WILL THE INFORM CONSUMERS ACT MAKE MARKETPLACE SELLER IDENTITIES MORE TRANSPARENT TO CONSUMERS?
(The second in a series of articles examining the merits of recently proposed legislation requiring e-commerce platforms to address counterfeit sales on their platforms.)
Earlier this year, the Senate introduced the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (referred to as the INFORM Consumers Act). Like the SHOP SAFE Act, also re-introduced this year in the House of Representatives, this bipartisan supported bill aims to protect consumers against harms from the online sale of counterfeit products. The INFORM Consumers Act, if enacted into law, will require e-commerce marketplaces to collect extensive information about third-party sellers using their platforms. As with the SHOP SAFE Act, there are also some shortcomings to this proposed legislation.
The bill requires marketplaces to collect and verify information regarding the identities of “high volume” third-party sellers that use their e-commerce platforms. This information includes:
- Bank Account Information. Bank account numbers, name of payees on the accounts, and information regarding payment processors used by the seller in sales transactions.
- Seller Contact Information. Presentation of a government-issued ID for an individual or, for a company, a valid government-issued record or tax document that includes the seller’s business name and physical address. Also required are a working email address and phone number of the seller.
- Annual Certification. Requirement of the seller to report to the marketplace, each year, if there is any change to the information required above or face suspension.
- Verification and Disclosure. Requirement of each marketplace to verify the accuracy of the information collected from the seller and disclose this information in a “clear and conspicuous” manner on the product listing or through a link placed near the product shown online.
- Reporting Mechanism. Requirement of each marketplace to disclose, “in a “clear and conspicuous manner” a reporting mechanism that allows consumers to report suspicious marketplace activities.
While the proposed legislation, if enacted, will make seller identities transparent and therefore likely to discourage some counterfeiters, the bill has some shortcomings.
First, as with the SHOP SAFE Act, while asking third-party sellers to verify their identities is a relatively straightforward requirement, there are limits on how much “verification” a marketplace platform can accomplish; for example, a seller may use a fake government ID, that the marketplace may not have a feasible, scalable, legal, or financially, viable means of verifying.
Second, recent privacy laws such as the General Data Protection Regulation (GDPR) in the European Union, and the California Privacy Rights Act (CPRA) in the United States may conflict with the bill’s requirements to publicly display personal, identifiable information of individual sellers. Congress will need to figure out how to address this potential conflict of laws.
Third, the bill contains several exceptions to the ID requirements that might enable counterfeit sellers to find “loopholes” and submit false or incomplete information. For example, the proposed legislation allows sellers simply to certify that they have no phone number or physical address and thus claim an exemption.
Again, some of these concerns may get addressed during the legislative process, as the bill is debated and amended in the Senate and in the House committees and discussed by lawmakers. This proposed bill is another favorable signal that Congress wishes to make e-commerce marketplaces more trusted, safe, and secure and reduce the number of counterfeit products sold to consumers. That said, with so many different pieces of proposed legislation, the current policy priorities of this administration, and a severely polarized Congress, will 2022 finally be the year we see some practical protection for brand owners and consumers? Let's hope so.