New Law Targets Online Sale of Stolen and Counterfeit Merchandise
Last updated September 12, 2023
For criminals, online marketplaces offer quick and easy channels for selling stolen and counterfeit merchandise. The Prosecutors Alliance of California estimates that more than $500 billion in stolen and counterfeit products are sold online worldwide annually.
“It’s been like the Wild West for years,” said Teresa Murray, consumer watchdog at the U.S. PIRG Education Fund. “Many online marketplaces haven’t been doing enough to protect consumers from sellers who appear to be peddling stolen or counterfeit goods.”
The bipartisan INFORM Consumers Act (Integrity, Notification, and Fairness in Online Retail Marketplaces), which took effect in June, should make it harder for crooks to sell stolen or counterfeit items—and make it more difficult for online marketplaces to ignore the growing problem. The Federal Trade Commission (FTC), published guidelines for enforcing the new law last month.
Listen to audio highlights of the story below:
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 these marketplaces,” according to the (FTC).
Under the new law, all online marketplaces, such as eBay and Amazon (as well as lesser-known sites), are required to collect and verify specific personal and financial information from most “high-volume” third-party vendors that sell new consumer products on their sites.
A company is considered high volume if it has 200 or more separate sales totaling $5,000 or more during any 12-month period within the past two years. It must provide the selling website a government-issued ID, its bank account number, tax identification number (or Social Security number for an individual seller), and a working email address and phone number.
If a high-volume seller has annual gross revenues of $20,000 or more on a particular online marketplace, the site must clearly disclose the following information on the seller’s product listing pages, or the platform’s order confirmation messages or account transaction histories: The seller’s full name (which may include the business name used on the site); physical address; and contact information that provides consumers with what the law calls “direct, unhindered communication” with the seller, including a working phone number, a working email, or other electronic means of communication.
The online marketplace must verify that the information provided by the third-party sellers is accurate and up to date and certify its accuracy at least once a year.
If a seller doesn’t provide the required information and does not respond to a notice of noncompliance within 10 days, the online marketplace “must suspend any future sales activity” until that seller complies with the law.
Online marketplaces that fail to comply with the INFORM Consumers Act face fines of $50,120 per violation. The statute also gives the states authority to ask federal courts for injunctions, civil penalties, and restitution or other compensation for state residents.
“This is a game changer,” Murray said. “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 Consumers Act, it’s not nearly as easy in the future.”
The INFORM Consumers Act won’t stop all online sales of counterfeit and stolen merchandise. You still need to be careful and look for warning signs.
A key red flag is a ridiculously low price for a brand-new item. When using a website that has third-party sellers, U.S. PIRG recommends comparing listings for similar products to see what the average price should be.
Also check other items the seller is offering.
“If someone is truly cleaning out their closet or getting rid of their kid’s toys or something like that, there’s going to be a mix of things for sale,” Murray said. “But if they’re selling 12 pairs of Nike shoes that are all supposedly new in the box with tags, that doesn’t smell right. That would cause me to say, hmm, I think these might be stolen.”
Why worry if something is stolen or counterfeit? Isn’t your goal to find the best price?
We all pay for this criminal activity. Legitimate manufacturers and honest retailers must hike their prices to cover the staggering losses they’re experiencing. The ability to “fence” stolen merchandise online is driving the rise in shoplifting, smash-and-grab robberies, and cargo theft, according to a recent report by the National Retail Federation. “The stolen products…fund other illegal enterprises such as guns, drugs, and human trafficking,” the report noted.
Counterfeit merchandise, which also hurts legitimate companies, has other pitfalls. It’s often of inferior quality, it may not meet U.S. safety standards, and it doesn’t come with a warranty.
The U.S. PIRG Education Fund has a tip sheet on how to avoid buying counterfeit or stolen items.
Spot something suspicious? The INFORM Consumers Act requires online marketplaces to provide users with a way to report possibly illegal conduct. According to the FTC, high-volume third-party sellers must “clearly and conspicuously” include both a phone number and an electronic way for consumers to contact the marketplace to report suspicious activity on their product listing page.
If you suspect a violation of the law, use this dedicated link to file a report with the FTC.
More Info: Learn more about counterfeit products at STOPfakes.gov
Contributing editor Herb Weisbaum (“The ConsumerMan”) is an Emmy award-winning broadcaster and one of America's top consumer experts. He has been protecting consumers for more than 40 years, having covered the consumer beat for CBS News, The Today Show, and NBCNews.com. You can also find him on Facebook, Twitter, and at ConsumerMan.com.