The Inform Consumers Act Targeting Organized Retail Crime Takes Effect

The Inform Consumers Act, a new law that aims to curb organized retail theft and the sale of counterfeit and harmful products on online platforms, takes effect on Tuesday as more retailers blame theft as a reason for lower profits, reports CNBC. Congress passed the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act — or the INFORM Consumers Act — effective as of June 27, 2023. The new law requires online marketplaces, such as Amazon.com, to verify and share information on third-party sellers that handle a high volume of transactions on their platforms in an effort to deter bad actors from selling stolen or harmful goods. If the companies fail to get in line, they could face more than $50,000 in fines for each violation.

According to the Federal Trade Commission, the goal of the bipartisan legislation is to "add more transparency to online transactions and to deter criminals from acquiring stolen, counterfeit or unsafe items and selling them through those marketplaces. The Act also makes sure online marketplace users have a way to report suspicious conduct concerning high-volume third-party sellers."

Total Retail's Take: Retailers have increasingly fell victim to organized crime both in stores and online in recent years. Retail theft and organized retail crime (ORC) have been cited as serious problems and the leading cause of inventory shrink by retail CEOs. Companies have been working to mitigate their individual risk, such as investing in safety resources or installing fixtures to protect merchandise, but the Inform Consumers Act is the first legislation to address the issue industry-wide.

Online marketplaces are now required to collect, verify and disclose certain information about third-party sellers that have high transaction volumes on their platforms. Marketplaces must include that information either in the seller's product listings or in order confirmations, and suspend sellers if they fail to disclose the required information. The marketplaces also have to provide a clear way for consumers to report suspicious conduct on product listings from relevant third-party vendors.

The rules apply to sellers that had 200 or more separate sales or transactions and $5,000 or more in gross revenue in any continuous 12-month period during the past 24 months, according to the FTC. The disclosure requirements are steeper for sellers that have annual gross revenues of $20,000 or more on a particular marketplace.

The Buy Safe America Coalition, a group that advocates against the sale of stolen or counterfeit goods and comprises of retailers including Gap, The Home Depot, Walgreens, and Best Buy, sent a letter to the FTC this month urging the agency to “take immediate action” once the Inform Act becomes law.

While the Inform Consumers Act may pose challenges for both small and large marketplace organizations, as well as questions around enforcement by the FTC, retailers and brands are hopeful that this legislation will curb the sale of counterfeit goods and mitigate profit loss from retail crime going forward.