Business Blog
First INFORM Consumers Act enforcement case filed against online marketplace Temu
Online marketplaces and third party sellers looking for a refresher on the INFORM Consumers Act should look no further than the recent settlement with Whaleco, Inc., which operates the online marketplace Temu. The complaint alleges the company failed to provide online shoppers with required information and tools. This is the first case brought to enforce the INFORM Act.
The INFORM Act, which went into effect in 2023, seeks to make online transactions more transparent. Among other things, the law requires online marketplaces to collect, verify, and disclose certain information about high-volume third party sellers. (Informing Businesses about the INFORM Consumers Act has more on how the law defines terms, what’s required of online marketplaces, and the substantial penalties the FTC and state law enforcers may seek if online marketplaces violate the law.)
In 2022, Temu launched its online marketplace in the United States, where consumers can view product listings on Temu’s homepage, through search results, and in gamified shopping experiences on the platform. According to the complaint, Temu violated the INFORM Act by failing to offer a mechanism for consumers to report suspicious activity — electronically and by phone — on the gamified product listings of many high-volume third party sellers and by failing to offer a telephonic mechanism on non-gamified product listings. The complaint also alleges that Temu did not post required identifying information about sellers on its gamified product listings or mobile site, and that Temu’s disclosures, when made, were difficult to find.
According to the settlement, Temu will pay a $2 million civil penalty, provide a telephonic mechanism for consumers to report suspicious activity on listings, and make other required disclosures.
Is your business covered by the INFORM Act? Make sure you:
- Review the provisions of the INFORM Act thoroughly. Make sure you fully understand — and have measures in place to comply with — each of its requirements.
- Make required disclosures easy for consumers to notice. Required disclosures should stand out from any surrounding material and use plain language. Minimize or eliminate steps consumers need to take to reach required disclosures.
- Ensure required disclosures are available across all iterations of your platform. The INFORM Act mandates disclosures on all interfaces with product listings. And as your platforms evolve, regularly assess and update your compliance efforts.
If your business sells through online platforms, check out What Third Party Sellers Need to Know About the INFORM Consumers Act. This covers what sellers are impacted by the INFORM Act, what you can expect online platforms to require of you, and what information platforms must disclose about you to consumers. It also answers some questions you may have about the law.
And if you spot a violation of the INFORM Act, report it to the FTC using this dedicated link.