Brand and Manufacturing Clients – Legal UpdateFebruary 2023
Congress passed a new Act last year that may assist Sideman & Bancroft’s brand and manufacturing clients in their efforts to curb the resale of infringing or unauthorized products on online marketplaces.
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, also known as the INFORM Consumers Act, requires online marketplaces- which broadly includes any person or entity that operates an “electronically based or accessed platform” that “includes features that allow for, facilitate or enable” one or more third party sellers to “engage in the sale, purchase, storage, shipping, or delivery of a consumer product in the United States” — to collect, verify, and disclose certain information regarding high-volume third-party sellers.
The impetus of the Act was to stem the resale of stolen products online. Requiring marketplaces to collect additional information from high-volume sellers not only places additional hurdles on “fences” seeking to quickly turnover these products in online forums, but also shifts responsibility to the marketplaces which profit off of these sales. The Act has the added benefit of ensuring that consumers have necessary information to make informed purchasing decisions, as well providing brand owners with insight into other unauthorized or harmful sales, such as the sale of counterfeit consumer products.
Below are some of the key provisions of the Act that will go into effect on June 27, 2023 (180 days after the Bill was enacted).
- The Act only requires collection and disclosure of information for “high-volume third-party sellers” of consumer products, which it defines as “vendors who have made 200 or more discrete sales in a 12-month period amounting to $5,000 or more.” Sec. 2(e)(3). It also only currently affects resellers of “consumer products,” which are defined as “any tangible personal property which is distributed in commerce and which is normally used for personal, family, or household purposes (including any such property intended to be attached to or installed in any real property without regard to whether it is so attached or installed).” 2(e)(2). Given this definition, it seems unlikely that the Act will apply to the resale of enterprise hardware or software products.
- For qualifying sellers, the online marketplace must obtain and verify the following information from the reseller: (1) bank account numbers, (2) government-issued identification, (3) tax identification numbers, and (4) contact information. Online marketplaces must verify and certify any changes to this information annually.
- For all qualifying sellers, the marketplace must disclose to consumers certain pieces of the collected information up-front, including the reseller’s name, verified contact information, and a mechanism through which a consumer can report suspicious marketplace activity by telephone or electronically, as well as a message encouraging customers to do so. “Suspicious marketplace activity” is not defined in the Act.
The Act contains additional detail regarding compliance, as well as exceptions for certain types of sellers that are exempt from its provisions. The new laws will hopefully improve enforcement against bad actors on online marketplaces, but it remains to be seen how effective this new tool will be. Please contact our office if you’d like to learn more about the Act and its implications for your brand.
 The Act follows the passage of several similar state laws currently in effect, such as Colorado’s House Bill 22-1099. It is unclear if these state laws will be preempted by the Act, as they are largely identical, but it is likely that they will be unless a particular law has more stringent reporting requirements, which no state law appears to have.