparency and impose more accountability on online marketplace operators. In particular, the higher volume of third-party sellers that operate on these platforms.
Late last year, the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the INFORM Act) was signed into law and takes effect at the end of June.
Its purpose is primarily to increase transparency for consumers, brands, and online marketplace operators about the sellers and sources of products that consumers buy online. It requires that online marketplace operators collect, verify, and disclose certain information about their “high-volume third-party sellers.”
Based on the Act’s definitions, these high-volume sellers are split into two categories: Tier 1 and Tier 2.
By June 27, 2023, online marketplace operators will have to have a system in place that allows them to do the following for these Tier 1 and 2 “high volume” third-party sellers:
If an online marketplace does not comply with the INFORM Act, the Federal Trade Commission (FTC), state attorneys general, or other state officers can bring an action against the online marketplace. There is no private right of action under the Act meaning that a brand or a consumer is not able to sue a marketplace operator for failing to follow the Act.
Time will tell how and whether online marketplaces will be able to implement the INFORM Act and how frequently the FTC and state attorneys general will enforce it. Based upon the FTC’s first-of-its-kind enforcement action against a manufacturer for its alleged “review hijacking” on Amazon product variation listings, some sort of FTC investigation or enforcement action into certain marketplace operators’ compliance with the INFORM Act seems likely. Undoubtedly, however, bad-actor sellers will surely attempt to find ways to skirt the requirements, evade identification, or avoid qualification as “high-volume” sellers under the Act. Vorys eControl will continue to monitor these developments as the Act takes effect and is enforced.
If you have any additional questions, please reach out to Vorys eControl attorney Emma Morehart.
Copyright 2024 Vorys, Sater, Seymour and Pease LLP. All Rights Reserved.
