The Effects of the INFORM Consumers Act on the Consumer Products Industry – Consumer Protection

In March 2021, the Senate reintroduced a revised version of a bill calling on online retailers to post specific, verified information about high-volume third-party sellers.1 consumer products for their customers. The Integrity, Notification, and Fairness of Online Retail Marketplaces (INFORM) for Consumers Act aims to end the online sale of stolen, counterfeit, and unsafe consumer products.

In particular, online marketplaces that include high-volume third-party sellers would be required to authenticate the identity of sellers through essential identifying and contact information in the hope of not only preventing sales counterfeit products online, but also to prevent organized retail criminal networks from stealing from stores and reselling items online.

From an economic perspective, widespread looting and increased sales of counterfeit products have caused retailers to lose a significant portion of their profits. Declining profits have led to a ripple effect of economic harms in the retail sector, such as layoffs of employees, damage to the value of genuine brands due to the theft of their intellectual property and the decrease incentives to innovate. Consequently, small businesses are the hardest hit, as they lack the capital to invest in brand protection measures.

As the number of organized retail crimes continues to rise, retailers have expressed concern about the negative impact these crimes are having on their businesses. In late 2021, 20 CEOs representing apparel, electronics, health and beauty, home improvement, and other general merchandise areas came together and sent a letter to congressional leaders urging legislators to pass the INFORM Consumers Act.

A January 2020 report from the Department of Homeland Security (DHS) explained how pirated and counterfeit products are hurting the retail space. Although the INFORM Consumer Act will affect various retail industries slightly differently, most retailers seem to share a common goal: to protect their employees and customers.

The health, beauty and cosmetics industry

One of the biggest problems in the health, beauty and cosmetics industry is the ingestion and application of potentially harmful counterfeit drugs and cosmetics in and on our bodies, respectively. With the increase in the number of online pharmacies, it seems that preventing counterfeit products from entering the United States is beyond our control. To counter this difficulty, the INFORM Consumers Act will create more transparency for consumers because, as the DHS report states, “Counterfeit drugs not only defraud consumers who often have serious health problems; they can also be mortal “since”[f]Some prescription drugs may lack active ingredients, contain incorrect dosages, or include dangerous additives. safety at risk.”

The jewelry, clothing and accessories industry

Like fake prescription drugs and cosmetics, products sold online in the jewelry, apparel, and accessories industry may contain hidden toxins that can pose significant health and safety risks to consumers. Additionally, consumers are taking big financial risks when shopping for jewelry, clothing, and accessories online, as luxury goods can cost thousands of dollars. The INFORM Consumers Act will allow shoppers to verify sellers selling retail products and confirm the authenticity of products before spending money on items that could potentially be made from substandard materials that lack quality. longevity and quality.

The household goods, household appliances, housewares and tableware industry

The housewares, appliances, housewares and tableware industry focuses on consumer safety when it comes to consumers using these products. A plethora of goods in this sector come from illegitimate imports, as revealed in a 2020 report by the Buy Safe America Coalition. Relevant examples of industrial sectors affected by these illegitimate imports include the manufacture of domestic laundry equipment, the manufacture of domestic refrigerators and freezers, the manufacture of domestic cooking appliances, and the manufacture of blinds and blinds. In one specific example, the DHS report stated that “[a]n investigation into counterfeit iPhone adapters by the [Government Accountability Office] found a 99% failure rate of 400 counterfeit adapters tested for safety, fire and electrocution hazards, and found that 12 of the adapters posed a risk of fatal electrocution to the user. Shoppers need a way to verify that these everyday household items are from legitimate sources with high safety standards, and the INFORM Consumers Act will help disclose this information to consumers before they make a purchase. .

The food and beverage industry

In the food and beverage industry, customers are concerned about spoilage and food safety in general. Retailers spend huge amounts of money ensuring food, including raw ingredients, is properly prepared, packaged, labeled, and distributed, which includes monitoring transportation, temperature, and shelf life across states. -United. When a food product leaves the distribution center or even a local store, however, there is no assurance as to how the food is handled, leaving consumers in the dark. Implementation of the INFORM Consumers Act directs consumers directly to the source, creating reliability and certainty before they purchase potentially unsafe food and beverage products.

The toy industry

The INFORM Consumers Act aims to combat counterfeiting, which affects the sales of toy companies. But more importantly, counterfeit toys are not tested to meet, and do not meet, safety standards designed to protect the public. As the DHS reports, “Children’s toys… [have been] filled with deadly metals like cadmium and lead… [and is an] where counterfeiters have taken advantage of e-commerce business models that offer limited, if any, liability to sellers. “The current state of unverified toy sellers has led parents to make blind decisions where they may unknowingly purchase unsafe and counterfeit toys for their children. The INFORM Consumers Act will allay parents’ fears by ensuring that the goods come from a justified source.

Conclusion

Overall, the INFORM Consumers Act is a straightforward, bipartisan law that aims to protect consumers by enhancing online transparency in the retail marketplace. However, not all retailers have the resources or even the skill to compile and publish the required information. However, with the help of a lawyer, retailers will be able to comply with the requirements that the law will require.

Footnote

1 The bill defines a high-volume third-party seller as “a user of an online marketplace who is a third-party seller and who, in any continuous 12-month period within the preceding 24 months, entered into at least 200 sales or transactions in the accumulation of a grand total of $5,000 or more in gross revenue. »

For more information

If you have any questions regarding this alert, please contact Brian D. Siff, Emily Tannenbaum, any of the attorneys in our Fashion, Retail, and Consumer Branded Goods industry group, or the attorney at the firm you regularly interact with. in touch.

Warning: This alert has been prepared and posted for informational purposes only and is not offered and should not be construed as legal advice. For more information, please see the full disclaimer.

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