On July 23, 2020, U.S. Congresswoman Jan Schakowsky introduced H.R.7756, a bill that – if ultimately passed by Congress – will require online marketplaces to verify and disclose to consumers certain information regarding high-volume third-party sellers on their third-party platforms. The goal of the bill, the “INFORM Consumers Act,” is to combat the sale of stolen, counterfeit, and dangerous consumer products by requiring increased transparency of third-party sellers on online retail marketplaces.
The newly-introduced legislation follows from a similar bill that was proposed by U.S. Senators Bill Cassidy and Dick Durbin on March 10, 2020, similarly titled “Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act,” or the INFORM Consumers Act. The INFORM Consumers Act directs online retail marketplaces that include third-party sellers of consumer products to verify the identity of high-volume third-party sellers on the platform, defining “high-volume third-party sellers” as those who have entered into 200 or more discrete transactions in a 12-month period amounting to an aggregate total of $5,000 or more. To confirm the identity of these third-party sellers, the bill requires online marketplaces to acquire sellers’ government-issued photo identification, tax identification number, bank account information, and contact information on an annual basis.
Beyond that, the bill would also require online retail marketplaces to disclose to consumers the seller’s name, business address, phone number, email address, and whether the seller engages in the manufacturing, importing, retail, or reselling of consumer products. The legislation presents an exception, however, for individual high-volume third-party sellers that allows them not to disclose their personal street address or personal phone number as long as the sellers respond to consumer inquiries submitted via email within a reasonable time. Furthermore, the online marketplaces would have to provide contact information for customers to report suspicious activity.
It is also important to note that the act would hold online retail marketplaces accountable for the products on their platform sold by third-party sellers, with the intent of preventing the sale of counterfeit or stolen products to unsuspecting customers, with the Federal Trade Commission standing to implement the bill’s requirements, with violations resulting in civil penalties.
By establishing a baseline level of transparency for online retail marketplaces, the bill provides information so that consumers can distinguish between genuine retailers and frauds. However, this new consumer protection may place a great burden on online retail marketplaces that do not currently meet each of the legislation’s requirements, given the potential costs associated with altering procedures and adopting measures necessary to ensure compliance.
Corey Lee is a partner at Hunton Andrews Kurth. His practice focuses on commercial litigation and internal investigations. Natalia San Juan is a member of Hunton Andrews Kurth’s litigation team.