Online Marketplace Temu to Pay $2 Million Penalty for Alleged INFORM Act Violations – Federal Trade Commission
Action is the first brought under the Act, which ensures consumers can report suspicious activity to online marketplaces and contact major third party sellers
Whaleco, Inc., which operates the online marketplace Temu, will pay $2 million to resolve allegations that it violated the INFORM Consumers Act of 2023, by failing to provide consumers with required information and tools to help them avoid and report stolen, counterfeit, or unsafe goods while shopping online.
“The INFORM Act is designed to ensure consumers have the information and tools they need to not only report suspicious activity to online marketplaces, but to directly identify and contact high-volume, third party sellers in many cases,” said Christopher Mufarrige, Director of the Federal Trade Commission’s Bureau of Consumer Protection. “Temu, one of the most recognizable online marketplaces, is responsible for complying with the Act. Today’s action serves as a reminder to online marketplaces that violating the INFORM Act can result in serious consequences, including civil penalties.”
This is the first action to enforce the INFORM Act, which requires online marketplaces to disclose a reporting mechanism on the product listings of all high-volume third party sellers that consumers can use to report suspicious activity to the online marketplace either electronically or by telephonic means. The Act also requires online marketplaces to disclose identifying information for many high-volume third party sellers—the name of the seller, its physical address, and contact information to allow consumers to reach the seller directly.
According to the complaint, Temu failed to provide any telephonic means for consumers to report suspicious marketplace activity. When it did provide such a mechanism, the complaint alleges, it was difficult for consumers to access. In addition, Temu failed to provide any reporting mechanism for product listings in its gamified shopping experiences, which allow shoppers to play games, spin wheels, earn coupons, and undertake other activities while browsing and purchasing products, until November 2024, according to the complaint. When Temu eventually added a reporting mechanism, it was not clear and conspicuous as required by law, the complaint alleged.
Next, the complaint alleges that for part of the time the Act has been in effect, Temu failed to disclose clearly and conspicuously required information about third party sellers as part of its gamified product listings and for its mobile website.
The proposed consent order announced today addresses each of the INFORM Act violations alleged in the complaint. The proposed order, if approved by the district court, will require Temu to:
- Provide a telephonic reporting mechanism that allows consumers to listen back to, re-record, and accept any report before submitting it, and provide instructions in a way that consumers can easily hear and understand; and
- Disclose certain information as required under the Act—including electronic and telephonic reporting mechanisms and high-volume third party sellers’ names, addresses, and a means of contacting them—in a way that is easy for consumers to notice and understand. This includes making required disclosures for gamified product listings and for all versions of the Temu online marketplace including its smartphone app and desktop and mobile websites.
The proposed order also includes a $2 million civil penalty against Temu, which must be paid within seven days of the district court’s entry of the stipulated order.
The Commission vote to authorize the staff to refer the complaint and proposed consent decree to the Department of Justice was 3-0. The DOJ filed the complaint and proposed consent decree upon referral from the Commission in U.S. District Court for the District of Massachusetts, Eastern Division.
NOTE: The Commission authorizes the filing of a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. Consent decrees have the force of law when approved and signed by the District Court judge.
The staff attorneys on this matter are Tiffany Woo and Carl Settlemyer of the FTC’s Bureau of Consumer Protection.
Learn more about the INFORM Act and report violations of the INFORM Act through the FTC’s special portal for potential INFORM Consumer Act violations.
