The Inform Act takes effect targeting organized retail theft

The Inform Act, a new law that aims to curb organized retail theft and the sale of counterfeit and harmful products on online platforms, takes effect Tuesday as more retailers blame theft as a reason for lower profits. 

The new law requires online marketplaces, such as Amazon and eBay, to verify and share information on third-party sellers that handle a high volume of transactions on their platforms in an effort to deter bad actors from selling stolen or harmful goods.

If the companies fail to get in line, they could face more than $50,000 in fines for each violation.

The bipartisan legislation, which stands for Integrity, Notification and Fairness in Online Retail Marketplaces, passed in December as part of an omnibus spending bill, more than a year after it was introduced by Reps. Jan Schakowsky, D-Ill., and Gus Bilirakis, R-Fla.

“The goal of the INFORM Consumers Act is to add more transparency to online transactions and to deter criminals from acquiring stolen, counterfeit, or unsafe items and selling them through those marketplaces,” the Federal Trade Commission, which will be tasked with enforcing the law along with state attorneys general, said on its website. 

“The Act also makes sure online marketplace users have a way to report suspicious conduct concerning high-volume third party sellers.”

The law comes after trade associations and retailers lobbied Congress about an alarming uptick in retail theft that they say was driven by lax regulations governing third-party sellers and verification processes on online platforms. They claim organized crime groups steal merchandise from stores and then resell it on online marketplaces, typically at a lower amount than the sticker price.

Many experts say organized retail theft has grown alongside the rise of online shopping, which boomed during the Covid pandemic and became the primary way consumers shopped.

During the second quarter of 2020, e-commerce sales in the U.S. accounted for 16.1% of total retail sales and reached $211.5 billion, a 44.5% increase from the prior-year period, according to Census data. E-commerce growth in the U.S. has since leveled out, but its share of sales has remained consistent.

In the first quarter of 2023, e-commerce in the U.S. accounted for 15.1% of total retail sales, and reached $272.6 billion, a 7.8% jump from the year-ago period.

While stolen or counterfeit goods make up a small fraction of those transactions, retail groups and law enforcement officials have increasingly called on legislators to address the problem. They’ve said it’s been difficult to catch bad actors who sell stolen goods online because their identities were shielded.

Criminals have been able to operate with “complete anonymity using fake screen names and fake addresses,” but the Inform Act will change that, Lisa LaBruno, senior executive vice president of retail…