The INFORM Act or The Integrity, Notification, and Fairness in Online Market Retail Marketplaces for Consumers Act is a legislative effort to protect consumers from unknowingly purchasing stolen, counterfeit, or unsafe consumer products from online sellers. With a June 27, 2023 compliance deadline, operators of online marketplaces should start taking steps to comply with its mandates.
Here’s the TL:DR: The act’s purpose is to establish a baseline level of transparency to make it easier for consumers to identify exactly who they are buying from while making it harder for deceitful sellers to avoid identification.
The INFORM Act imposes new and rather hefty due diligence and disclosure requirements on all online marketplaces: the electronically based, “consumer-directed” platforms that “facilitate or enable third party sellers to engage in the sale, purchase, payment, storage, shipping or delivery of a consumer product.”
High-volume third-party sellers (defined as vendors with more than 20 transactions and $5,000 in sales revenue within in a 12-month period) will be required to provide verifiable authenticating information to eliminate the anonymity they sometimes enjoyed on some platforms. The marketplaces will be responsible for collecting and verifying that information. Which includes:
- Bank account number
- Tax ID number (corporate sellers) or social security number (individual sellers)
- Working phone number
- Working email address
- Copy of a government-issued record or tax document that includes the business name and physical address
In addition, for sellers with annual revenue through a given marketplace of $20,000 or more, marketplaces must collect, verify, and display the seller’s name and physical address on a product page, in purchase confirmations, or in order details.
This will all be enforced by the FTC. Now all of this sounds great. But there might be a couple of hidden pitfalls, Ani Chaudhuri, CEO, Dasera speaks to that:
Implementing the INFORM Consumers Act aims to increase transparency and protect consumers from counterfeit, stolen, or dangerous products. However, the verification process may raise concerns about collecting, storing, and handling personal data. Online marketplaces must adhere to stringent data protection laws and ensure that the collected information is used solely for the purposes outlined in the Act. Additionally, they must safeguard sensitive information from unauthorized access and potential breaches to maintain consumer privacy.
To protect sensitive seller information, online marketplaces should implement robust security measures like data encryption, secure authentication protocols, and regular security audits. Furthermore, they should have a well-defined data retention and deletion policy to minimize risks associated with data storage. Marketplaces must also establish incident response plans and invest in employee training to ensure their staff can handle potential security breaches or unauthorized access.
Key provisions of the INFORM Consumers Act impacting high-volume third-party sellers include verifying their government ID, tax ID, bank account information, and contact details. Small business owners may face challenges, such as increased administrative burdens, potential privacy concerns, and additional costs associated with compliance. They may also experience increased competition due to heightened transparency, which could impact their online marketplace operations.
Experts expect the INFORM Consumers Act to change the online marketplace landscape significantly. Increased transparency and accountability may deter fraudulent sellers, creating a safer and more trustworthy consumer environment. Complying with the new regulations may lead to increased administrative work and costs for sellers, but it could also boost consumer trust in their products. Overall, the Act is expected to promote a more level playing field and foster healthy competition.
To comply with the INFORM Consumers Act without compromising operations or competitiveness, small business owners should:
a. Familiarize themselves with the Act’s requirements and implement necessary changes promptly.
b. Invest in secure data storage and management solutions to protect sensitive information.
c. Maintain transparent communication with customers to build trust and credibility.
d. Continuously monitor and adapt to changes in the online marketplace landscape to stay competitive.
Industry experts generally view the INFORM Consumers Act as a positive step toward ensuring integrity, notification, and fairness in online retail marketplaces. The Act aims to protect consumers and promote transparency. However, its effectiveness will depend on the FTC’s enforcement measures and the online marketplaces themselves. There may be areas for further consideration or refinement, such as addressing potential privacy concerns, minimizing administrative burdens on small businesses, and providing support to help them comply with the new requirements.
Hopefully online marketplaces can adapt to this new reality quickly. I can see this being a non-issue for big online marketplaces. But smaller ones may struggle to adapt. Let’s hope that everyone gets their respective houses in order by the implementation date of June 27 so that online commerce can be a better place for all.
