New law thwarts online criminals selling fake or stolen goods.

A new federal law is set to crack down on online criminals who sell fake or stolen products, addressing the issue of shoplifting gangs using e-commerce sites as a platform.

The INFORM Consumers Act, which came into effect on June 27, aims to restrict the sale of stolen and counterfeit goods online, according to the Federal Trade Commission (FTC).

Retailers often find their stolen merchandise being sold on e-commerce platforms.

Under this legislation, online marketplaces will be required to collect, verify, and disclose information about third-party sellers who make over 200 sales totaling $5,000 or more in a year.

The INFORM Act comes into effect just before Amazon Prime Day on July 11–12, when the popular online retailer offers discounts exclusively to Prime members.

Consumer Act Will Add Safeguards to Online Commerce

This e-commerce law was passed after a lobbying campaign to address counterfeit items, which were initially left out of the bipartisan Chips and Science Act in 2022.

All major online marketplaces, including eBay, Etsy, Poshmark, and Amazon, will be subject to this law.

Last week, the FTC sent letters to 50 online marketplaces across the United States, informing them of their obligations under the new law.

“The INFORM Consumers Act requires online marketplaces to protect consumers from counterfeit, unsafe, and stolen goods by verifying the identity of high-volume third-party sellers on their platforms and making it easier for consumers to report suspicious conduct,” said the FTC.

Third-party sellers will need to provide information such as a government-issued ID, bank account number, working email address, phone number, and taxpayer identification number, as outlined in the Federal Trade Commission’s business guide.

Customers will now have access to verified contact information for larger third-party sellers, those with sales exceeding $20,000 a year, and can communicate with them outside of the e-commerce platform.

Previously, buyers had to rely on the e-commerce platform for all communication with sellers.

The FTC will enforce the law, and online retailers can face fines of up to $50,000 per transaction.

Some Critics Want Stronger Protections Against Fraud and Sales Of Stolen Goods

However, some critics argue that the new act lacks the stronger protections included in the earlier SHOP SAFE Act, which failed to pass in Congress.

Consumer advocates claim that the INFORM Act does not hold online platforms accountable when third parties sell counterfeit or stolen products, or when platforms fail to comply with certain regulations.

“Notably, the legislation is supported by Amazon and other marketplaces as it’s seen as a watered-down bill that would head off more stringent legislation, like the SHOP SAFE Act,” wrote Ben Koltun, director of research at Beacon Policy Advisors, in a note in 2022.

E-commerce platforms, including Amazon and eBay, were strong supporters of the INFORM Act.

TechNet, an organization representing Big Tech CEOs and other top executives, sent a letter to Congress last December praising the law’s potential to enhance consumer safety and increase seller transparency.

Nevertheless, many are relieved that Congress has passed at least some consumer safeguards for e-commerce transactions.

“This is a game changer,” said Teresa Murray, director of the consumer watchdog office at the nonprofit U.S. Public Interest Research Group (PIRG), in an interview with MarketWatch.

“For bad guys, stealing items has generally been the difficult part. Selling things online once you’ve stolen them has been the easy part. This law will make it harder for them to profit from their crimes.”