Unmasking Online Counterfeiters with the INFORM Act

On June 27, 2023, the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – the INFORM Act – went into effect. Congress passed the INFORM Act in an effort to deter third parties from selling fake or stolen goods on online marketplaces. The Act aims to hold online marketplaces accountable for the criminal acts of its third-party sellers, imposing significant civil penalties on marketplaces that fail to comply.

The Act requires online marketplaces that allow third parties to sell consumer goods through its platform to collect and verify certain information from its “high volume sellers.” The Act defines a “high volume seller” as any party who entered into 200 or more transactions and generated $5,000 or more in gross revenue in a 12-month span. Online marketplaces, like Amazon, eBay, and Etsy, will now be required to collect and verify bank account information, contact information, and a tax identification number from those “high volume” sellers. Online marketplaces must also provide a clear way for consumers to report any suspicious activity on each of these sellers’ product listings, though it’s unclear what the marketplaces must do with these reports.

While many marketplaces already collect and provide this information, once a third party generates $20,000 or more in gross revenue, the Act then requires the marketplace disclose more information about the seller on its listings including (1) the full name of the seller; (2) the physical address of the seller; and (3) working contact information that allows for “direct, unhindered communication” with the seller.

While the Act appears to be a step forward for brands looking to stop counterfeiters, we must wait and see if there are any unforeseen consequences from its implementation. Also, as the Act does not have any private enforcement provisions, companies must rely on the Federal Trade Commission (FTC) for enforcement.

If you have further questions about the INFORM Act and how it may impact your business, please reach out us at here.