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Ecommerce in the omnibus: INFORM Act passes Congress

The law aims to combat retail crime by requiring authentication of high-volume marketplace sellers.

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Photo by Elijah Mears on Unsplash

In Washington, Congress passed a big piece of legislation to end the year. The $1.7 trillion omnibus package funded a range of initiatives and created a host of new laws in areas such as defense, elections and healthcare.

Ecommerce was among the topics included in the bill that was signed by US President Joe Biden just before Christmas.

The legislation contained the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM Consumers) Act. Cosponsored by US Senators Dick Durbin (D-Illinois) and Bill Cassidy (R-LA), this law is designed to bring more information about sellers on marketplaces to light, with the hope of curtailing illicit activity.

This legislation requires major online marketplaces to verify the identity of high volume third-party sellers.

This is designed to combat online retail crime. Reducing anonymity among sellers will help to combat the sale of counterfeit goods, proponents said. It also has the potential to disrupt organized retail crime rings that steal goods from stores and resell them.

“People deserve to know basic information about those who sell them consumer products online,” said Durbin, in a statement. “By providing appropriate verification and transparency of high-volume third party sellers, the INFORM Consumers Act will shine a light that will deter online sales of stolen, counterfeit, and unsafe goods and protect consumers.

The legislation will bring additional requirements for marketplaces and high-volume third-party sellers, which are defined as vendors who have made 200 or more discrete sales in a 12-month period, amounting to $5,000 or more.

Sellers must provide a government ID, tax ID, bank account information, and contact information to marketplaces, which must then authenticate the information.

The marketplaces must also ensure that these sellers disclose basic identity and contact information to consumers.

A hotline will also need to be created by marketplaces to report suspicious marketplace activity, such as the posting of “suspected stolen, counterfeit, or dangerous products,” Durbin’s office states.

The law’s provisions will be implemented by the Federal Trade Commission.

To reach passage, the legislation garnered support from a cross-section of marketplaces and retailers.

Platforms including eBay, Etsy, Poshmark, and Pinterest banded together to form a coalition called Protect America’s Small Sellers. Brands and retailers like Levi’s, 3M, Gap Inc., Nordstrom, Ulta Beauty, Home Deport and Walgreens also signed on in support.

“The exponential growth of online marketplaces highlights the necessity to safeguard small businesses and consumers from bad actors,” said Chris Lamond, PASS executive director, in a statement. “The INFORM Consumers Act exemplifies our esteem for consumer safety and power, as well as our goal to cultivate and encourage small sellers.”

The multi-year effort achieved its aim as the industry leaders say organized retail crime continues to rise. According to the National Retail Federation’s (NRF) 2022 National Retail Security Survey, retail shrink, which refers to all product losses from theft, damages or errors, accounted for $94.5 billion in losses in 2021 when taken as a percentage of total sales.

“While [organized retail crime] can vary in scope and scale, the common denominator is that the activity is a coordinated, organized effort,” said David French, SVP of government relations at NRF, which also supported the legislation. “These criminal rings operate sophisticated enterprises that aim to ransack retailers and sell illegally obtained merchandise for profit, endangering both employees and consumers.”

This being legislation, there was negotiation involved to get the bill across the finish line. eBay said it helped to usher through changes that were designed to protect privacy.

"While the original version of the INFORM Consumers Act would have imposed burdensome information collection and disclosure requirements for small businesses and individuals, eBay led efforts to vastly improve the bill to provide a nationwide standard that strikes an appropriate balance to increase transparency and safety for consumers online while also protecting seller privacy," the company wrote. "This compromise legislation avoids a patchwork of state laws and has broad support from consumer groups, retailers, and law enforcement."

With retailers like Macy's standing up third-party marketplaces and the channel expected to grow to 60% of global ecommerce by 2027, the bill's requirements will be important for ecommerce professionals to educate themselves on as they seek to bring more sellers into the mix.

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