New INFORM Consumers Act to guard IP rights in the US
The US Congress has adopted the INFORM Consumers Act that aims to fight IP infringing goods on online marketplaces. Find out how it affects your brand’s IP rights.
Protecting IP rights on online marketplaces is difficult without sufficient backing from legislative bodies. Luckily, many countries are discovering the damage IP infringing fraudsters are causing the economy and step up their game by creating more efficient legislation.
The EU has already done so, and now the US is following suit with the INFORM Consumers Act.
What is the INFORM Consumers Act
The fitting acronym is short for the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act passed by the US Congress and signed by President Biden at the end of December 2022.
Simply put, this law aims to “require online marketplaces to collect, verify, and disclose certain information regarding high-volume third party sellers of consumer products to inform consumers.” The US government’s intention with INFORM is to put a stop to the selling of counterfeit products on online marketplaces.
INFORM creates a legal framework for the collection, verification and sharing of information about third party sellers on an online marketplace in the US.
What is a third party seller according to INFORM
High volume third party sellers are in the focus of the Act. According to the text, a third party seller is “a participant on an online marketplace's platform … who, in any continuous 12-month period during the previous 24 months, has entered into 200 or more discrete sales or transactions of new or unused consumer products resulting in the accumulation of an aggregate total of $5,000 or more in gross revenues.”
New tasks for marketplaces
INFORM requires online marketplaces to collect and verify information about third party sellers. This includes bank account numbers, government-issued IDs that certify a business’ identity, tax identification, as well as contact information like email address, phone number and physical address.
If a seller fails to provide adequate information, or update the existing information when necessary, the marketplace is required to suspend their account within 10 days until the situation is rectified.
For the sake of the seller in this screenshot, we hope they’ve provided more information to Amazon than currently displayed, otherwise they’ll soon land in trouble.
In case a seller’s total sales volume surpasses the threshold of $20,000, they are obligated to share their identifying business information with consumers. This can be done via the product listing on the online marketplace. This requirement increases transparency and helps consumers identify who they are buying products from.
Which means that if the seller in the screenshot above exceeds the total sales value of $20,000, they’ll have to update their information page soon.
Finally, INFORM also creates a reporting mechanism for online marketplaces to follow in case a high volume third party seller is suspected of trading counterfeit products.
The next steps
The US Federal Trade Commission is tasked with enforcing INFORM after it has taken effect 180 days after being signed. This means that the Act will enter into force in June 2023.
Why we need INFORM and similar legislation
Just like in the case of the EU Digital Services Act, we at globaleyez welcome the adoption of INFORM and look forward to the hopefully significant positive changes it will bring to the industry.
In the course of our work as brand protection experts, we’ve repeatedly encountered the severe scale of IP infringements present on countless online marketplaces worldwide. Since it’s not strictly in the nature of e-Commerce platforms to enquire about their third party sellers (after all, a sale is a sale, whoever’s making it), it’s up to legislators to create a framework where online marketplaces have to take a more active role in identifying their sellers.
Because who sells what matters a lot. Not only to brands whose IP rights (and consequently, their reputation, revenue, distribution network, etc.) are hurt in the process, but also consumers who buy them, the economy, the environment, and many more actors you’d never even think can be affected by the manufacturing and distribution of counterfeits.
Especially large marketplaces and their dishonest third party sellers may pose significant dangers to consumers. Not knowing who they’re buying from puts consumers at a clear disadvantage, and many marketplaces are usually not very forthcoming with information when it comes to third party sellers.
This makes the new information requirements all the more necessary. Moreover, we welcome the new obligation to include a reporting mechanism when it comes to fraudulent listings.
Reporting is not new to us; in fact, it’s an integral part of the job of online brand protection experts. In the course of our marketplace monitoring service, we uncover listings that infringe on our clients’ IP rights. Then, should our clients ask us to enforce their rights, we report these to the marketplace and demand their takedown.
However, thanks to the new mechanism, more people may be encouraged to report a suspect listing, raising awareness of the issues and making it more difficult for counterfeiters to stay unnoticed. This in turn can significantly lower the overall number of fraudulent listings present on e-Commerce platforms.
High volume third party sellers - what online brand protection experts think
Although each unauthorized seller harms your brand, not all of them harm you to the same extent. In fact, those that sell more cause significantly more harm than the others. Therefore, we also have our category of high volume third party sellers, albeit in a slightly different context.
Contrarily to INFORM, we don’t set up a hard definition for “high volume”. It wouldn’t make any sense, since every brand is different, and the same $10,000 loss may cause a lot more damage to a small manufacturer than a multinational luxury brand. Instead, we define high volume sellers on a case by case basis, thanks to our marketplace sales tracking service.
This service allows us to track the turnover, bestselling products and revenue of sellers, whether authorized or unauthorized. With marketplace sales tracking, we can determine which seller is causing you the most harm (or, alternatively, which of your authorized sellers is the most successful) and therefore, prioritize our course of action. It obviously makes more sense to take out the largest offenders first, which allows us to form the most cost-effective response - and gives you the most value for your money.
Moreover, sales tracking is also an excellent tool to evaluate a new market regarding bestselling products, potential gains and strongest competitors. With sales tracking, you can enter a new market knowing exactly what to expect and how to act for success.
Tighter legislation for the protection of IP rights in e-Commerce gives a strong basis for online brand protection. Therefore we welcome the introduction of INFORM and can’t wait to evaluate its effects on the market in action.
If you don’t want to wait that long, or are worried about counterfeit and grey market products, or any other IP issues, contact globaleyez and tell us all about your challenges.