The INFORM Act – A New Tool To Combat Online Counterfeits
January 12, 2023 at 03:40 pm IST
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On December 29, 2022, President Biden passed the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, also known as the INFORM Consumers Act (the "INFORM Act") as part of the omnibus Consolidated Appropriations Act of 2023. The INFORM Act serves to target stolen and counterfeit products on e-commerce platforms by requiring Online Marketplaces, defined as "any person or entity that operates a consumer-directed electronically based or accessed platform," (e.g., Amazon, Facebook, Etsy) to gather identifiable information about its high-volume third-party sellers. High Volume Third-Party Sellers are defined as sellers that produce 200 or more transactions resulting in $5,000 or more in gross revenue during a continuous 12-month period. Within 10 days of qualifying as a High Volume Third-Party Seller ("Seller"), such Seller must provide the Online Marketplace its (1) bank account numbers, (2) government-issued identification, (3) tax identification numbers, and (4) contact information. Online Marketplaces are required to verify the accuracy of this information annually. If an Online Marketplace does not receive this information within the 10-day period, it is required to suspend the Seller's activity until it receives such information.
The INFORM Act necessitates transparency not only between Online Marketplaces and Sellers, but with the consumer as well. The INFORM Act requires Sellers' identities and contact information be made available to consumers. In addition, Online Marketplaces are required to provide consumers with an electronic and telephonic method to report suspicious activity. The Federal Trade Commission will oversee and implement any penalties for violating the requirements, which go into effect June 27, 2023.
With the proliferation of third-party sellers on online marketplaces such as Amazon, Facebook, and Etsy, the INFORM Act is aimed at protecting consumers from buying products that may be unsafe, deceptively labeled, expired, or even banned by federal regulators. At the same time, the INFORM Act should make it easier for intellectual property owners to report fraudulent, counterfeit, or infringing products and to enforce their intellectual property more swiftly and aggressively. The INFORM Act creates incentives for online marketplaces to be more diligent and proactive about vetting its third-party sellers, the result of which should help lower the cost and reduce the time it takes for IP owners to enforce their rights and combat counterfeit products on the market.
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Mr Brad Rose
Pryor Cashman LLP
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Amazon.com, Inc. is one of the world leaders in on-line distribution of products to the general public. The group also operates a marketplace activity, allowing individuals and distribution companies to conduct their purchase and selling transactions for goods and services. The activity is organized around three families of products and services:
- electronic and computer products: toys, cameras, computers, laptops and peripherals, TVs, stereo systems, readers, wireless communication products, etc. Amazon.com also offers kitchen and garden equipment, clothing, beauty products, etc.;
- cultural products: books, musical products, video games and DVDs;
- other: primarily Internet interface and application development services.
Net sales break down by source of income between sales of services (55.5%) and sales of products (44.5%).
Net sales are distributed geographically as follows: the United States (68.8%), Germany (6.5%), the United Kingdom (5.9%), Japan (4.5%), and other (14.3%).