June 2023 is bringing sweeping changes in legislation set to impact any online marketplace seller that makes $5,000 or more annually. Are you prepared?
On the most recent episode of Owning the Buy Box, host Dave Cooper discusses how the INFORM Consumers Act is set to change how seller information is collected and verified. We discuss how this will impact marketplaces and what sellers can do to prepare for the upcoming changes. In addition, Dave provides insights on the types of information that must be collected on sellers and how this will be implemented.
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After being in the works for many years, the INFORM Consumer Act is driven by one may purpose: offering greater transparency for online consumers.
INFORM stands for Integrity, Notification and Fairness in Online Retail Marketplaces, and it’s set to greatly influence the vast majority of online sellers. The legislation requires that each seller with over 200 sales or $5,000 in sales, whichever comes first, to report information such as tax ID, working phone number and email address, bank account details and more. Some information will be made publicly available to buyers.
Many marketplaces are getting ahead of the impending legislation by already collecting this data. But, once implemented, many will be required to improve their data-collection infrastructure and build the departments necessary for ensuring information is gathered accurately and in a timely manner.
While the legislation has no immediate or direct effect on brand protection, there are a few potential secondary benefits.
For example, with increased transparency in product sourcing, consumers will be able to identify whether a product is coming from a brand directly, a secondary seller or an unknown seller.
This level of transparency also creates an opportunity for brands to identify the lifecycle and journey of their products, potentially making it easier to detect unauthorized sellers.
Although the INFORM Consumers Act is set in stone, implementation is not. Still, if a marketplace is not compliant come June of this year, they will face up to $46,000 in fees per violation.
Sellers should expect to have more complex data-reporting requirements, which will occur annually. So, while measures will likely discourage unauthorized sellers, those that slip through the cracks will not be required to submit for additional approval until the next year.
Annual data confirmation is relatively intuitive — those who sell online should be required to report their information for tax purposes already. However, with the low threshold of $5,000, there will be a heavy demand for increased data processing and confirmation. Marketplaces that do not have established systems in place may have extended wait periods as they sift through case-by-case.
“There are complex requirements that will be costly to implement and remain compliant with and require real resources to implement correctly,” Dave says.
For established, legitimate sellers, there likely will not be significant changes to the way in which selling functions. However, there may be additional requirements on the front end, particularly in regard to data reporting and confirmation.
Much of the data required for collection by the INFORM Consumers Act is already being collected by marketplaces. Some online marketplaces may need to collect and verify additional data points. Most will be required to develop a system in which many of those data points are publicly available.
But there’s one part of the legislation that is surprising — the requirement to identify whether a product has been “commingled.”
Comingling is a common practice on Amazon and across other marketplaces. Supply chains cross over and, sometimes, a product that is purchased from one seller or marketplace is actually provided by another.
While all sellers making over $5,000 will be required to report information, those high-volume sellers making $20,000 or more must provide a reporting mechanism in which consumers can give real-time, direct feedback. Marketplaces like Amazon already institute something similar to safeguard against counterfeits, inadvertently helping to support brand protection.
While the INFORM Consumers Act may offer many benefits for consumers and purchasing transparency, it was a missed opportunity to offer true value to brand owners.
“There are just too many gaps,” Dave says. “There are some good, indirect benefits, but nowhere does the legislation create additional rights for brand owners.”