Consumer Protection Law Taking Effect This Month Could Subject Online Marketplaces to Civil Penalties of up to $50,120 Per Violation

On Tuesday, June 20, 2023, the Federal Trade Commission sent letters to 50 online marketplaces notifying them of their responsibility to fully comply with the new Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – or the INFORM Consumers Act – as soon as the law takes effect on June 27, 2023.

Congress passed the INFORM Consumers Act (“the Act”) in December 2022 as part of the Consolidated Appropriations Act of 2023 in order to help protect consumers from counterfeit, unsafe and stolen goods. The Act imposes upon online marketplaces obligations regarding the collection, verification, safeguarding, and disclosure of certain identifying information regarding “high-volume third-party sellers” that sell, offer to sell, or contract to sell new or unused consumer products in the United States using marketplace platforms. The Act also seeks to make it easier for consumers to report suspicious marketplace activity by requiring online marketplaces to allow consumers to electronically and telephonically report certain activities to the online marketplace.

The FTC sent letters to companies that may meet the Act’s definition of “online marketplace”. The Act broadly defines an “Online marketplace” as a 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.” 15 USC 45f (f)(4). The Commission made clear, however, that receipt of a letter does not reflect an assessment as to whether the company has engaged in conduct that would violate the Act.

The letter encourages online marketplaces to communicate with their respective third-party sellers about how to comply with the Act’s collection, verification, and disclosure requirements.   

The letter also made clear that it intends to treat violations of the INFORM Consumers Act as a violation of an FTC rule, which can result in civil penalties of $50,120 per violation. See 15 U.S.C. § 45(m)(1)(A). Online marketplaces are encouraged to review the FTC’s business guidance, “Informing Businesses About the INFORM Consumer Act” which offers helpful perspective on compliance. We also stand ready to advise.