[Editor’s note: This story originally was published by Real Clear Policy.]
By Krisztina Pusok & Edward Longe
Real Clear Policy
When a bipartisan group of U.S. Senators introduced The Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers (INFORM Consumers) Act at the end of March 2021, it was well received as an effort to address the growing problem of illicit goods sold online. In its current form, however, provisions in the INFORM Consumers Act would disproportionately harm women, as they make up a significant proportion of individuals who own online stores and earn income on third-party platforms.
Under the INFORM Consumers Act, a third-party vendor would be classified as a high-volume seller if they “entered into 200 more…sales or transactions” in a twelve-month period on eCommerce sites such as Etsy, Amazon, or eBay. Once classified as a high-volume seller, sellers would be forced to provide consumers with their full name, business address, information as to whether the vendor manufactures, imports, or resells products. Additionally, vendors would be forced to provide the online eCommerce platform with verified bank account information, a government-issued photo I.D., a government-issued record verifying business information, and a business tax identification number. This information must be provided within two business days.
Failure to provide this information in the required timeframe would force eCommerce platforms to suspend stores, preventing them from making sales and earning additional income. The suspension would only be lifted once the owner provides the required information.
After introducing the bill, Sen. Richard Durbin (D-IL) stated, “people deserve to know basic information about those who sell them consumer products online. Our bill ensures a baseline level of transparency for online marketplaces, where currently it may be difficult to know who third-party sellers are and how to contact them.” Given the profoundly harmful effects of the INFORM Consumers Act could have on their competitors, it’s unsurprising that major retailers have come out in support of the plan.
While the new requirements would affect every seller on eCommerce platforms such as Etsy, eBay, and Amazon, women would be most affected as they make up the largest share of sellers on these platforms. Just on Etsy, 87% of sellers identified as women in 2019, as reported by the platform. This is more than double the number of women-owned businesses in the U.S. ECommerce platforms have helped women create businesses that not only enable them to earn income but also offer “flexibility and an outlet for their creative passions,” according to Etsy.
More importantly, Etsy reported that about half of its majority-female sellers had “never sold their goods until they sold them on Etsy,” meaning eCommerce platforms have provided millions of women the opportunity to earn income outside the traditional model of 9AM to 5PM employment. The INFORM Consumers Act’s heavy-handed provisions, unless revised, could ultimately force women out of platforms such as Etsy and threaten their ability to earn income and make ends meet.
Given the average seller on Etsy averages 20 sales each month, millions of female-owned small businesses could be classified as high-volume sellers and be forced to comply with the INFORM Consumers Act’s provisions. The compliance costs of the INFORM Consumers act would not only raise the cost of doing business, forcing them to raise prices, but it could also disincentivize thousands of women from starting businesses and providing consumers access to over 85 million goods.
While Congress should prioritize protecting consumers from stolen, counterfeit, and dangerous products, in its current form, the INFORM Consumers Act will inflict significant harm on women who make up an overwhelming majority of business owners on online platforms. Rather than create unnecessary burdens on these sellers that could deny them economic prosperity and financial independence, Congress should be taking legislative steps that empower platforms to root out nefarious sellers and remove them from their sites. It seems the INFORM Consumers Act may achieve this, but the collateral damage will be also significant.
Dr. Krisztina Pusok is a Director at the American Consumer Institute and Edward Longe is a research associate at the American Consumer Institute, a nonprofit educational and research organization. For more information about the Institute, visit www.TheAmericanConsumer.org or follow us on Twitter @ConsumerPal.
[Editor’s note: This story originally was published by Real Clear Policy.]
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