The INFORM Act May Pose A Challenge In Terms Of Compliance For Online Marketplaces
Posted in Commentary with tags Online sales on May 11, 2023 by itnerdThe INFORM Act or The Integrity, Notification, and Fairness in Online Market Retail Marketplaces for Consumers Act is a legislative effort to protect consumers from unknowingly purchasing stolen, counterfeit, or unsafe consumer products from online sellers. With a June 27, 2023 compliance deadline, operators of online marketplaces should start taking steps to comply with its mandates.
Here’s the TL:DR: The act’s purpose is to establish a baseline level of transparency to make it easier for consumers to identify exactly who they are buying from while making it harder for deceitful sellers to avoid identification.
The INFORM Act imposes new and rather hefty due diligence and disclosure requirements on all online marketplaces: the electronically based, “consumer-directed” platforms that “facilitate or enable third party sellers to engage in the sale, purchase, payment, storage, shipping or delivery of a consumer product.”
High-volume third-party sellers (defined as vendors with more than 20 transactions and $5,000 in sales revenue within in a 12-month period) will be required to provide verifiable authenticating information to eliminate the anonymity they sometimes enjoyed on some platforms. The marketplaces will be responsible for collecting and verifying that information. Which includes:
In addition, for sellers with annual revenue through a given marketplace of $20,000 or more, marketplaces must collect, verify, and display the seller’s name and physical address on a product page, in purchase confirmations, or in order details.
This will all be enforced by the FTC. Now all of this sounds great. But there might be a couple of hidden pitfalls, Ani Chaudhuri, CEO, Dasera speaks to that:
Implementing the INFORM Consumers Act aims to increase transparency and protect consumers from counterfeit, stolen, or dangerous products. However, the verification process may raise concerns about collecting, storing, and handling personal data. Online marketplaces must adhere to stringent data protection laws and ensure that the collected information is used solely for the purposes outlined in the Act. Additionally, they must safeguard sensitive information from unauthorized access and potential breaches to maintain consumer privacy.
To protect sensitive seller information, online marketplaces should implement robust security measures like data encryption, secure authentication protocols, and regular security audits. Furthermore, they should have a well-defined data retention and deletion policy to minimize risks associated with data storage. Marketplaces must also establish incident response plans and invest in employee training to ensure their staff can handle potential security breaches or unauthorized access.
Key provisions of the INFORM Consumers Act impacting high-volume third-party sellers include verifying their government ID, tax ID, bank account information, and contact details. Small business owners may face challenges, such as increased administrative burdens, potential privacy concerns, and additional costs associated with compliance. They may also experience increased competition due to heightened transparency, which could impact their online marketplace operations.
Experts expect the INFORM Consumers Act to change the online marketplace landscape significantly. Increased transparency and accountability may deter fraudulent sellers, creating a safer and more trustworthy consumer environment. Complying with the new regulations may lead to increased administrative work and costs for sellers, but it could also boost consumer trust in their products. Overall, the Act is expected to promote a more level playing field and foster healthy competition.
To comply with the INFORM Consumers Act without compromising operations or competitiveness, small business owners should:
a. Familiarize themselves with the Act’s requirements and implement necessary changes promptly.
b. Invest in secure data storage and management solutions to protect sensitive information.
c. Maintain transparent communication with customers to build trust and credibility.
d. Continuously monitor and adapt to changes in the online marketplace landscape to stay competitive.
Industry experts generally view the INFORM Consumers Act as a positive step toward ensuring integrity, notification, and fairness in online retail marketplaces. The Act aims to protect consumers and promote transparency. However, its effectiveness will depend on the FTC’s enforcement measures and the online marketplaces themselves. There may be areas for further consideration or refinement, such as addressing potential privacy concerns, minimizing administrative burdens on small businesses, and providing support to help them comply with the new requirements.
Hopefully online marketplaces can adapt to this new reality quickly. I can see this being a non-issue for big online marketplaces. But smaller ones may struggle to adapt. Let’s hope that everyone gets their respective houses in order by the implementation date of June 27 so that online commerce can be a better place for all.
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