Washington, D.C. — Whaleco Inc., operator of the online marketplace Temu, has agreed to pay $2 million to settle allegations from the Federal Trade Commission that it violated the INFORM Consumers Act of 2023. The settlement, filed in U.S. District Court for the District of Massachusetts on Sept. 5, 2025, addresses failures to provide consumers with tools to report and avoid stolen, counterfeit or unsafe goods on the platform.
The INFORM Act, effective June 27, 2023, requires online marketplaces to verify high-volume third-party sellers — those with at least 200 separate sales and $5,000 in gross revenues over the prior 12 months — and disclose specific information on product listings. This includes the seller’s name, physical address and contact details, along with electronic and telephonic mechanisms for reporting suspicious activity. The law aims to increase transparency and deter fraud by allowing consumers to directly contact sellers and alert platforms to potential issues.
According to the FTC complaint, Temu did not offer a telephonic reporting option for suspicious activity on any product listings. When electronic reporting was available, it was not easily accessible, particularly in the platform’s gamified shopping features, such as games, spin wheels and coupon-earning activities. These sections lacked reporting mechanisms until November 2024, and even then, the tools were not clear and conspicuous as required. Additionally, Temu failed to disclose required seller information on gamified listings and its mobile website for portions of the Act’s effective period.
The proposed consent order, pending court approval, mandates Temu to implement a telephonic reporting system where consumers can review, re-record and submit reports, with clear instructions. It also requires prominent disclosures of reporting mechanisms and seller details across all platform versions, including the smartphone app, desktop and mobile websites. Temu must pay the $2 million civil penalty within seven days of court entry. The FTC’s 3-0 vote authorized referral to the Department of Justice, which filed the complaint and order.
Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said, “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. 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 marks the first enforcement action under the INFORM Act, part of the National Defense Authorization Act for Fiscal Year 2023. The legislation responded to rising concerns over counterfeit goods and stolen merchandise flooding e-commerce sites, with the FTC estimating billions in annual losses to consumers and legitimate businesses. Online marketplaces must maintain reasonable security practices to verify seller identities, including checking government IDs and financial records for high-volume sellers.
Temu, launched in the U.S. in September 2022 by Chinese parent company PDD Holdings, has grown rapidly by offering low-priced items shipped directly from overseas suppliers. The platform’s gamified elements, which encourage prolonged browsing through rewards and challenges, have drawn millions of users but also scrutiny for facilitating unregulated third-party sales. The FTC’s case highlights how such features can obscure required consumer protections, making it harder for shoppers to spot and report issues like fake products or unsafe items.
For consumers, the settlement reinforces protections against online fraud. Shoppers on platforms like Temu can now expect clearer paths to report problems, potentially reducing exposure to counterfeit electronics, apparel or health products that pose safety risks. The Act applies to sales exceeding de minimis thresholds for international shipments, ensuring even low-value imports face scrutiny. While the penalty is modest compared to Temu’s scale — the company reported over $14 billion in U.S. sales in 2023 — it signals the FTC’s intent to monitor compliance aggressively.
The case stems from the FTC’s ongoing efforts to adapt consumer protection laws to digital marketplaces. Prior to the INFORM Act, the agency pursued similar issues under Section 5 of the FTC Act, prohibiting unfair or deceptive practices. This targeted enforcement underscores evolving regulatory focus on third-party sellers, who account for a significant portion of sales on sites like Temu, Amazon and eBay. Marketplaces must now integrate disclosures into dynamic interfaces, such as mobile apps, to avoid penalties up to $50,120 per violation.
Southern Maryland residents, who increasingly rely on online shopping for convenience amid rural delivery challenges, stand to benefit from stronger safeguards. Local consumers have reported rising encounters with counterfeit goods through platforms like Temu, according to FTC consumer alerts. The settlement may prompt broader industry changes, as other marketplaces review their reporting tools to preempt similar actions.
The INFORM Act’s verification requirements also aid law enforcement by providing traceable seller data, helping combat organized retail crime rings that resell stolen goods online. The FTC continues to educate businesses on compliance through resources like its INFORM Act webpage, emphasizing plain-language disclosures and accessible reporting.
As e-commerce evolves, this action sets a precedent for accountability. Temu’s swift resolution avoids prolonged litigation, but ongoing monitoring will test the platform’s adherence. Consumers are advised to verify seller details and use reporting features when encountering suspicious listings.