INFORM Act attacks sale of hot goods online.

In June, the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (the “INFORM” Consumers Act) took effect. Passed late last year as part of an omnibus spending bill, the bipartisan legislation seeks to stem the rising tide of stolen goods sold online. It does so by placing strict reporting requirements on third-party sellers including well-known market participants like Amazon and eBay. These online marketplaces will be required to verify and share information of third-party sellers who process a significantly high volume of business through their sites.

Specifically, if a third party conducts 200 or more transactions that result in total revenues greater than $5,000 in any continuous twelve-month period, the online marketplace must require the seller to provide: (1) bank account number; (2) government issued ID; (3) tax identification number; and (4) basic contact information. The marketplace must verify this information and provide annual updates if it changes. Additionally, the law requires the marketplaces to provide opportunities for consumers to report electronically and by phone any suspect activity on the marketplace. For sellers with gross revenues greater than $20,000 on a marketplace site, the reporting requirements become more stringent.

The legislation responds to traditional retailers’ concerns that criminals increasingly obtain stolen or counterfeit items and move them through online marketplaces. Smash and grab robberies getting big attention on the nightly news are often staged by organized crime rings who sell their hot commodities online for prices lower than the retailers’ sticker prices.

Digital marketplaces that fail to follow the law face potential civil penalties of $50,120 per violation. Both the FTC and states’ attorneys general will have authority to bring federal claims against companies that violate the law.