New Law Makes It Harder for Online Criminals to Sell Fake or Stolen Products

Workers prepare to destroy fake handbags in a a ceremonial destruction of counterfeit and pirated goods at the National Police headquarters in Manila, Philippines, on June 23.

A new federal law will make it harder for online criminals to sell fake or stolen products in the wake of shoplifting gangs selling products on e-commerce sites.

The INFORM Consumers Act, which went into effect on June 27, is intended to limit the sales of stolen and counterfeit products online, said the Federal Trade Commssion (FTC).

Goods stolen from retailers are often sold on e-commerce states.

The legislation will require online marketplaces to collect, verify, and disclose information about third-party sellers who make more than 200 sales that total $5,000 or more in a year.

The INFORM act goes into effect right before Amazon Prime Day from July 11–12, when the major online retailer offers discounts for Prime members.

Consumer Act Will Add Safeguards to Online Commerce

The e-commerce law was passed after a lobbying campaign to address counterfeit items after being left out of the bipartisan Chips and Science Act in 2022.

All online marketplaces, including eBay, Etsy, Poshmark, and Amazon, will be covered under this law.

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

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

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

Customers will now be able to find the verified contact information for larger third-party sellers, with sales of over $20,000 a year and get in touch with them outside of the e-commerce website.

Previously, online purchasers usually had to communicate through the e-commerce platform to communicate with a seller.

The FTC will enforce the law and online retailers can be fined up to $50,000 per transaction.

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

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

Consumer advocates say that the INFORM Act does not hold online platforms liable when a third party sells counterfeit or stolen products, or when the platform fails to follow 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 firm backers 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 improve consumer safety and increase seller transparency.

Still, many were glad to hear that at least some consumer safeguards were passed by Congress for e-commerce transactions.

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

“For bad guys, stealing items has generally been the difficult part. Selling things online once you’ve stolen them is easy. We hope that with the INFORM Act, it’s not nearly as easy in the future,“ adding, ”the only people opposing this may be thieves,” Murray continued.

Christopher McGourty, founder and CEO of the National Anti-Organized Retail Crime Association. told KUTV2, a CBS Salt Lake City affiliate, that the law adds a layer of accountability for sellers of stolen, counterfeit, and harmful goods online.

“There’s been a sense of lawlessness right now in the United States, and that is really truly what we need to break,” McGourty said.

“It’s hard to say because it’s brand new. I think we kind of have to come back and revisit it and see where we are,” he added regarding if the law’s effectiveness.

McGourty said it could be a slow move away from the more extreme safety measures shoppers are seeing in stores to protect their merchandise.

“We have to make sure we’re holding people accountable, and you know for the district attorneys out there we hope they will follow through and prosecute people if they’re committing crimes,” McGourty said.

California Retailers Express Skepticism of New Law

Meanwhile, California retail groups remain skeptical, especially in San Francisco, where a shoplifting wave has plagued businesses and attracted national attention.

Local and state authorities have failed to crack down on the problem, but some hope the federal law will add tools to their existing arsenal.

“I’m not going to rule out that it’s going to be effective, but I can see a lot of ways when looking at it—I don’t know if it’s going to deter the theft that’s happened. That’s the real question,” Kirthi Kalyanam, executive director of the Retail Management Institute at Santa Clara University, told the San Francisco Chronicle.

“I don’t think in the short run that this is going to have any impact on what you see in a city like San Francisco.”

The retail crime wave in California is self-inflicted and the new law is unlikely to solve the problem,  Rachel Michelin, president and CEO of the California Retailers Association, told the San Francisco Chronicle.

Proposition 47, approved by California voters in 2014, raised the threshold for the value of stolen goods to trigger a felony from $400 to $950.

Voters rejected an effort to overturn portions of Prop. 47 in 2020, and other attempts to overturn the law by Republicans have failed in the Democrat-controlled state legislature.

“We know these repeat offenders are coming into the stores, they’re stealing under that threshold. They get a cite and release and they keep doing it,” Michelin said.

“This isn’t going to impact them,” she concluded.