The Inform Act takes effect targeting organized retail theft

The Inform Act, a new law aimed at curbing organized retail theft and the sale of counterfeit and harmful products on online platforms, takes effect on Tuesday as more retailers blame theft as a reason for lower profits.

The new law requires online marketplaces, such as Amazon And ebayto verify and share information with third-party sellers who handle a high volume of transactions on their platforms in an effort to deter bad actors from selling stolen or malicious goods.

If the companies fail to get around, they could face fines of more than $50,000 per violation.

The bipartisan legislation, which represents integrity, notification and fairness in online retail marketplaces, was passed in December as part of the blanket spending bill, more than a year after it was introduced by lawmakers. Jan Schakowsky, D-Ill., and Gus Bilirakis, R-Fla.

“The goal of the Consumer Inform Act is to add more transparency to online transactions and to deter criminals from acquiring and selling stolen, counterfeit, or unsafe items through those marketplaces,” the Federal Trade Commission, which will be tasked with enforcing the law along with state attorneys general, states. its website.

“The law also makes sure that users of an online marketplace have a way to report suspicious behavior with respect to third-party bulk sellers.”

The law comes after trade unions and retailers pressured Congress about an alarming increase in retail theft that they say is being driven by lax regulations governing third-party sellers and checks on online platforms. They claim that organized crime groups steal goods from stores and then resell them on online marketplaces, usually for less than the sticker price.

Many experts say organized retail theft has grown alongside the rise of online shopping, which has boomed during the Covid pandemic and become the primary way to shop for consumers.

During the second quarter of 2020, e-commerce sales in the United States accounted for 16.1% of total retail sales and reached $211.5 billion, up 44.5% from the same period last year, according to Census data. The growth of e-commerce in the United States has plateaued since then, but its share of sales has remained flat.

In the first quarter of 2023, e-commerce in the United States accounted for 15.1% of total retail sales, reaching $272.6 billion, an increase of 7.8% over the same period last year.

While stolen or counterfeit goods make up a small portion of those transactions, retail groups and law enforcement officials are increasingly calling on lawmakers to address the problem. They said it was difficult to catch bad actors selling stolen goods online because their identities were protected.

Criminals have been able to operate in “complete anonymity using fake screen names and fake addresses,” but the Information Act will change that, Lisa Labruno, senior executive vice president of retail operations for the Retail Industry Leaders Association, told CNBC.

“Under INFORM, online marketplaces can no longer turn a blind eye to criminal actors using their platforms to sell stolen and counterfeit goods. The Federal Trade Commission and state attorneys general will be empowered to hold these platforms accountable, and consumers will also have their own reporting mechanism to report suspicious activity,” he said. Labruno. “For retailers, the implementation of INFORM means we have more support and partners in the fight against organized retail crime.”

Online marketplaces are now required to collect, verify, and disclose certain information about third-party sellers who have high transaction volumes on their platforms.

The rules apply to sellers who have 200 or more separate sales or transactions and $5,000 or more in total revenue in any continuous 12-month period during the past 24 months, according to the FTC.

Digital marketplaces will now be required to collect bank account details, tax identification number and contact information from the relevant sellers and validate the information within 10 days of the seller reaching “Volume” status.

Only individuals who carry out the relevant number of transactions will be required to give their name, email address and telephone number to the Platforms. Legal entities and companies are required to provide the same information. But they also need to provide a copy of a valid government-issued ID, valid government record, or tax document that includes the business name and physical address of the seller.

Marketplaces must include this information either in sellers’ product listings or in order confirmations, and suspend sellers if they fail to disclose requested information. Marketplaces must also provide a clear way for consumers to report suspicious behavior in product listings from the relevant third-party sellers.

Disclosure requirements are more severe for sellers with annual gross revenues of $20,000 or more in a given market.

Many of the online marketplaces subject to regulation are national household names. But smaller, more specialized platforms with relevant vendors and scale are also covered.

“While our organizations represent a diverse range of industries and interests, we are uniquely united in our belief that INFORM must be fully enforced by the Federal Trade Commission (and government brokerage firms) to protect consumers and businesses from what has become a serious threat to consumers, honest businesses, and a fair and healthy marketplace.” By retailers incl gapAnd Home DepotAnd Walgreens And best buy, States. “We strongly encourage the FTC to act quickly and publicly to enforce the law rigorously.”