Online marketplaces such as eBay, Gumtree and Amazon have popularised online shopping for goods. While the websites or apps facilitate sales, they do not supply the goods directly. If you run a similar online marketplace, you need to know how to comply with the Australian Consumer Law (ACL). This article explains how the ACL applies to your online marketplace.

What is an Online Marketplace?

An online marketplace is a platform that pairs buyers and sellers with particular products or services. These platforms are usually websites or apps that host advertisements of goods by sellers that buyers can see. They often provide a common portal for payment and communication between buyers and sellers. The business model revolves around charging fees for the use of the platform, since the marketplace itself does not own inventory.

Therefore, a marketplace operator is quite different from a seller. A seller is typically one person or company that sells goods or services to another person, whether on their website or through an online marketplace. Their business model is about selling goods in their inventory.  

How Does the ACL Apply to My Online Marketplace?

The Australian Consumer Law (ACL) is a body of rules that set out protections for customers. The two key obligations that apply to online marketplaces are to:

  1. prevent misleading and deceptive conduct; and
  2. uphold consumer guarantees.

What is Misleading and Deceptive Conduct?

As a general rule, businesses cannot engage in any conduct that is likely to mislead or deceive consumers. Misleading and deceptive conduct involves a person engaged in conduct (such as words or actions) that is in ‘trade and commerce’ that misleads or is likely to mislead the consumer.

Trade and commerce’ refer to any sales to the public at large as part of an established business. For example, selling toys from a supermarket you operate would be ‘trade or commerce’. Selling toys from a one-off private garage sale would not. Therefore, the ACL does not apply to individuals who sell products on a platform, only companies or individuals who make large sales to the public as part of an established business. 

Furthermore, the ACL prohibits a person from making false or misleading representations about goods or services, such as the goods or services are of a particular:

  • standard;
  • quality;
  • value;
  • grade; or
  • composition. 

A court will judge misleading or deceptive conduct alongside other facts in the context of the circumstances at the time. The conduct must have misled, or is likely to mislead, the consumer.

How Can Online Marketplaces Avoid Misleading or Deceptive Conduct?

You are responsible for checking that the sellers on your online marketplace have provided correct information about their goods. You do not want to rely on disclaimers that the information may not be accurate as a way to limit your business’ liability. The court takes disclaimers into account, but may still find that the information was misleading or deceptive to the consumer.  

Therefore, you should always ensure that displayed prices are clear and accurate. If the seller does not clearly display or has partially obscured the price, they may risk misleading their customers. Your online platform should always present any information that could influence a customer’s purchasing decision. Otherwise the competition regulator, the Australian Competition and Consumer Commission (ACCC), may issue large fines if it upholds complaints about misleading representations in your online marketplace.

For example, you should display the total calculated price of a product where possible, including additional fees such as the goods and services tax (GST). If your platform charges any fees or surcharges, you should also include them in the upfront price. If you cannot calculate the fees immediately (such as approximate shipping costs), you should disclose that you will charge extra fees. Let customers know when they have to pay the extra fees as soon as practicable. 

In addition, ensure your terms and conditions are clear, transparent and easily accessible. Advise your sellers about standards of conduct and the situations where you can de-list their advertisements for non-compliance. 

What Are the Consumer Guarantees?

Under the ACL, sellers must provide guarantees about the goods they sell to consumers. These rights (which you cannot exclude by contract) exist regardless of any warranty provided by the seller.

Sellers must guarantee that the goods:

  • are of acceptable quality;
  • will match their description, or any sample or demonstration model;
  • will be fit for any purpose made known to the supplier.

Buyers will have rights against the seller if a good fails to meet a consumer guarantee. If the failure is minor, the seller can choose the remedy, such as offering a free repair of the goods. If the failure is major, the buyer can choose between a repair, replacement or refund or compensation for the good’s reduced value. 

major failure includes goods or services that are substantially not fit for the purpose, unsafe for the customer or otherwise very different from what was described. A minor failure is anything that is not a major failure, which would be otherwise easy to repair, replace, refund or fix.

How Do Consumer Guarantees Apply in an Online Marketplace?

Online marketplace sellers must comply with consumer guarantees. If they breach any of the guarantees, they will have to refund, repair or replace any defective goods. However, if the seller is just an individual making a one-off sale (therefore, not engaging in trade or commerce), they do not owe those guarantees to consumers. Therefore, you should ensure any sellers covered by the ACL know about consumer guarantees.

Your online marketplace is unlikely to owe consumer guarantees regarding the quality of goods to buyers on your platform. When someone buys a product from a seller on your platform, they enter into a contract of sale. Your online marketplace is not part of that contract between buyer and seller. Therefore, the seller is responsible for complying with consumer guarantees. 

However,  you must comply with consumer guarantees if the problem relates to the payment process in your online marketplace. As you are responsible for hosting the payment gateway for buyer and seller, the ACL will apply to you in that situation. If your service is poorly delivered (such as failing to process any payments from either side), consumers may seek compensation or ask the ACCC to investigate you. 

Finally, your online marketplace should not misrepresent any consumer guarantees or exclude the ACL’s operation. Otherwise, you may be engaging in misleading or deceptive conduct. You should also ensure the sellers on your platform do not make similar misrepresentations.

Key Takeaways

Online marketplaces do not directly sell goods to consumers. However, your online marketplace can still be liable for misleading or deceptive conduct or breaching consumer guarantees. The ACCC can hand down penalties worth thousands of dollars if you breach the ACL. Therefore, you should implement the following procedures to ensure ACL compliance, such as:

  • checking if the information on the goods provided by sellers is accurate, even if you include disclaimers about the accuracy of the information;
  • ensuring sellers are aware of their ACL obligations, such as consumer guarantees; and
  • setting out terms and conditions that govern the conduct of sellers and buyers on the platform.

If you have any questions, get in touch with LegalVision’s competition lawyers on 1300 544 755 or fill out the form on this page.

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