Temu Settlement Offers Wake-Up Call: Is Your Business Complying With the INFORM Consumers Act?

The Federal Trade Commission's recent $2 million settlement with Whaleco Inc.—the operator of the online marketplace Temu—marks the first enforcement action under the INFORM Consumers Act. It signals a clear message from the FTC: compliance is not optional. In this case, Whaleco faced allegations of failing to meet the Act's requirements for transparency and consumer protections in its operations, ultimately leading to the $2 million civil penalty.

The INFORM Consumers Act, effective since 2023, aims to increase transparency in online commerce by requiring marketplaces to collect, verify, and disclose specific information about high-volume sellers. It also mandates that platforms provide consumers with clear mechanisms—both electronic and telephonic—to report suspicious activity. These requirements apply across all platform interfaces, including websites, mobile apps, and gamified experiences. Crucially, the Act authorizes both the FTC and state attorneys general to bring enforcement actions, expanding the regulatory exposure for noncompliant platforms. Civil penalties for violations can be substantial, creating a meaningful risk profile for companies in the e-commerce ecosystem.

In its complaint, the FTC alleged that Temu failed to meet several of the Act's core requirements. Specifically, the Commission claimed that Temu did not offer a mechanism—either electronic or telephonic—for consumers to report suspicious activity on gamified product listings and failed to provide a telephonic reporting option for non-gamified listings. The FTC also alleged that, where disclosures were made, they were often hard to find—especially on mobile platforms and within nontraditional user interfaces. As part of the settlement, Temu agreed to pay a $2 million civil penalty, implement a telephone-based consumer reporting mechanism, and improve its seller disclosure practices across all interfaces.

Key Takeaways

This case highlights several key compliance takeaways:

• First, enforcement is no longer theoretical—compliance with the Act is now squarely on the FTC's enforcement agenda and penalties can be substantial.
• Second, all iterations of a marketplace must comply—mobile apps, interactive features, and non-traditional formats are fully within scope.
• Third, disclosure obligations are not met simply by making information available somewhere on the platform; the disclosures must be prominent, easy to understand, and accessible.
• Fourth, ongoing monitoring is essential, as platform changes or new features can inadvertently introduce compliance gaps.

The Temu settlement serves as a reminder for businesses to prioritize transparency and consumer protections under the INFORM Act. Online marketplaces and businesses that enable high-volume third-party sales should now treat INFORM Act compliance as a key regulatory priority. Legal counsel and compliance teams should consider conducting a gap analysis, to ensure that required disclosures and reporting mechanisms are consistently implemented across all consumer touchpoints, and implement internal processes to track and respond to evolving guidance and enforcement trends.