No Leniency for Marketplaces Says FTC: INFORM Consumers Act Takes Effect June 27

The Federal Trade Commission (FTC) has signaled its plans to move swiftly and vigorously against online marketplaces that are not compliance ready for the Integrity, Notification, and Fairness in Online Market Retail Marketplaces for Consumers Act (INFORM Consumers Act), which takes effect on June 27, 2023.

The FTC recently issued letters to approximately 50 nondisclosed online marketplaces reminding them of their obligations under the INFORM Consumers Act and warning that the agency is prepared to penalize those who “run afoul of the law.”

The act became law on December 29, 2022 as part of the Consolidated Appropriations Act of 2023. The act’s intent is to protect consumers from unknowingly purchasing stolen, counterfeit, or unsafe consumer products from online sellers. To facilitate this, the act imposes mandates on online marketplaces, i.e., the electronically based “consumer-directed” platforms that “facilitate or enable third party sellers to engage in the sale, purchase, payment, storage, shipping or delivery of a consumer product.”

These mandates require, among other things, marketplaces to collect, verify, and certify authenticating information from its sellers including bank account information, tax ID numbers, and usable contact information, such as a “working” email and phone number. Further, for those third-party sellers that annually gross $20,000 or more in revenues on the platform, the marketplace must disclose to shoppers the seller’s full name, physical address, and working contact information so that shoppers may have “direct, unhindered communication” with those sellers.

However, the act is sometimes vague on how to meet its requirements. For example, the act does not identify the means by which a marketplace must “verify” the information it collects. Similarly, the act does not define the type of “reporting mechanism” that an online marketplace must post to the relevant listing page so that shoppers may report “suspicious conduct.”

Additionally, the FTC in its letter urged marketplaces to communicate with their third-party sellers and advise them how to “avoid potential imposters attempting to trick them into sharing sensitive personal or account information,” a charge that does not appear expressly in the act.

Notably, the act provides a few exceptions to its strict disclosure rules, although some say that these exceptions are inconsistent with the act’s underlying policy of eliminating the anonymity that sellers sometimes enjoyed on some platforms. Indeed, for sellers who “certify” that their business address is a home address and that their phone number is a home phone number, marketplaces need not publicly disclose that information to shoppers—a “working” email is enough.

Online marketplaces of all kinds have been working diligently to implement new internal policies, controls, and procedures to comply with the INFORM Consumers Act, a brand-new law that does not provide its subjects with the benefit of prior interpretation or precedent. Notwithstanding this, with its latest notice the FTC has unequivocally warned that it plans to use all available enforcement authority to ensure that consumers receive the benefits of the act.

Online marketplaces that have prepared for the implementation of the act must stay vigilant. Those that have not fully examined the requirements of the act and evaluated the FTC’s enforcement reach should seek guidance soon to understand its potential impact.