INFORM Consumers Act

Under the INFORM Consumers Act, marketplaces need to follow standard processes, like:

• Verify seller identities (for example, by implementing iDenfy’s identity verification service that automatically verifies seller information by extracting personal information from captured data from government-issued ID documents). 
• Disclose seller information to consumers (this includes details like the seller’s name, business address, contact details, and the country of origin of products).
• Use measures designed to detect counterfeit products (as a way to ensure that only genuine, legally compliant items are offered, as opposed to fraudulent or replica goods).

The INFORM Consumers Act helps improve transparency and security by:

• Building a more reliable environment for both buyers and sellers
• Safeguarding users by reducing the risk of fraudulent, fake, or unsafe items
• Promoting fair competition by ensuring that all sellers follow the same accountability standards

Under the Act, a high-volume seller is generally defined as an individual or business that conducts a large number of sales through an online marketplace within a set time period, exceeding a certain revenue threshold: 

➡️ During any continuous 12-month period within the past 24 months, the seller has completed 200 or more separate sales or transactions of new or unused consumer products and generated $5,000 or more in gross revenue.

Online marketplaces are affected by the Act, which can be divided into two types:

1. Consumer-directed platforms. This is an online marketplace that allows third parties to sell products to consumers. 
2. Marketplaces with high-volume sellers. This includes marketplaces that have sellers who meet bigger revenue thresholds and are considered to be “high-volume third-party sellers” under the Act. 

Online marketplaces face a few challenges regarding complying with the Act. For example:

• Finding the balance between security and user experience (for example, when creating a new seller onboarding process)
• Having and managing a high seller volume (for example, when bigger marketplaces need to verify and maintain data of their user base that has thousands or millions of sellers)
• Dealing with extra costs that come with new compliance tasks (for example, implementing new seller verification procedures). 
• Combating new fraudulent users and suspicious activity (for example, document forgeries or schemes like synthetic identity fraud are getting more sophisticated due to the widespread use of AI).