The Integrity, Notification, and Fairness in Online Retail Marketplaces (INFORM) for Consumers Act, bipartisan federal legislation aimed at curbing organized retail crime on online marketplaces, went into effect on June 27.
Experts say the law is designed to make it more difficult for organized retail crime groups to sell illicit goods through platforms like Amazon or Facebook by requiring online marketplaces to do more to protect consumers from counterfeit, unsafe and stolen goods.
Organized retail crime has become a significant problem in the industry, with thefts costing retailers and communities an estimated $95 billion in 2022, according to the National Retail Federation.
To address this issue, retailers worked with lawmakers to pass the INFORM Act, which mandates that online marketplaces collect, verify and disclose specific information from third-party sellers conducting a minimum of 200 transactions resulting in total revenues of $5,000 in a year.
Under the law, online marketplaces are now required to obtain and verify seller information such as bank account numbers, government-issued identification, tax identification numbers and contact information. Additionally, sellers’ names and contact information must be disclosed to consumers to facilitate reporting of any suspicious activity on the platform.
David Johnston, vice president of asset protection and retail operations for the National Retail Federation, was optimistic about the impact of the legislation.
“Through the verification and validation required from the INFORM Act, it’s now going to remove that veil not only for those that are investigating suspected items but also for the consumers,” he told Fox Business.
Another significant aspect of the bill is its focus on strengthening communication between law enforcement, online marketplaces and the retail community. For instance, the law states that if consumers, retailers or law enforcement suspect that a marketplace is not complying with the law, they can report it to the Federal Trade Commission (FTC), which will investigate the matter. Noncompliant online marketplaces may even face fines of $50,120 per violation, as outlined by the FTC.
“Online marketplaces have always been viewed as an avenue of anonymity and uncertainty as to who is actually selling the merchandise,” Johnston explained.
While industry experts consider the INFORM Act a positive step, they acknowledge that it may not completely solve the problem of organized retail crime.
Johnston believes that the legislation will help dismantle local or regional organized groups but may have limited impact on larger, well-structured transnational criminal organizations operating within the resale system.
“It’s too early to tell how far the needle will move. However, it’s a single step in the journey to curbing the organized retail crime that we’re seeing and the increase in threats,” Johnston said.
Still, retailers affected by organized retail crime believe more needs to be done to address the issue.
“Congress and states must focus on three paths forward: first, enforcing the new law of the land, second, creating capacity for law enforcement to investigate and prosecute cases through funding federal, state and local task forces,” Home Depot spokesperson Evelyn Fornes told Fox News.
Major retailers such as Home Depot, Walgreens and Best Buy have expressed support for the INFORM Act and have called for strong enforcement of regulations by the FTC and state attorneys general.
Lisa LaBruno, senior executive vice president of retail operations at the Retail Industry Leaders Association, commented on the legislation to 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 FTC and state attorneys general will be empowered to hold these platforms accountable, and consumers will also have their own reporting mechanism to flag suspicious activity,” LaBruno said. “For retailers, INFORM’s implementation means we have more support and partners in the fight against organized retail crime.”
In addition, the Buy Safe America Coalition, consisting of retailers such as Gap and Home Depot, urged the FTC to rigorously enforce the law to protect consumers and businesses from the threat of organized retail crime.
Online marketplaces, including eBay and Amazon, have responded to the new requirements by modifying operations.
“We were proud to support passage of the INFORM Act to create a national standard to protect consumers from bad actors who seek to misuse online marketplaces, while also ensuring important protections for sellers,” an eBay spokesperson said.
Amazon has also notified high-volume sellers to verify their information to ensure compliance with the law.
FTC Bureau of Consumer Protection Director Samuel Levine said that under the INFORM Act, the FTC will collaborate with state partners to hold online marketplaces accountable.