Marketplace terms and conditions – legal issues

A marketplace platform is great for doing online business and connecting service providers and customers. Notable marketplaces are Airtasker, eBay and Amazon, however marketplaces can be used by businesses looking to facilitate human connections between people, such as LinkedIn.

Whatever the purpose of the marketplace, platform operators need to have a set of terms and conditions in place which ringfence the platform operator from certain liabilities and seek to ensure that most issues between users are matters between them, and not the platform operator.  Below we outline some of the essential terms that a marketplace terms and conditions should consider.

Establishing the position of the platform operator

Platform operators need to state their role.  This is best done by stating the purpose of the marketplace, whether it be e-commerce or social media, and how the users can interact.

For e-commerce platforms, the role of sellers and buyers will differ, and each will have different use rights in the marketplace.  Sellers can advertise their products and services and buyers can either bid for them or just buy them.

Either way, how users can communicate is an essential aspect of marketplace terms and conditions which must be mapped out.  This can then minimise user complaints to the platform operator.  The terms and conditions must also state that the platform operator is an intermediary and not a party to any agreements between users, the reason being that the users are free to agree the terms of their relationship to which you are not a party.  To support this, the terms and conditions must include a dispute resolution clause which clearly outlines how disputes are handled between users and the role, if any, of the platform operator.  For example, mediation or binding arbitration.

Accounts

If the marketplace includes user accounts, all the terms and conditions of each user’s account needs to be stated, which will differ depending on the type of user.  For example, a seller will have a merchant account that allows them upload products and services for sale and advertising.  The terms and conditions need to prohibit the seller from selling illegal products or services or uploading any content for which it does not have a licence, is illegal or does not fit the criteria of the marketplace.  Further, the seller may also specify its own terms for delivery, returns and refunds.

Payment options

Payment options are dependent on the type of marketplace.  There are three (3) main types of payment options:

• Free use of the marketplace, but with payments for optional extras;
• Subscription access, usually on a monthly basis payable upfront by direct debit; and
• payments direct between the users, where they are seller and buyer, which should include the % the platform operator will charge for facilitating the transaction.

With any payment option, the user must warrant that it is authorised to make any payments and the platform operator must disclaim any liability in relation to any non-payment between users, including where caused by the third-party payment gateway provider, such as stripe.

Intellectual property

Intellectual property is a key component of building a marketplace platform.  This includes the software all the content and data set available.  Whether “User Generated Content” is involved will also affect the contractual rights of the parties.   The terms and conditions need to clearly state that users cannot copy any content, other than where expressly stated, and must not scrape databases and underlying analytics in the platform program to create copycat site.

Disclaimers

A key issue to establish, where applicable to the particular platform, is that all interactions and agreements, including sales and communications, between users are a matter between users, and not the platform operator, so that if a dispute arises between users, say the quality of any products or services advertised by a seller, the marketplace terms and conditions make it clear that the platform operator is not liable.

Furthermore, the platform operator must disclaim liability to users for the condition, legality, suitability and content of any products or services posted by sellers.

Related to this, the platform operator should make it clear that it does not provide any form of endorsement of users or products and services advertised on the marketplace.

Likewise, the terms and conditions need to clearly state that users are responsible for providing information that is true, and that the platform operator does not accept any liability for the accuracy of any information uploaded onto the marketplace by users.

Liability

On top of disclaimers, the platform operator should seek to limit its liability.  This is usually limited to the amount of any fees paid by the user in any 12-month period for all claims in the aggregate, or a nominal amount where no fees have been paid. Platform operators should also be aware of their obligations under the Australian Consumer Law, whereby if marketplace services suffer a major failure, consumers have the right to:

• cancel the service contract and obtain a refund for any part of the service not consumed; or
• keep the contract and receive compensation for the difference in value between the service supplied and the service for which they paid.

Indemnities

An indemnity is a promise to keep another person from harm, meaning to pay out if a third party makes a claim against that person due to the acts or omissions of the person giving the indemnity. For example, a seller indemnifying the market platform operator from any buyer claims against the platform operator in relation to faulty goods.

Additionally, an indemnity should be included which protects the platform operator from any loss, and against any claims, the platform operator may incur or receive arising from the users use of the marketplace or a user’s breach of any laws, including the rights of any third parties.  For example, intellectual property infringement where a user uploads content for which it does not have a licence.

Takeaways

Marketplaces vary depending on the purposes of the marketplace and the rights of users. Consequently, each set of marketplace terms and conditions needs to be drafted individually to take into account the uniqueness of the marketplace and the applicable use rights of various users of the marketplace.

Further information for online businesses

Dundas Lawyers acts for some of the largest internet businesses in their sector in Australia.  If you need advice on how structure your marketplace terms and conditions, contact us for a confidential and obligation-free discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

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