INFORM Act: Verifying Seller Information

Online marketplace obligations under the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act (INFORM Consumers Act) came into effect on June 27, 2023. The new law requires online marketplaces to collect, verify, and disclose specific information about high-volume third-party sellers, with the aim of enhancing transparency and reducing fraud. In this guide, learn what the INFORM Consumers Act entails and best practices for compliance.

Key Requirements of the INFORM Consumers Act

The INFORM Consumers Act requires online marketplaces to collect, validate, and disclose certain information about high-volume third-party sellers of unused consumer products. Under the act, a high-volume third-party seller is any person or business with 200 or more individual sales and gross revenues of at least $5,000 in any continuous 12-month period over the past 24 months. The threshold only applies to online marketplaces that the third-party seller doesn’t control.

Online marketplaces must collect the following information from qualifying high-volume third-party sellers:

• Bank account information, including your bank account number. If you don’t use a bank account, you must provide the name of the payee for payments the online marketplace makes to you.
• Business tax identification number or taxpayer identification number
• Contact information, including your name, a working email address, and a phone number. Legal business entities must provide a working email address, phone number, and government-issued ID or tax document that includes the seller’s business name and physical address.

An online marketplace must disclose seller information on product listing pages, including their full name or business name, physical address, working phone number, and working email address if a high-volume third party’s annual gross revenues exceed $20,000 or more. An exception exists for sellers who operate out of their homes. In that case, the online marketplace may only disclose their country, state, phone number, and email address.

Collecting Seller Information

Under the INFORM Consumers Act, online marketplaces may handle the collection of information from high-volume third-party sellers themselves or via a payment processor or other third party it contracts. Information collected includes bank account details, the name of the payee for payments, taxpayer identification numbers, and contact details, including a working email address and phone number.

Once an individual or business meets the definition of a high-volume third-party seller, the online marketplace has 10 days to collect the information. If a seller fails to provide their information within the 10-day timeframe, the online marketplace must suspend their sales activity until they do.

Verifying Seller Information

After an online marketplace collects the required information from a high-volume third-party seller, it has 10 days to verify the details. Identity verification may include sharing the information obtained with a third-party identification verification provider, using taxpayer identification matching tools, or searching publicly available databases.

Online marketplaces must also validate the seller’s email and phone number are active, which may be possible by sending verification codes via email or text.

Once an online marketplace verifies the information of a high-volume third-party seller, it must recertify the details at least once every 12 months. Sellers must respond to an electronic certification request within 10 days.

Disclosing Seller Information

Online marketplaces must disclose certain information about high-volume third-party sellers whose revenues exceed $20,000 annually on their product pages. The information that must be disclosed includes:

• The seller’s full name, business name, or the name the seller uses on the online marketplace
• The seller’s physical address and contact details so customers can contact you freely. Contact details can include a working phone number and email address or some other means of direct electronic messaging.
• Online marketplaces with high-volume third-party sellers who rely on other businesses to supply their products must include the name of that company, its address, and contact information on the seller’s product pages.

The INFORM Consumers Act recognizes that some sellers work from home, and sharing their home addresses on online marketplaces may be a privacy concern. For those individuals and businesses, an exemption allows online marketplaces to share only their country, state, phone number, and email address, or other means of direct electronic communication.

If a customer contacts a seller who qualifies for the exemption, the seller must reply within a reasonable timeframe to continue to be eligible for the exception.

Avoiding Legal Risks

Online marketplaces that fail to comply with the INFORM Consumers Act may face stiff penalties of $50,120 per violation. For that reason, it’s imperative to implement robust data security measures, regular audits, and compliance checks to ensure the data of high-volume third-party sellers is collected securely and properly validated.

If a seller’s information is inaccurate, it may lead to customer disputes that harm the seller’s and the online marketplace’s reputation. Partnering with a third-party risk management solution like EvidentID can automate much of the collection, verification, and monitoring process to eliminate the need for constant oversight by an online marketplace team.

Impact on Online Marketplaces

The INFORM Consumers Act stands to upend some of the traditional business processes used by online marketplaces. It is essential that staff understand the intricacies of the new law and how it impacts their responsibilities. Training staff on the rules of the INFORM Consumers Act can educate them on the importance of due diligence when dealing with high-volume third-party sellers.

Keep in mind that compliance with the INFORM Act isn’t a one-time deal. Online marketplaces must engage in continuous monitoring to keep high-volume third-party seller information and contact details current.