$2 Million and a First: Temu and the Law Nobody Had Enforced Yet

The Federal Trade Commission announced on September 5, 2025, its first-ever enforcement action under the INFORM Consumers Act, a 2022 federal law aimed at reducing the sale of counterfeit, stolen, and unsafe goods online, charging Whaleco, Inc., the operator of the Temu marketplace, with failing to provide consumers with required tools to report suspicious sellers and listings.DOCUMENTED

Under a proposed settlement filed by the Department of Justice on the FTC's behalf, Temu will pay a $2 million civil penalty and must implement clear, accessible reporting mechanisms across all versions of its platform going forward.DOCUMENTED

What the INFORM Act requires

Congress passed the Integrity, Notification, and Fairness in Online Retail Marketplaces for Consumers Act, known as the INFORM Consumers Act, in 2022, with the law taking effect in June 2023. The statute requires online marketplaces where "high-volume third-party sellers" operate — defined as sellers with 200 or more separate transactions and at least $5,000 in gross revenue over any 12-month period within the preceding 24 months — to collect, verify, and disclose specific identifying information about those sellers, including bank account details, tax identification information, and contact information, generally within 10 days.DOCUMENTED

Separately, the law requires marketplaces to provide consumers with an easily accessible mechanism, available both electronically and by telephone, to report suspicious activity connected to high-volume third-party seller listings, and requires marketplaces to suspend sellers who fail to supply the required verification information.DOCUMENTED

What the FTC alleges Temu failed to do

According to the complaint, filed by the Department of Justice at the FTC's request in the U.S. District Court, Temu did not provide any telephone-based reporting option for suspicious seller activity when the law's requirements first took effect, only introducing a phone option in January 2024 — and even then, the complaint alleges, the option was difficult for consumers to locate and use.DOCUMENTED

The complaint further alleges that Temu's "gamified" shopping experiences, including spin-the-wheel style promotions and other reward-based interactive features built into the app, provided no reporting mechanism whatsoever until November 2024, meaning consumers encountering suspicious third-party seller listings through those game-like interfaces had no way to flag concerns for a substantial period after the law's requirements took effect.DOCUMENTED

"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 FTC'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."DOCUMENTED

Congressional pressure preceded the case

The INFORM Act had gone largely unenforced in the two years following its effective date, a gap that drew bipartisan Congressional attention. In August 2025, Senate Judiciary Committee Ranking Member Dick Durbin and Senator Bill Cassidy sent a letter to the FTC stating they were "concerned by the apparent lack of action" to enforce the law, having separately sent letters to 46 online marketplace companies earlier in 2025 requesting information about their compliance efforts. The FTC's case against Temu followed roughly two weeks after that letter, marking the law's first-ever enforcement action.DOCUMENTED

The settlement's terms

Under the proposed order, Temu will pay $2 million in civil penalties and must implement compliant reporting mechanisms, both electronic and telephonic, across every version and interface of its platform, including any gamified or promotional features that offer product listings. Legal commentary on the settlement has noted that, notably, the order does not require Temu to submit to a monitor or independent assessor of its practices going forward, a departure from the kind of ongoing oversight the FTC imposed in some technology-sector settlements under prior leadership.DOCUMENTED

A signal to the rest of the industry

Because the INFORM Act's civil penalties can reach more than $53,000 per violation, and because Temu is far from the only online marketplace hosting high-volume third-party sellers, legal observers have characterized the case as a clear signal that other major e-commerce platforms should expect similar scrutiny of their own seller-verification and consumer-reporting practices going forward, particularly given the sustained bipartisan Congressional interest that helped prompt the FTC's first action under the three-year-old law.

Because the INFORM Act applies to any online marketplace hosting high-volume third-party sellers, not just Temu specifically, legal commentators have emphasized that the $2 million penalty and accompanying compliance requirements function primarily as a template for how the FTC intends to evaluate similar marketplaces going forward. Given the sustained, bipartisan Congressional pressure that helped prompt this first enforcement action after two years of apparent dormancy, other major online marketplaces hosting comparable volumes of third-party sellers now have a concrete enforcement precedent, rather than only the statute's text, to measure their own compliance against.REVIEWED

The roughly two-year gap between the INFORM Act's effective date and its first enforcement action also illustrates a broader dynamic in how new consumer-protection statutes are typically enforced: rather than pursuing the first identified violation immediately, regulators often wait to bring an early case against a company with sufficient scale and public visibility to generate the kind of industry-wide compliance signal the FTC's own announcement explicitly invoked.REVIEWED

Legal advisors to e-commerce clients have specifically flagged the case's treatment of gamified shopping features, spin-the-wheel promotions and similar interactive elements, as an important reminder that INFORM Act compliance obligations extend to every interface through which a product listing might reach a consumer, not merely the platform's primary, traditional search-and-browse shopping experience.REVIEWED

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