New law protects online shoppers from stolen and counterfeit products

Photo (c) Pramote Polyamate - Getty Images

Online platforms will be held accountable for third-party sellers

When you order things online you now have a new set of consumer protections. A new law – the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act – or the INFORM Consumers Act – took effect this week.

It holds online selling platforms, such as Amazon and eBay, accountable for the sale of outdated, stolen, or counterfeit merchandise by third-party sellers. The law was prompted by reports from consumers, such as the one ConsumerAffairs received from Rafael, from Oakland who said an item he purchased from eBay was counterfeit and he got little help from the company.

“They essentially protected a seller that was selling fraudulent items over their customer, and justified it by using the return option that was selected as the reason, as if that was more important than the actual injustice,” Raphael wrote in his review.

New requirements

According to the Federal Trade Commission, The INFORM Consumers Act puts new requirements in place for online marketplaces. Those are defined as a person or business that operates a consumer-directed platform that allows third-party sellers to engage in the “sale, purchase, payment, storage, shipping, or delivery of a consumer product in the United States.” 

Under the new law, online marketplaces must collect and verify certain financial and identifying information from “high-volume third-party sellers” – defined as a person or business that meets specific sales thresholds on that platform. 

Online marketplaces will generally be required to disclose on those sellers’ product listing pages the seller’s name, address, and contact information. In addition, online marketplaces must suspend high-volume third-party sellers that don’t provide the required information and must offer a clear way for consumers to report suspicious conduct.

Amazon and eBay support

Amazon and eBay both have expressed support for the new law. In a statement to the media, eBay said it is “fully prepared” to comply with the new law. In a blog post, Amazon it backs legislative efforts “to stop bad actors from harming consumers, including increasing penalties against online criminals and providing greater resources for law enforcement.” 

Marketplaces that fail to comply could face civil penalties of up to $50,120 per violation.

Major retailers like Target and Walmart were supportive of the new law, seeing it as a possible way to reduce the epidemic of shoplifting. Executives at especially-targeted retailers have suggested that much of the theft is done by organized gangs who then sell the stolen goods on legitimate platforms.

The Prosecutors Alliance of California, an organization promoting criminal justice reforms, estimated last year that criminal shoplifting gangs are selling more than $500 billion in stolen or knock-off goods each year.

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