New legislation aims to protect US consumers from online fakes

By Julia Wray | Published: 27-Jul-2020

American retailers back the INFORM Consumers Act to help prevent the online sale of stolen and counterfeit goods, a major problem for beauty brands

Retailers in the US are supporting new legislation to combat the online sale of stolen, counterfeit and dangerous consumer products.

The ‘Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act’, or INFORM Consumers Act, will require online marketplaces to verify high-volume third-party sellers in a bid to prevent organised retail crime and better inform consumers.

The trade in counterfeit goods online is especially pertinent for the beauty industry as, in 2017, cosmetics and pharmaceutical products made up 6.5% of all counterfeit goods seizures in the US.

"Organised retail crime (ORC) is very real across all of retail and beauty retailers are no exception," said Mary Dillon, CEO, Ulta Beauty.

"The issue is about much more than protecting our products from being stolen. Our associates and guests are put at risk when these crimes are committed and it is our highest priority to keep everyone safe while in store."

The legislation was introduced in the US House of Representatives on 23 July by Congresswoman Jan Schakowsky (IL-09), a Senior Chief Deputy Whip and Chair of the Consumer Protection and Commerce Subcommittee.

The bill instructs online marketplaces to verify high-volume third-party sellers by acquiring the seller’s government ID, tax ID, bank account information and contact information.

Online marketplaces will be asked to make sellers disclose their name, business address, email address and phone number to consumers.

The seller must also tell consumers whether they are the manufacturer, importer, retailer or reseller of a consumer product.

The online marketplace will also need to supply a hotline to allow customers to report suspicious activity, such as the posting of suspected stolen, counterfeit or dangerous products.

High-volume third-party sellers are defined as vendors who have made 200 or more discrete sales in a 12-month period amounting to US$5,000 or more.

“While online marketplaces attract more and more consumers as a result of the pandemic, it’s critical for consumers to know who they are buying consumer products from,” said Congresswoman Schakowsky.

“American manufacturers and retailers alike are fighting to survive as they compete with knock-off versions of their own products, sometimes appearing to be authentic, but lacking in quality or safety.

“It is critical for consumers and legitimate businesses be protected from counterfeit, stolen, and dangerous products by requiring more transparency on online marketplaces.

“This bill is a commonsense, easy fix, and I hope for swift passage.”

Senators Dick Durbin (D-IL) and Bill Cassidy (R-LA) introduced the Senate companion bill in March 2020 and Representative Kathy Castor (D-FL) is an original cosponsor of the House bill.

<i>Cosmetic and pharmaceutical products make up 6.5% of all counterfeit goods seizures in the US</i>

Cosmetic and pharmaceutical products make up 6.5% of all counterfeit goods seizures in the US

Response from retail

US-based retailers and retail groups welcomed Congresswoman Schakowsky’s introduction of the Act last week.

“Consumers continue to buy items online in record numbers and that shift has exposed a growing and dangerous trend that must be dealt with immediately – the exponential growth of stolen and counterfeit goods sold through online marketplaces,” said Michael Hanson, Senior Executive Vice President for Public Affairs at the Retail Industry Leaders Association (RILA).

“The INFORM Consumers Act provides a measured response to this problem by requiring online marketplaces to verify information about the sellers on their platform.

“Big tech marketplace platforms have their place in an increasingly diverse and digital economy, connecting legitimate sellers, often small businesses, to a large and growing pool of online shoppers,” Hanson continued.

“But their growth cannot be a golden ticket for criminal rings targeting legitimate businesses and innocent consumers.”

"Organised retail crime is complex. One way to move the needle is by impacting the ability to profit from sales of stolen goods," added Ulta's Dillon.

"The INFORM Consumers Act is designed to make it harder to anonymously sell goods online which, in addition to disrupting profits from stolen goods and providing transparency to consumers, may also address escalating violence which can accompany these crimes.

"Ulta Beauty thanks Congresswoman Schakowsky for her leadership and strongly supports The INFORM Consumers Act. This Act is an important step to make it harder for criminals to sell online and will help protect retail employees and guests in-store."

American pharmacy giant Walgreens likewise voiced its support, with Walgreens’ President, Alex Gourlay, commenting: “The lack of transparency and accountability in today’s digital marketplaces has contributed to the rapid rise of organised retail crime, which has become one of the top challenges facing the retail industry today.

“Walgreens strongly supports Congresswoman Schakowsky’s INFORM Consumers Act, which complements the bipartisan Senate bill introduced earlier this year to require online marketplaces to verify high-volume sellers, remove incentives for retail theft and help make our communities safer.

“Now, more than ever, consumers deserve to know who they are buying products from online, in order to make safe and informed purchasing decisions for themselves and their families.”

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