A new piece of legislation drawing support from the retail industry doesn’t mention Amazon by name, but it is crafted so as to impose new requirements on the company's third party marketplace.
The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM) Act was introduced on March 10, by U.S. Senators Bill Cassidy, M.D. (R-LA) and Dick Durbin (D-IL) for the stated purpose of fighting the online sale of stolen, counterfeit and dangerous consumer products by requiring extensive transparency of large-volume third-party sellers in online retail marketplaces. In other words, Amazon.
Its third party marketplace accounts for 58% of the company’s retail sales, according to the company’s most recent disclosures. The marketplace helps Amazon offer a massive assortment and extract various fees from sellers for advertising, warehousing of goods and fulfillment of orders. Amazon has been criticized for years for not adequately vetting sellers and preventing abuses of its marketplace platform.
“The ease with which organized criminal networks can utilize the anonymity of online marketplaces to fence stolen goods has led to a proliferation of organized theft targeting local retailers,” said Ulta Beauty CEO and Retail Industry Leaders Association Chair Mary Dillon. “Most disturbing, are the threats and physical acts of violence our employees and customers experience when confronted with this criminal activity. Reversing this trend is about much more than protecting goods and property, this is about protecting people throughout the country who are increasingly at risk when these crimes are committed. Reducing these threats starts with making it harder to sell stolen goods online, and the INFORM Act is a great first step in the right direction.”
In addition to Dillon, other retailers have weighed in with their support of the legislation.
“The lack of transparency and accountability in today’s digital marketplaces has contributed to the rapid rise of organized retail crime, which has become one of the top challenges facing the retail industry today,” said Alex Gourlay, co-chief operating office of Walgreens Boots Alliance. “Walgreens strongly supports Senators Bill Cassidy and Dick Durbin’s INFORM Consumers Act, which would require online marketplaces to verify high-volume sellers, remove incentives for retail theft and help make our communities much safer. Americans deserve to know who they are buying products from in order to make safe and informed purchasing decisions for themselves and their families.”
“We’re pleased to see the U.S. Senate work toward keeping online marketplaces accountable for the products sold on their platforms which will prevent criminals from selling counterfeit and stolen goods to unsuspecting customers,” said Scott Glenn, vice president of asset protection for The Home Depot.
While the legislation itself doesn’t mention Amazon, The Retail Industry Leaders Association wasn’t shy about mentioning the company. In announcing its support for the legislation, RILA said the INFORM Act requires common-sense disclosures from third-party marketplace sellers who use online platforms like Amazon.com to sell products to American consumers. In addition to providing consumers with greater transparency, the legislation will allow law enforcement to better identify high-frequency sellers suspected of trafficking stolen and counterfeit goods, according to RILA.
“Online marketplaces make it easy for small and medium sized businesses to connect with customers all over the world, but some have become a hotbed for unscrupulous actors to sell stolen and counterfeit goods,” said RILA senior executive vice president for public affairs Michael Hanson. “Retailers have seen a dramatic increase in organized retail crime (ORC) in recent years, with career criminals targeting stores with alarming frequency, and in many cases, escalating levels of violence. This is because perpetrators, often organized and coordinated to target multiple retailers, are increasingly turning to online marketplaces to move large quantities of stolen merchandise."
The anonymity and unregulated environment in which these platforms operate have made them a stage to sell products that would never be allowed on a store shelf, according to Hanson. For example, expired and defective products, products made with unsafe levels of chemical substances, and products that do not meet U.S. quality and safety standards are often deceptively marketed and sold though these platforms, he contends.
The INFORM Consumers Act will verify high-volume third-party sellers by acquiring the seller’s government ID, tax ID, bank account information and contact information. High-volume third-party sellers are defined as vendors who have made 200 or more discrete sales in a 12-month period amounting to $5,000 or more. The legislation instructs online marketplaces to order their high-volume third-party sellers to disclose to consumers the seller’s name, business address, email address, phone number and whether the seller is a manufacturer, importer, retailer or a reseller of consumer products.
The online marketplace will also need to supply a hotline to allow customers to report to the marketplace suspicious marketplace activity. The bill presents an exception for individual high-volume third-party sellers that permits them not to have their personal street address or personal phone number revealed to the public if they respond to consumers’ questions over email within a reasonable timeframe. The bill’s requirements would be implemented by the FTC and violations would be subject to civil penalties.
“Transparent marketplaces are safer marketplaces, and consumers should be provided with basic identifying information about those who sell consumer products online,” said Senator Durbin. “Our bill ensures a baseline level of transparency for online marketplaces, where currently it may be difficult for consumers to know who third-party sellers are and how to contact them. In an era where stolen, counterfeit, and dangerous goods are increasingly offered for sale online, the INFORM Consumers Act will help promote responsible marketplace behavior, deter shadowy sales practices, and protect consumers.”