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Will The INFORM Consumers Act Take a Bite Out of Organized Retail Crime?
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – AKA the INFORM Consumers Act – is now the law of the land.
Congress passed the bipartisan act in December to make it harder for criminals to sell stolen and counterfeit goods through online marketplaces on eBay, Amazon.com and others.
The law requires marketplace operators to collect and verify financial and identity information about high-volume sellers, including their names, address and contact information. Bank and tax or taxpayer identification information is required.
Marketplaces must suspend sellers who fail to provide the necessary information. Consumers who buy items from marketplace sellers will now have a way to report suspicious business activity as a result of the new law.
Online marketplaces that violate the act may incur civil penalties of $50,120 per violation.
The Federal Trade Commission (FTC), which will enforce the law with the attorneys general offices from all 50 states, sent a letter last week to 50 online marketplaces notifying them of their obligation to comply with the new law.
“The Commission will enforce the Act to the fullest extent possible and will collaborate with our state partners to hold online marketplaces accountable,” said Samuel Levine, director of the FTC’s Bureau of Consumer Protection.
Amazon, eBay and Meta have all expressed support for the new law and plan to comply with the new rules, CNBC reports.
Amazon has informed marketplace sellers that they must comply or risk being thrown off of the marketplace.
An eBay spokesperson said the platform “fully supports transparency and is committed to a safe selling and buying experience for our customers.”
Lisa LaBruno, senior executive vice president, retail operations, at the Retail Industry Leaders Association, said retailers are hopeful that the new requirements will lead online marketplace platforms to “finally evict bad actors from their platforms.”
“While this law is not a miracle cure for organized retail crime, it’s a significant dose of help that finally holds marketplaces accountable when their platforms are used to sell stolen product,” Ms. LaBruno said. “Coupled with the ORC task forces launched in multiple states and cities across the country, we’re finally beginning to see the resources, collaboration and commitment needed to turn the tide in this fight.”
Discussion Questions
DISCUSSION QUESTIONS: What effect do you expect the INFORM Act to have on the sale of stolen and counterfeit goods on online marketplaces? Will the FTC and states be able to enforce the new law?
Poll
Loading …BrainTrust
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
David Spear
VP, Professional Services, Retail, NCR
Definitely a step in the right direction. Finally. But there has to be more than risk of being thrown off the market place. There has to be a process, a time line, and a deadline. If the deadline is not met, then the plug is pulled. C’mon people. Consequences!
This is an excellent law. It makes ultimate sense even without consideration of shoplifting. It will surely make it more difficult for organized crime to use Internet selling. Even legit sellers may be hesitant to follow it.
However, the reality is that it does nothing for personal shoplifting, which is more than half the problem.
The challenge to catch the organized entities is a game of “wack-a-mole”, which may make the capture and prosecution of offenders not worth the effort.
Without reading the details of the law in its entirety, the key points noted in this article seem positive. As we’re well aware, ORC has been a disturbing, growing trend that negatively affects retailers, consumers and communities. I understand the logic of how this law might eventually deter store theft, but it’s efficacy will be highly correlated to the magnitude and enforceability of its penalties.
Targeting fraudulent sellers, improving due diligence and setting steep fines will make theft less attractive. This Act supports consumer trust, especially in luxury e-commerce.
Retail stakeholders will expect this new Act to spark more enforcement than current inaction on shoplifting.
The INFORM Act will curtail counterfeit goods being sold through traditional marketplaces and sites, but never underestimate the power of the criminal or the value of a highly discounted luxury item. I would suspect that there will be shadowed sites and other pop up channels to provide access to these goods.
Agreed, but the bigger impact I beleve is in consumer package goods. Look for baby formula or batteries online as an example. A few weeks ago when I checked, there were 100’s of options of full case products on marketplacs. Consumers don’t by a case and then realize they don’t need it. 100% of those are fenced.
As the adage goes, follow the money. This makes it harder for criminals to profit from their activities, and I believe it is a great step inattacking this problem by eliminating the most lucrative, and easist to access, channels of distribution and revenue. I believe this will have a big impact, especially on smaller operators who until know, had a pretty easy way to fence their goods. To be clear this is one, long over due, step, but every little bit helps.
On a personal note, the last week or so I’ve seen a dramatic reduciton in the fencing activity on the online marketplaces I monitor. Could be chance or could be a result of new enforecement? Either way, it’s a good thing.
As we have seen countless times with the Robinson-Patman Act, legislation and regulation are only as good as their enforcement. If these new rules are enforced by both governments and the platform, well and good. If not, or only randomly enforced, the bad guys will quickly figure out how to work around it.
The INFORM Act is a step in the right direction and will make it more difficult for criminals to shield their identity when selling stolen or counterfeit goods online. That said, it will only work if it is enforced properly – which means details are routinely collected and verified, and are used to follow up on any suspicious behaviors. Just having to provide information will deter some criminals; others will look for ways round the regulations, including my creating multiple accounts to remain under the transaction threshold.
This is progress, but ample resources will be needed to find ultimate success against organized theft and counterfeit rings. Ultimately means both the retailers and governments will need to do their parts, and work together. Hopefully it leads to a significant reduction of crime by taking away some incentive from thieves.
As to individuals looking to steal for themselves, however, that’s another story for the many retailers looking for relief, and more help from local governments.
The INFORM Consumers Act requires online marketplaces to collect and verify certain identification and bank account information for high-volume seller. Additionally, marketplaces must collect, verify, and display the seller’s name and physical address on a product page, in purchase confirmations, or in order details.
The law is made to benefit retailers, by helping curb retail crime that is usually carried out through online marketplaces. Retailers who fail to comply with the reporting and disclosure requirements may become caught up in enforcement mechanisms meant to deter retail criminals.
INFORM is certainily a step in the right direction. I suspect the new law will reduce organized crime across marketplaces – until the will to continue profiting from this kind of reckless retail creates a way around this speed bump.