Legislation That Could Unmask Third-Party Sellers

Online marketplaces fight federal and state legislation that would make the companies disclose contact information for third-party sellers.

Andrew Quintrell
Andrew Quintrell

Legislation That Could Unmask Third-Party Sellers

Amazon is the biggest and most well-known online marketplace. The company, along with other online retailers, is trying to go against federal and state legislation. According to a recent bill, all third-party sellers on Amazon and other online websites will need to verify their identity.

On top of that, these stores will also need to provide consumers with contact information and provide multiple ways to contact the store. Here’s everything you need to know about the legislation and how the online retail community perceives the news.

Online Retailers Vs. Brick-And-Mortar Retailers

The legislation has seen the formation of two sides. Online retailers like Amazon, Esty, eBay, and others are completely against the bill. On the other hand, traditional retailers like Home Depot, Walgreens, and JC Penney are in favor of the bill.

The online retailers argue that millions of small businesses rely on their services, and they would suffer because of the legislation. Many drop shippers operate on Amazon without having a proper physical store.

The way Amazon and other online marketplaces operate allows hundreds and thousands of small business owners to make a living. Unfortunately, this new legislation would make it incredibly difficult for a lot of small businesses to continue their operations.

What’s The Need for The Legislation?

There are two main reasons behind why the legislation is being proposed. Firstly, there’s considerable pressure from the brick-and-mortar retailers. Because of the pandemic, they lost significant ground to online retailers.

Statistics indicate that 20% of all consumer retail purchases in 2020 were online. This is a 6% increase from the 14% in 2019!

Another reason behind the legislation is a response to an increasing number of counterfeits, stolen, and potentially dangerous items on standard marketplaces.

Isn’t The Legislation Good?

The legislation is good for brick-and-mortar retailers who are worried about losing their market share as consumers become more familiar with online shopping. However, it’s going to impact third-party sellers.

Online marketplaces are sticking up for the little guy and their own interests by arguing their case. One of their main arguments is that a lot of small businesses operate out of their homes. If they had to provide a physical address, it would compromise their privacy significantly.

They argue that by having to choose between their security and privacy when considering selling online, the result would be fewer online sellers. The presence of fewer online sellers would directly benefit Walmart, Home Depot, and other traditional retailers.

Cover the Fraudsters

However, the main argument that supports the bill is also a compelling one. The ability to remain anonymous is what essentially allows fraudsters to get away with selling online. It’s become very common to find counterfeit and potentially dangerous items on a lot of online marketplaces.

Even Amazon has come under fire for selling counterfeit items and third-party goods that are potentially dangerous to customers. There have been many instances where government bodies have ordered products from online marketplaces and determined that a significant majority of the goods were counterfeit.

There have also been instances where consumers have tried to sue Amazon after failing to get in touch with the actual seller. However, Amazon maintains in the court that they’re just the middleman and not responsible for a defective or counterfeit product.

The brick-and-mortar retailers try to turn this argument around on online retailers. According to consumer laws, these traditional retailers are responsible for any defective products or counterfeit items.

As a result, these stores need to have many different measures in place to ensure that their products are up to the mark. Online marketplaces don’t have to worry about the same level of accountability because they rely on third-party sellers.

Even though Amazon claims that they’re just the middleman in the situation, there’s a lot of pressure on them to address the situation. Recently, Amazon reported that they managed to seize and dispose of over 2 million counterfeit products at their warehouses.

To further help deter counterfeiters, Amazon is introducing a new seller identification system. The system essentially connects prospective sellers through a video chat with the Amazon office that can help verify the seller's identities. It can also help ensure that the seller has all the appropriate government-issued documentation.

Online Retailers are not Going Down Without a Fight

While there’s a lot of pressure to pass the legislation because of the increasing amount of counterfeit selling, online retailers are still trying to make their case.

They are presenting arguments through two main groups. The most recent of the two is the Makers and Merchants Coalition. It’s a group that argues traditional retailers only want the legislation because it benefits them directly.

If there were fewer amounts of online sellers, then traditional retailers would receive more business. In addition, it would allow these traditional businesses to capture more of the ecommerce market as well.

The Makers and Merchants Coalition have the support of Amazon, Etsy, Rakuten, and other online marketplaces and companies. These include PayPal, Google, and Microsoft as well.

The second group is known as the Coalition to Protect America’s Small Sellers. Several online retailers like eBay, Etsy, and Poshmark that are completely reliant on third-party sellers.

To combat the formation of these coalitions, the brick-and-mortar retailers are forming their own group. Home Depot, Lowes, Walgreens, CVS, and other traditional retailers are coming together to form the Buy Safe America Coalition.

State Pressure

Aside from the traditional retailers, many different states are in favor of the legislation. The legislation is at the proposal stage on the federal level as well. Some senators even attempted to introduce the INFORM Consumers Act via an amendment to the United States Innovation and Competition Act. This remains before the senate.


The bill that requires third-party sellers to reveal their contact information is going to make the identity of online retailers transparent to customers. As a result, customers will have more confidence in their online purchases. Brands will also have more control over their product distribution and counterfeit issues.

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