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Online marketplaces are becoming more popular in New Zealand, with many different kinds that specialise and cater to consumer needs. What niche your online marketplace covers and how it works is entirely up to you. However, there are some legal aspects of running an online marketplace that you need to consider. Otherwise, you could open yourself up to potential legal issues in the future. It is crucial to make sure you draft up your obligations and site rules in your online marketplace’s essential legal documents, to make sure that you can cover your bases. This article will outline some of the most important online marketplace legal factors you should consider when setting up and running your business.

Your Involvement

A key part of running an online marketplace is defining your involvement in it. You are offering an introductory service to facilitate transactional relationships between buyers and sellers. It is important that you make clear that your involvement does not extend beyond this facilitation. 

You can define this relationship in your terms and conditions so that buyers and sellers know where your obligations reach. You need to specifically outline the detached nature of your legal relationship. The contract is between the buyer and the seller. You are merely providing the platform they use to meet.

For example, say you run an online marketplace allowing local businesses to find and sell to consumers. You are not a party to the transactions that businesses engage in with their customers.

Site Functioning

Another online marketplace legal consideration is how the site actually functions and how users can become members. You need to think about:

  • what people are buying and selling on the marketplace; 
  • who is eligible to sell goods and services on your marketplace; 
  • whether users need to set up an account and maintain a profile on your marketplace. 

A vital aspect of your platform is the payment process. Having a secure payment service on your website is essential for making sure that transactions are happening safely and efficiently. You also have to decide how you are being paid. Three common ways are to:

  • have users pay a subscription fee to use the site;
  • take a commission of each sale; or
  • require a one-off listing fee when buyers put items/services up for sale.

Your legal considerations may change according to the payment option you use.

User Conduct

It is generally a good idea to outline what is and is not permitted conduct on your platform. This shows that you are a responsible facilitator of business and dedicated to maintaining an efficient and fair service.

For example, if you allow commenting on your marketplace’s listings, you should outline the kinds of comments that are not permitted on your platform. If you allow abusive, harmful or offensive comments to stay up where the general public can see them, this could open you up to potential liability. You have an obligation to responsibly moderate the online space you maintain.

Complying With Regulations

Depending on how your site works, you will have online marketplace legal regulations that you need to follow. As an online marketplace, you have specific tax obligations to comply with. 

For example, if your website hosts any offshore merchants (sellers from outside of the country), then you may need to pay GST on the sales they make. You will also have obligations under NZ consumer law that you will need to be aware of and comply with.

If you provide an online marketplace where people sell their services, you should make sure they hold the relevant licence or qualifications to sell those services.

Liability & Disclaimers

Limiting your liability and providing disclaimers in your marketplace terms and conditions is crucial for your online marketplace. You will have a variety of people using your website, so you want to make sure that you are not responsible if an issue arises between buyer and seller. 

For example, if something goes wrong in delivering a product, a legal disclaimer will make sure you are not responsible for that damage. But you still have to make sure that you comply with your consumer law obligations.

Privacy Issues

As an online platform, you will be collecting information about the people who use your website. This will often include sensitive information, like financial details or addresses. You have a responsibility under privacy law to make sure that you handle this information responsibly, which you should set out in your website’s privacy policy.

Intellectual Property

You will likely have your business name, logos and branding in use across your website. Users will use this branding when: 

  • buying or selling on your platform; and 
  • advertising their products. 

So, you should make sure that you have taken legal steps to protect your intellectual property rights.

Key Takeaways

Running an online marketplace can be a good source of revenue and an efficient way to find your niche in the market. You are only offering an introductory service to facilitate business between your users, without being a party to those transactions yourself. So, you need to make sure that you protect this legal relationship and avoid potential liability. If you would like more information or help with your online marketplace’s legal aspects, contact LegalVision’s New Zealand ecommerce and online business lawyers on 0800 005 570 or fill out the form on this page.

FAQs

What is an online marketplace?

An online marketplace is a platform where users can conduct business, such as the buying and selling of goods or services. The marketplace’s owner does not partake in this process. TradeMe and Airbnb are examples of online marketplaces.

How does an online marketplace work?

An online marketplace provides a platform for people to advertise their products or place listings. Other users can then buy those products or services. The person or organisation does not take part in this transaction but they can provide the means for it to happen.

What is the law surrounding online marketplaces?

Online marketplaces still have to abide by consumer law and the laws surrounding responsible commercial practice in NZ. They also have their own concerns of being an online business, such as privacy concerns, protecting their intellectual property and limiting liability.

How do online marketplaces make money?

Online marketplaces can make money in a variety of ways. They could charge a subscription fee to use the website, or take a commission from sales. They could also charge a one-off listing fee or gain money through advertiser spots on their website.

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