The Federal Trade Commission (FTC) has announced that Whaleco, Inc.—the company behind Temu—will pay a $2 million penalty to resolve allegations that it violated the INFORM Consumers Act of 2023. This marks the first enforcement action under the law, which was designed to improve transparency and crack down on counterfeit, unsafe, or stolen goods sold on online marketplaces.

According to the FTC’s complaint, Temu failed to provide consumers with key reporting tools and seller information required under the Act, particularly within its gamified shopping experiences and mobile platforms. The agency’s action is a wake-up call for every marketplace operator and third-party seller who may be underestimating the seriousness of INFORM compliance.

What the INFORM Act Requires

The INFORM Consumers Act—short for Integrity, Notification, and Fairness in Online Retail Marketplaces—was passed as part of the 2023 omnibus appropriations bill. Its goal is to bring greater transparency to high-volume third-party sellers on marketplaces like Amazon, eBay, and Temu.

Some of the key requirements include:

• Verification of high-volume third-party sellers through government ID, tax ID, bank account, and contact information.
• Disclosure of seller identity and contact information to consumers, including names and addresses (with limited privacy exceptions).
• Clear reporting mechanisms—both electronic and telephonic—for suspicious or fraudulent activity.

“People deserve to know basic information about those who sell them consumer products online,” said U.S. Senate Majority Whip Dick Durbin when the bill was introduced. “By providing appropriate verification and transparency, the INFORM Act will deter sales of stolen, counterfeit, and unsafe goods.”

Where Temu Fell Short

The FTC alleged several failures on Temu’s part:

• No working telephonic reporting system for consumers.
• Gamified shopping experiences without reporting tools until late 2024.
• Sellers’ contact and identity details missing from certain listings, particularly on the mobile site and app.
• When reporting options were eventually added, they were not “clear and conspicuous” as required by law.

Under the proposed court order, Temu must implement compliant reporting systems across all versions of its platform, ensure seller information is disclosed clearly, and pay the $2 million penalty within seven days of court approval.

What Sellers Need to Know

While this enforcement was directed at a marketplace, the INFORM Act has direct consequences for sellers too. The Act defines “high-volume sellers” as those making 200+ transactions totaling $5,000+ in a 12-month period—a threshold that captures a significant percentage of Amazon FBA and eBay sellers. Some sellers have expressed concern about privacy, particularly home-based operators, but the law does allow alternatives (like email-only communication) under certain conditions.

If you’re an Amazon seller, staying compliant is crucial to avoid account issues. We’ve broken down exactly how to complete the requirements for the INFORM Act here.

Takeaway

The FTC’s action against Temu is a warning shot: the INFORM Act isn’t just another piece of legislation to skim over—it’s a compliance requirement with teeth. Marketplaces must implement robust reporting mechanisms and disclosure tools, and sellers must be prepared to share verified business information with both platforms and consumers. Ignoring it could mean penalties, account suspensions, or worse.

For sellers, this is a reminder that transparency is no longer optional. Whether you’re running a seven-figure brand or a side hustle from your garage, understanding how INFORM applies to you is now a critical part of doing business online.