INFORM Consumers Act takes effect today, targets theft

The INFORM Consumers Act takes effect today– which means online marketplace managers have to follow new standards to allow third-party sellers use the site.

This new regulation is intended to discourage theft from physical retailers, who have been suffering especially since COVID.

The new law will reportedly fine a company $50,000 for each instance they fail to comply, according to CNBC.

The INFORM Consumers Act, which stands for, Integrity, Notification and Fairness in Online Retail Marketplaces, was passed in an omnibus spending bill in December and received bipartisan support.

The new law applies to businesses that run "online marketplaces" which the Federal Trade Commission (FTC) defines as "a person or business that operates a consumer-directed platform that allows third party sellers to engage in the 'sale, purchase, payment, storage, shipping, or delivery of a consumer product in the United States.'"

Those who sell a high volume of products on the platform will have to verify how they attained the product they are selling lest they face suspension.

Criminals are suspected to often steal from physical retailers in order to turn around the stolen product through an online marketplace.

Because of this, the FTC says the law is to enforce transparency between sellers and consumers, as well as provide a deterrent to theft.

"The goal of the INFORM Consumers Act 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 FTC reportedly said about the law, according to the outlet.

Census data indicates that online sales in 2020's second quarter accounted for 16.1% of total retail sales in the U.S. and reached $211.5 billion, which is a 44.5% increase from the prior-year period. In the first quarter of 2023, it has increased 7.8% from one year ago, CNBC reports.

With more online sales, physical retailers suffer twice from theft, but with more regulations, sellers could be discouraged from using smaller business platforms.