Marketplace websites and UK regulations

21 Feb 2011
Alasdair Taylor

I’ve just finished working on a new template terms and conditions of use document for marketplace-type websites. This process has not been as straightforward as it should have been. Both the Ecommerce Regulations and the Distance Selling Regulations are poor fit for this kind of website, because of the range of different contractual relationships that this kind of website can give rise to.

When considering this kind of site, we need to distinguish between four different types of actor: the website operator, buyers, sellers and casual website users.  The website operator has distinct legal relationships with buyers, sellers and other users. In addition, each time a sale occurs, a buyer will contract with a seller. Usually, the website operator will not be a party to contracts of sale entered into via the website by buyers and sellers.

Clearly, the Distance Selling Regulations will apply to sales by a seller acting in the course of a business to buyer who is a consumer. Website operators may want to assist sellers in complying with the Distance Selling Regulations in this respect, perhaps by supplying terms and conditions of sale that the seller can use. However, operators will want to avoid any responsibility for sellers’ legal compliance, and may therefore want to refrain from offering this kind of help, notwithstanding that that may lead to a lower level of legal compliance.

What is uncertain is whether the Distance Selling Regulations will apply to the operator-seller relationship in the situation where the seller is not acting in the course of a business. Can a seller be a consumer? The common sense definitions of these words would suggest not, but the legal definition of “consumer” has proven flexible in the past.  A cautious website operator may want to either prohibit consumers from becoming sellers, in order to avoid this problem, or alternatively ensure that all the contract provisions that will apply between the operator and sellers are consumer law-compliant.

Another issue concerns the application of the Distance Selling Regulations to the operator-buyer relationship, and the point at which they might apply. The definition of “distance contract” in the regulations suggests that they apply from the point of registration in respect of the contract with the operator (as well as at the point of sale in relation to the contract with the seller) but many of the provisions in the Regulations (notably those concerned with the “cooling off” period specified by the Regulations) only make sense in respect of contracts where the consumer is paying money to the supplier.

Turning to the Ecommerce Regulations, it is clear that the provision of the website services by the website operator to both sellers and buyers in relation to sales made via the website will be “Information Society Services” within the meaning of the Ecommerce Regulations. Again, what is less clear is at what point the procedural obligations under the Ecommerce Regulations become operable – at the point of registration, at the point of purchase of a product listing (where relevant), at the point of sale, or at multiple points? Another question is this: can a seller be considered to be a supplier of “Information Society Services” within the meaning of the Regulations?

So as to avoid clogging up the template with repetitive procedural requirements, I made a number of assumptions in the drafting of the template: (i) that the Distance Selling Regulations will not apply to the operator-buyer relationship (because the buyer is not paying the operator except to the extent that the operator is acting as a payment processor on behalf of the seller); (ii) that sellers will never be treated as consumers (arguably, selling is the very antithesis of consuming); (iii) that sellers will not be considered to be suppliers of “Information Society Services” (because it is the operator providing those services); and (iv) that the operator’s obligations vis-à-vis both the seller and the buyer under the Ecommerce Regulations apply at the point of registration. Of course, this approach may not the right approach for any given website.

You can see the fruits of this labour on Website Contracts.


Interesting article………..
But where is the buyer’s responsibility in all this?
I would love to see a reworking of the law to help the many small businesses trying to make a fair and honest living using marketplaces and their own websites to sell their goods
We have had returns not packaged well enough to stop breakages but still have to give a full refund
DSRs need to be seriously updated with some fair rules and regs
Please include these in any new template–small business sellers would really appreciate it

The chance of a re-balancing of distance selling law in favour of sellers is remote, at least for the near future. The Distance Selling Directive was intended to be unfair to sellers in some instances. The rationale was that pan-EU rights of return would lead to a higher level of online (especially cross-border) sales, and that a higher level of online sales would, overall, benefit both consumers and sellers.

Because of all the consumer protection legislation, it is difficult to draft template terms and conditions of sale that are strongly pro-seller. As well as the Distance Selling Regulations, you need to take account of the Unfair Terms in Consumer Contracts Regulations, the Consumer Protection from Unfair Trading Regulations, the Unfair Contract Terms Act, the Sale of Goods Act, and so on. Many of the legislative provisions are drafted in very general terms, making them hard to avoid (and hard to interpret).

To Linda,

DSR’s do make the consumer responsible for the care of any products which they return. Yes you do have to give a full refund, however the consumer is responsible for p&p costs in that return and if they are damaged then you should ask them to claim damages from the postal service they used. If they are unable to do this then you have the right to take action against the consumer.

If you sold something which was ‘perfect’ and it was returned damaged to whatever degree, you would have to prove it. If you couldn’t, the refund would be in granted to the buyer and you would lose out from your original buying price as you would have to sell it cheaper due to the damage. It would not be economical to take action against the buyer unless you have a clear cut case and it may STILL cost you more than it’s worth. The DSR is unfair to sellers.

One could ‘use’ a seller to to supply a new product just so that you could take it on holiday and use the item(s) for a week. Once you return, you post it back to the seller and demand under the DSR, a full refund as ‘found to be unsuitable’. The ‘new’ item would have to be sold as ‘used’ or shop soiled and the dealer would lose out on his original buy price. If it is found to be marked by the buyer … prove it. The EU DSR is an unfair act and WILL be abused. It is also biased against the seller, EVEN IF (business seller), you sell a damaged item (on ebay) with ‘As seen’ and no returns accepted, and add, “ONLY BID if you are happy buying ‘Used’ or ‘Damaged’…the buyer can STILL refuse the items within 14 days. A bloody stupid directive! This does NOT apply to private sellers, only business who cannot pose as Private Sellers!! This act need amending.

Hi Alasdair, just wondering about a situation where a commission fee is also charged by the site owner. Would that make website operator party to contracts of sale entered into via the website by buyers and sellers or could that be a separate contract?

Also, and to be fair I haven’t read the whole contract, but you do list some of the seller’s obligations so, I wondered about the seller’s obligations under the CPU to display name and address. On Ebay, for instance, the sellers designated as ‘shops’ do have those details but other Ebay sellers whose products suggest business activity don’t carry that information.

Hi KiKi,  I don’t think that the payment of commission on sales by a seller to a marketplace operator would, in itself, make the operator a party to the contract of sale.  There are an awful lot of sellers on eBay who don’t comply with the relevant disclosure laws.  eBay makes it easy to sell without complying with all the rules, and without necessarily being aware of your compliance obligations.

Thank you so much for such a fast response and apologies for duplicating the query. Didn’t appear to have uploaded. However the first query was badly phrased on my part. I meant where the marketplace also charges a fee to the buyer.

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