It’s safe to say that online marketplaces are dominating the world of e-commerce—the rise of Amazon, eBay and Catch.com is proof enough. eBay alone has over 61 million monthly visits, whereas Amazon boasts of over US $162, 360 million in net sales in 2022.
This presents a unique opportunity for small business owners and entrepreneurs to capitalise on a world with online shopping addictions!
But here’s the thing…
Online marketplace regulations in Australia can be easily overlooked if you are not sufficiently informed.
With so much use, issues are bound to arise, that’s why the legal side of marketplace selling is critical to consider. If you are thinking of starting your own online marketplace business, you should know how to protect yourself from these issues.
In our latest post we cover the benefits of online marketplaces, how to structure your online marketplace business in accordance with online marketplace regulations, and the precautionary legal steps you need to take so that you can efficiently make online sales.
What is an Online Marketplace?
An online marketplace is an e-commerce platform that facilitates shopping from a variety of different sources. Online marketplaces in Australia are widespread and cater to a variety of different industries. These e-commerce platforms can even be used on apps.
The range is quite great and stems from Airbnb for short-term rental properties to eBay for consumer products. Oftentimes, the operator of the marketplace does not own any actual products, but their role is to facilitate the transaction between a seller and user.
Benefits of Online Marketplaces for Small Businesses
While one would assume that the core benefit of an online marketplace for small businesses is exclusively tied to reach, this isn’t the case.
A few other key benefits include:
- Acquisition of new customers— Online marketplaces have a large number of users and as a small business, you can capitalise on having access to these individuals.
- Brand Awareness— While these websites can be competitive in nature, efficient use of resources can boost brand awareness to drive sales.
- Establishing trust— As a small business, you can utilise the established trust that the marketplace has built with its users.
How to Structure your Business in an Online Marketplace
When structuring operations within an online marketplace, it is essential to outline your role in the business relationship to make it clear to the consumer what your business is providing.
Most users of online marketplaces are often operating as sole traders. Operating as a sole trader is easy to start and does not require an Australian Business Number (ABN). Under this structure, all you need to do is simply sign-up by creating an account on your preferred online marketplace portal.
As a business, you have to be aware that you have unlimited liability which means you are responsible for all success and failure of your ventures.
Alternatively, you could register a company with the Australian Securities and Investments Commissions (ASIC) in order to create a separate legal entity. Under this model, limited liability is established and personal assets can be protected.
When considering which option is right for you it is essential to understand what you want to achieve through your business.
Online marketplace regulations: why it matters and steps ahead
Now that we have covered the business bases, let’s move on to the online marketplace regulations around online marketplaces as service providers.
Understanding the limits of your responsibilities and the relevant regulatory bodies is critical to a successful online presence. Knowing online marketplace regulations can protect you from making errors when applying the legal aspects of online marketplaces to your business.
Not abiding by these regulations can backfire and impact your business significantly. Like in a hallmark case involving Amazing and a seller, which left a woman partially blind when a retractable dog leash she bought from Amazon malfunctioned. The result was in the favour of the woman and the Court stated that Amazon was ‘fully capable… of removing unsafe products from their website’.
This case highlights that both businesses and online marketplaces can be held liable for issues and that it is critical for both parties to work together to ensure consumers are safe.
Recent developments concerning the connection between consumers and seller have brought to light issues concerning algorithms and product rankings. The Australian Competition and Consumer Commission (ACCC) has highlighted that consumer protection is paramount.
Precautionary legal steps- 6 things to remember
Understand terms and conditions
As a business owner, you need to know how the online marketplace operates in order to create a profitable business model. This involves considering payment, acceptable use and the extent of your liability.
Documents like Website Terms and Conditions of Use (Goods) and Website Terms and Conditions of Use (Services) can further assist you in the development of your business model within an online marketplace.
The Australian Consumer Law governs online marketplaces in Australia. As a business owner, you should also monitor activity on the online marketplace for breaches of these laws and take action where appropriate to assist your online business. This is to avoid any litigation or dispute resolution that would be damaging to your business practices. Some of these terms may include:
- Not engaging in misleading and deceptive conduct
- Not making any false representations about your online business’ product or service. This is essentially ensuring that your product labelling is correct.
- Not targeting any group unconscionably. This can include individuals with a disability, the elderly or the financially disadvantaged.
- Ensuring product safety and fitness for purpose.
- Prohibiting vendors from selling certain categories of items, such as weapons, drugs and alcohol, tobacco etc.
Think of copyright considerations
When selling products online you have to consider any copyrights that may impact your online business practices. Considering Intellectual property when selling a good or service is essential to safeguard against a potential claim of action. As per the Copyright Act 1968 (Cth) you cannot sell items with copyrighted materials. Implied copyright for business owners can include, for example. vendors selling t-shirts with a Star Wars-themed design would be infringing Disney’s copyright.
Have a robust shipping policy
Once you make a sale you are going to have to ship your products out. Whether it’s from wholesalers or your own warehouse, your online store must ensure that that process is smooth to enhance the customer service experience. Using a shipping policy clarifies your procedures in regards to the delivery of goods so your customers know what to expect and whether or not you have a return policy.
Ensure privacy and data protection
Privacy is becoming an ever sensitive issue, with massive data breaches on online platforms often making the headline. As a business, considering online marketplace regulations and privacy laws in Australia is paramount. The personal information of buyers should be dealt with cautiously. It is likely that you will have access to their name, address, phone number and credit card details. In handling this data, you must comply with the Australian Privacy Principles. These principles include:
- Obtaining consent from users for you to receive and use personal information.
- Clearly disclosing what personal data you will receive and how you will use them.
- Taking reasonable steps to prevent the misuse of and unauthorised access to the personal information of customers.
Abide by safe advertising guidelines
As a business you should advertise your products accurately whether it’s on the online marketplace or on a search engine. Accordingly, you should make sure that the algorithms, features and presentation of products are optimised to the best of your ability so that you do not mislead or deceive buyers. This includes promotional materials on social media and other apps.
Some aspects you should consider to assist advertising decision-making include the following:
- Product review systems. You should ensure that product reviews are clearly seen and are fairly presented. Star ratings should include the number of people who’ve given the product a rating and reviews that seem fake or malicious should be removed.
- How are you promoting products on your marketplace? For example, you may promote popular items, items low on stock or highly discounted items on the front page of your online marketplace. You should ensure that the way you promote items doesn’t mislead customers into rushing into a decision or overstate the value of the items.
- What features can you include to make sure products are advertised as transparently and reliably as possible? It is advised that pictures and accurate descriptions of products are found in advertisements to make it clear to the buyer what they are purchasing.
Comply with the Spam Act
To sell your products or services, you’re going to need to market and advertise your business. However, there are important online marketplace regulations that you should be aware of in terms of direct marketing. One of the most important of these is the Spam Act 2003 (Cth). The Spam Act covers all electronic communications you send to your customers and requires customer’s consent.
So remember, when sending out any marketing materials the business, as the sender must be identifiable and receivers must be able to opt out of messages being sent by your business for the sake of consumer protection.
Now that you know the ins and outs of operating your business in an online marketplace, you can take confident steps. Here’s a quick recap of the legal steps that you need to take:
- Update terms and conditions
- Think of copyright considerations
- Have a robust shipping policy
- Ensure privacy and data protection
- Abide by safe advertising guidelines
- and Comply with the Spam Act.
And, if you need any further assistance protecting your business’ online marketplace or online store you can hire a lawyer with Lawpath who can assist you doing the same with ease!