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Consumer Trends 2023: Platform problems and market mayhem

16 January 2023

Who really is responsible for the products sold on marketplaces and who should be? Is it right that platforms should be responsible for all content and products sold and act as if they did so themselves? What proposals do the government and the EU have, and will this relentless march to regulate the marketplaces and platforms change in 2023?

Many retailers now offer marketplaces to extend the reach of their online product range to capture brands and products that neither have to own or distribute, but just provide a channel for that product's sale.   2022 has seen many retailers adopt this model with everything from beauty and cosmetics to hardware and DIY, there is almost no part of the sector where both pureplay and retailers with both bricks and mortar and online are not leveraging this model.

It is not surprising that this is the case as a pure marketplace play is just a technology hosting arrangement, like Uber in other parts of the sector, you just connect buyer and seller and take a fee for that taking place on your platform. It is a simple business model and one where there is limited risk, limited cost and an easy reward. For those who wish to offer additional services, there are the options to undertake fulfilment and offer additional services to add additional revenue streams.

In all of these models, the marketplace is not the seller, but the actual retailer of the product, like a true concession in a department store or more simply any retailer in a shopping centre. Each retailer is responsible for its product descriptions, its product safety, and its logistics.

Where this becomes slightly more blurred is that most platforms will take the customer's money as the seller's agent and then deduct their fees and send the money on to the seller. They also often have template pages, for obvious UX and consistency reasons, that drives the presence or absence of certain information in certain locations.  When this becomes safety critical, i.e. with allergen information in food for instance, this can become more blurred. As it also does when the marketplace rather than the retailer uploads or enters the data. 

The call for greater regulation

This all matters because for years, many have been arguing for greater regulation of marketplaces. It takes mere seconds to find many articles from consumer associations and others calling for greater regulation due to the fact that (as the Electrical Safety First put it), 'due to a lack of regulation around online sales, it is all too easy to unknowingly buy unsafe goods online. Counterfeit, sub-standard and recalled electrical goods can all pose a serious risk and fire hazard.' They and many others call for, amongst other things, marketplaces to take more responsibility and be designated as a retail store not just the facilitator of the sale, though some go further.

The reality is that the law applies to those selling through an online marketplace in precisely the same way as it does anyone else selling online or in store. Depending on the product, as the precise rules vary, either the producer or the distributor of the products must ensure that the products that they sell are safe, in no cases is it the domain of the third party website that they may happen to be sold on

It has been clear through the UK Government's Product Safety Review that the UK Government wants this to change. The EU has taken a similar position in the new draft General Product Safety Regulation. At the time of writing we do not know what the UK position will be, but the EU position is clearer.

Could the EU model be adopted in the UK?

The EU duty means that all online marketplace designs must include core safety related information, including warnings and information to identify the product, including its type and, when available, batch or serial number and any other product identifier. 

There will also be duties of cooperation on the online marketplaces, including the requirement for a single point of contact with market surveillance authorities and to monitor information on the Safety Gate portal and act accordingly. 

While these duties are a considerable extension of the current position, and to some extent shift some of the obligations from those who should be responsible to technology platforms, the position could be far worse.  Not least as distributors under this draft law have the duty to verify that a manufacturer or importer have discharged their duties in respect of displaying serial numbers, including the manufacturers contact details and instructions and safety information in a language that can be understood. In practice this is going to necessitate a new pre-sale Quality Assurance process to be implemented. 

We await the UK proposals, but these are likely to go at least this far. With the EU's Platform Regulations and Digital Services Act already extending responsibility to marketplaces, this looks like the next step in that journey and it will not be long before the marketplaces are treated as if they are directly retailing. This trend will change the viability of the model for some and while we anticipate that these models will continue to grow over the next 12-24 months, the risk/reward ratio of this model may start to change.

If you have any questions or would like to discuss any of these topics and what they mean for you and your business, please get in touch with our regulatory experts. 

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