Controversial Bill Inserted into COMPETES Act Threatens Privacy Rights and Entry of New Participants
By Alyssa Aguilar
On October 5, 2021 Congresswoman Jan Schakowsky (IL-09) and Congressman Gus Bilirakis (FL-12) introduced the INFORM (Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers) Act. This proposed legislation hopes to combat the online sale of stolen, counterfeit, and dangerous consumer products by high-volume online sellers by requiring that online marketplaces verify the seller’s identity. On January 25, 2022, the House of Representatives inserted this proposed legislation into the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength Act (COMPETES) Act of 2022, previously referred to as USICA (United States Innovation and Competition Act). Although many legislators were concerned about INFORM, no changes were made when it was inserted into COMPETES.
COMPETES is a nearly 3,000 page trade bill that authorizes billions of dollars to boost domestic research and development to enhance the country’s global competitiveness, as well as for critical supply chains and science, technology, engineering, and mathematics (STEM) education and training. It also seeks to provide support to early-career researchers, to diversify the research workforce, and increase reporting requirements for foreign gifts and contracts to institutions of higher education. This bill is being presented as a way to remain competitive with China in the semiconductor and other technology focused industries. COMPETES was passed by the House 222-210 on February 4, 2022 and will now need the House and Senate to compromise as it reaches the Senate. President Biden has spoken out in favor of COMPETES and if it makes it to his desk, he is expected to sign the entire bill into law.
How does this fit into COMPETES? Like SHOP SAFE, it doesn’t. What are the requirements of INFORM? As mentioned, online marketplaces must collect information from these “high-volume” sellers and the marketplaces must also verify that information. Under INFORM, a high-volume seller is a seller that “in any continuous 12-month period during the previous 24 months, has entered into 200 or more discrete sales or transactions of new or unused consumer products and an aggregate total of $5,000 or more in gross revenues”. Ten days after a seller is deemed “high volume”, they must provide the following information to the marketplace:
- Their bank account number;
- Contact information provided via a government issued ID or record or tax documents for the business;
- A business Tax ID, or if a person does not have one, their personal Taxpayer ID; and
- A working email and phone number.
This information must be updated at least annually. The marketplace must then confirm all of this information within ten days of receipt. If a government tax document is received, there is a presumption that the information contained within that document is verified.
The online marketplaces would be required to store all of this information and provide the necessary level of security of course and INFORM requires this. However, databases that store government ID’s and other sensitive information, just like all of the information that INFORM requires, are highly susceptible to data hacks, breaches, or overreach by law enforcement. What if a seller is not comfortable with disclosing all of that information for privacy or other concerns? INFORM states that if a seller does not comply with the disclosure requirements, they will receive a written or electronic notice from the online marketplace. If compliance is not met after ten days of receipt, the marketplace will suspend the seller’s account until compliance is met.
Further, INFORM requires that online marketplaces must make this information available to consumers. The online marketplaces must disclose:
- The full name of the seller;
- The seller’s physical address;
- The business’s email and/or phone number; and
- “Whether the high-volume third party seller used a different seller to supply the consumer product to the consumer upon purchase.” If the sellers used a different seller to supply the product, then items 1-3 must be supplied about the different seller as well.
There is an exception if the seller does not have a business address or if they have a combined business and personal address. The marketplace can opt to disclose only the country where the seller resides or, if applicable, the state and country and tell consumers there is no business address and to contact the seller through phone, email, or other electronic means. There is also an exception if the seller only has a personal, and not a business phone number, the marketplace must inform consumers that they must contact the seller via email or other means of electronic communication.
Lastly, online marketplaces must enable reporting of “suspicious activity”, but provide no context as to what suspicious activity entails. In theory, consumers and even other sellers could file reports to the online marketplace about whatever activity they feel may be suspicious. Further, INFORM does not provide any penalty for false reports, opening up the possibility of account suspensions with little to no merit, thus shutting people out of the marketplace and inhibiting competition.
Why is this legislation happening now? Congress has stated that shoplifting and selling counterfeit goods online is on the rise and now is the time to act before things get too out of hand. A recent law in Arkansas, the Arkansas Online Marketplace Consumer Inform Act, was passed in March and enacted in April 2021 and seemed to kick off this legislative push towards online marketplace transparency. However, a recent article by The Disruptive Competition Project titled “Inventing a Shoplifting Apocalypse to Blame on Ecommerce” pulls in data to show that putting the blame on e-commerce for the increase might be mistargeted and there isn’t really much of an increase anyways. If that is the case, then this legislation is purporting to solve a problem created or fostered by online marketplaces that is not really there.
What can you do? Call your Senators and let them know that INFORM is not the answer to their concerns and has no place in COMPETES. It is not in the Senate’s current COMPETES proposal as of now, but that could change. While some of these concerns that INFORM attempts to address are valid, there has to be a balance between protecting consumers, encouraging competition and the entry of new participants, and ensuring privacy. INFORM is receiving more backing and support by organizations and even online marketplaces, because it is seen as a lesser of two evils against SHOP SAFE. However, we should not have to settle for a lesser of two evils. IP Justice believes in a robust and diverse online marketplace and INFORM puts that in jeopardy.