INFORM Consumers Act: A Major Win for Brands

The INFORM Consumers Act has come into effect, bringing sweeping changes to online marketplaces to the benefit of consumers and legitimate businesses alike.

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Online marketplaces have become a fantastic place for smaller businesses and creators to sell their products online without having to create their own physical stores or dedicated websites. 

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However, with the rise of online marketplaces, the issue of counterfeit products has become a major threat to legitimate brands and consumers. The INFORM Consumers Act aims to address this problem by mandating online marketplaces to take more efforts towards stopping counterfeit products and providing a safer shopping experience for consumers. 

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What is the INFORM Consumers Act?

The INFORM Consumers Act is a recently passed legislation in the United States that aims to tackle the sale of counterfeit products online from online marketplaces.

These online marketplaces are now required to collect certain information from their high-volume sellers, such as:

• Tax ID numbers
• Government-issued IDs
• Bank account information

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Additionally, more information will have to be made easily accessible to the end consumers themselves. This information includes:

• The seller’s name
• Their business address
• Their contact information
• The products’ country of origin

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What is Considered a “High-volume Seller”?  

Per the INFORM Consumers Act, a high-volume seller is defined as a third-party seller active on an online marketplace who has engaged in 200 or more discrete sales or transactions of new or unused consumer products within a continuous 12-month period during the previous 24 months. The total gross revenues generated from these transactions must amount to $5,000 or more.

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This is an extremely low threshold for qualification. It means that bad actors will only make a relatively small number of transactions before they are required to provide this information to the platform and the consumers buying their products.  

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Which Online Marketplaces Are Affected by INFORM?

The INFORM Consumers Act affects all websites that allow third-party sellers to do business on its platform in the United States. This Act affects every online marketplace that may come to mind, including Amazon, eBay, Wish, AliExpress, Alibaba, Etsy, Target, Wayfair, Overstock, Mercari, StockX, Newegg, and countless more.

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This also affects social media marketplaces, like TikTok Shop, Facebook Marketplace, and Instagram Shopping.

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Who Benefits From INFORM?

It’s clear that the INFORM Consumers Act will have a huge impact on the future of online sales - an impact that will be positive for everyone but those with a history of fraudulent behavior. 

Brands

This Act immediately improves circumstances for brands doing business online by making it that much harder for bad actors to sell counterfeits and impersonate their brand. The low threshold for qualification means that bad actors will have to identify themselves to online marketplaces before they surpass even $5,000 in sales - or commit fraud by using fake names and IDs. Additionally, the information provided will make it much harder for counterfeiters to cycle through an endless supply of fake identities or anonymous aliases. 

Consumers

Perhaps the biggest winner of the INFORM Consumers Act, consumers now face a significantly safer shopping experience. Brands are now much more well-equipped to remove counterfeit products from online marketplaces, many of which can be extremely dangerous to end consumers if products like medicines, foodstuffs, or cosmetics are replicated illegitimately and improperly. Shoppers are also safer now knowing that they are dealing with a legitimate seller, rather than a fraudster with zero interest in providing a satisfactory online shopping experience. 

Platforms 

While this Act may seem like an additional burden to online marketplaces at first glance, the reality is that responsible platforms have already had similar procedures in place for years. Marketplaces like eBay, Target, and Amazon, who supported this bill from the get-go, have long provided brands and customers with the ability to submit reports for counterfeit products and remove them from their platforms.

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The only online marketplaces who will be seriously negatively affected by the implementation of INFORM will be those irresponsible enough not to already be working towards a safer online shopping experience anyway.