CBD Oracle’s investigation of the hemp market on Amazon revealed many uncomfortable facts for the retailer, including high-THC gummies on sale and widespread deceptive advertising, but the report also concludes that Amazon may be breaking federal law.
The INFORM Consumers Act aims to empower consumers in online marketplaces, and in some cases requires that marketplaces disclose contact information about the seller to consumers.
However, the report alleges that Amazon breaks this rule, potentially leading to fines of up to $1.3 million.
TL;DR
- The INFORM Consumers Act was created to improve transparency in online marketplaces like Amazon.
- Customers must be given information to enable “direct, unhindered communication” with a seller with an annual income of over $20,000.
- 28 out of 56 products met this threshold but didn’t have sufficient contact information listed.
- One product has been removed, but CBD Oracle reported the remaining 27 to the FTC.
- Amazon could be fined up to $1.35 million for the violations.
The INFORM Consumers Act Explained
The INFORM Consumers Act (Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act) aims to improve transparency in online marketplaces and give consumers a place to report suspicious activity.
The provisions of the law come into effect at certain sales thresholds. Every seller considered a “high volume third party seller” by the law has to provide a bank account, tax ID, and contact information to the marketplace. This starts to apply when the seller makes over $5,000 from 200 or more separate sales of new or unused products in a continuous 12-month period over the past two years.
However, if the seller makes more than $20,000 in the same time period, the marketplace must give consumers some key pieces of information either on the product page, the order confirmation message, or in another document or communication made to them.
These pieces of information are:
- The full name of the seller (or a company name).
- The seller’s physical address (unless they only have a home address).
- Contact information for the seller, to allow for “direct, unhindered communication” between them and consumers. This can be a working phone number, a working email address or some other means of direct electronic messaging.
The punishment for breaking this rule is a civil penalty of $50,120 per violation for the online marketplace.
Amazon’s INFORM Consumers Act Violations
The big problem comes in the second set of requirements, the information Amazon is supposed to disclose to consumers.
Our analysis of Amazon’s hemp market found that product listings included a link to the seller’s information page, but this link did not usually provide a working phone number or email address, and order confirmations contained no such information.
Specifically, 89% of companies did not provide a responsive phone number to consumers, and only 50% listed an email address or provided a contact form. However, the email addresses and contact forms were all found independently, not through Amazon, and no company responded to our emails.
There is theoretically a method of electronic communication on each seller page, but the law says it must be “direct” and “unhindered.” This option is the electronic chat accessed by clicking “Ask a question” from the seller page. However, there are two major problems with this as an option for the INFORM Consumers Act.
The chat is first handled by the AI chatbot. In order to actually pose your question to the seller, you have to endure the chatbot’s attempt to address your concern. In our attempts, we simply requested a Certificate of Lab Analysis (COA) for the product, but the chatbot was entirely unable to address the issue (in one case simply copying a comment that recommended a different product). Regardless of the outcome, this is clearly a “hindrance” to communicating with the seller – it’s an explicit barrier to direct conversation.
Secondly, when the question is eventually posed to the company, it cannot be considered direct communication. In fact, the chatbot gives the following message:
“When you submit this form, Amazon will replace your email address with one provided by Amazon in order to protect your identity, and forward the message on your behalf. […]
Amazon uses filtering technology to protect buyers and sellers and to identify possible fraud. Messages that fail this filtering – even if they are not fraudulent – will not be transmitted. This form is for use by Amazon customers to ask product-related questions to Amazon store sellers.”
Notably, even non-fraudulent messages may fail the “filtering” step and not be transmitted to sellers. Clearly, this is both indirect communication and yet another hindrance.
Identifying Offenders: How Much Does Each Company Make?
This lack of direct, unhindered communication is only a violation of the INFORM Consumers Act if the seller makes more than $20,000 in a 12-month period.
To identify these cases, CBD Oracle calculated the likely past-year earnings for each company using the “bought in the past month” figure provided by Amazon and the date the product was first listed.
This is probably an underestimate, given that sellers have complained that the figure is inaccurate and that each listing actually says “more than” x number sold. However, we also made the assumption that sales have been consistent, which is likely not true in most cases.
Regardless, using this as an estimate for each seller, CBD Oracle estimated that 28 products violated the Act. One seller’s listing was removed between the time the product was purchased and the analysis took place, but the remaining 27 product pages were in violation.
Amazon Could Be Fined Up to $1.3 Million
CBD Oracle reported these violations to the Fair Trade Commission (FTC), with the total potential fines for Amazon reaching $1.35 million. Processing the reports will likely take some time, but we will update this post with any news we receive.
Related:
References
- INFORM Consumers Act, 15 U.S.C. § 45f (2022). https://uscode.house.gov
- Informing Businesses about the INFORM Consumers Act. (2023, August 18). Federal Trade Commission. https://www.ftc.gov/business-guidance/resources/INFORMAct