As 2022 drew to a close, Congress passed an Act, with bipartisan support, that will enable the Federal Trade Commission (FTC) to enforce requirements geared toward combatting online counterfeit sales.
The Act, called the Integrity, Notification and Fairness in Online Retail Marketplace for Consumers Act or INFORM Consumers Act, is aimed at protecting both consumers and legitimate brand owners from being harmed through the sale of low-quality, counterfeit goods sold online.
The INFORM Consumers Act requires online marketplaces that are directed at consumers, to collect, retain, and disclose information about “high-volume” sellers. For the purposes of this Act, high-volume sellers are defined in the act as sellers who “conduct 200 or more transactions resulting in total revenues of $5,000 or more during a continuous 12-month period.”
To comply with this Act, online marketplaces to collect the high-volume sellers’ bank account numbers, government-issued identification, tax ID numbers, and contact information. Online marketplaces are required to verify this information every year and certify any changes. The Act also requires that the sellers’ names and contact information be made available to consumers through the online product listings, so that consumers have the ability to contact the seller directly and, if not receiving satisfaction from the seller, can report electronically and/or telephone any suspicious activity occurring in the online marketplace.
In a statement as the Act was making its way through Congress, eBay, perhaps the most well-known online marketplace but certainly not the only one, said that it “is committed to ensuring its platform is a trusted and safe marketplace for buyers and sellers. The new INFORM Consumers Act represents a good faith effort…to enable a safe and transparent online buying process.”
The challenge, of course, is that many of the worst counterfeiters operate anonymously and from outside the United States. Studies have estimated that counterfeit products cost the U.S. economy approximately $54-70 billion in lost revenue each year. On such a massive scale, this is not the work of a petty criminal, but the result of organized criminal activity.
Michael Hanson, the senior executive vice president of public affairs for the Retail Industry Leaders Association (RILA) was quoted in Loss Prevention Magazine as saying that he believes the INFORM Consumers Act is a tremendous first step, but RILA supports the formation of a federal task force comprised of representatives from Homeland Security, the Department of Justice, the FBI, the FTC, and the U.S. Postal Service to concentrate the power of law enforcement on the problem. “Establishing a federal task force that pulls together all of the respective agencies that have jurisdiction over organized retail crime is necessary to enhance collaboration and transparency in the fight against sophisticated crime rings. Many of these criminal syndicates are using the profits derived from the sale of stolen goods to fund additional violent criminal activity in our communities such as human trafficking, gun smuggling, narcotics, and terrorism – it makes collaboration between agencies more important than ever.”
The INFORM Consumers Act, which was brought about through the efforts of the International Anti-Counterfeiting Coalition, will go into effect on June 27, 2023. At that time, all online marketplaces will need to implement policies to provide for the necessary collection of all high-volume sellers’ information.