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If you are considering setting up an online marketplace in England, you must be aware of the laws that apply to online marketplaces. It can be confusing to work out precisely what you need to do, as most of the rules and regulations which apply to online stores were written before online marketplaces grew in popularity. This article will explain the key issues you must consider in running an online marketplace business.
What is an Online Marketplace?
An online marketplace is a business model that allows other people to sell goods on its platform. It takes no part in a sale itself. It merely allows a seller to advertise their goods and for a buyer to buy from that seller. Your marketplace will generally facilitate the ordering process and payment by the buyer. Some examples of well-known online marketplaces in the UK include Airbnb, Etsy, eBay and Deliveroo.
Website Requirements
Your online marketplace website must be GDPR compliant. This means you will need to have a privacy policy that explains what data you collect from your website visitors and customers and how you use that personal data. You should also have a cookie policy that explains what cookies are and which types of cookies you use on your website.
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Liability and Disclaimers
With most online stores or e-commerce sites, the website owner is also the seller of goods. With an online marketplace, you are effectively introducing the seller to the owner. Accordingly, you must have a terms and conditions document which includes a limitation of your liability and a legal disclaimer. This clarifies to buyers and sellers that you are not a party to the contract they make. Therefore, your business cannot be held responsible if anything goes wrong in their transaction.
Consumer Protection Laws
Even though you are not directly involved in selling goods to the consumer, you must abide by UK consumer protection laws as a business facilitating sales to consumers. Your customer has the right to a refund or replacement of faulty goods or goods that are otherwise not as described. They also have the right to cancel any order without giving a reason within 14 days of making the order.
Marketing
If you are utilising any form of online marketing, this will also need to be GDPR compliant. This means that you can only email those individuals who have agreed to receive emails from you.
HMRC VAT Requirements
If goods from outside the UK are sold through your online marketplace, you must register for and charge the customer VAT on these goods. Furthermore, if the goods are valued at more than £135, import customs may also be payable.
Even if you only allow overseas sellers to sell through your marketplace if the goods they sell are in the UK already, you will still need to comply with specific VAT requirements. Your business must carry out VAT checks on all overseas sellers you allow to sell through your marketplace. If you do not do this, you might be liable for your overseas seller’s unpaid tax.
If you believe that an overseas seller should pay VAT you must:
- check that the seller has a valid VAT registration number by asking the seller for their VAT number and checking it online;
- check where the seller is located;
- check where the goods are located;
- consider how quickly the seller can fulfil orders from UK customers;
- consider how they fulfil orders to UK customers;
- check if you have previously removed that seller from your online marketplace in the past; and
- be aware of any information from the seller, HMRC or anyone else that the seller may have been dishonest relating to VAT issues or failed to meet VAT obligations previously.
Key Takeaways
Online marketplaces can be a successful way to make money and provide an arena for smaller businesses to reach customers. However, there are several legal issues you should consider before you decide to start your online marketplace business. You should ensure you understand all your legal obligations concerning running your business. This includes VAT requirements if you choose to allow overseas companies to sell through your website. You must also limit your liability for any potential issues arising from transactions between sellers and buyers.
If you need help setting up or running an online marketplace, our experienced e-commerce lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
An online marketplace provides a platform for sellers to offer their goods or services to buyers and for buyers to buy from the seller. It allows small business owners to have an internet presence without having their own website. An e-commerce site is an online store that sells goods directly to consumers. For example, Amazon is an e-commerce site that sells goods to the end consumer. However, Amazon Marketplace is Amazon’s online marketplace site since it allows sellers to sell their products directly to customers.
Yes, your online marketplace must comply with these laws and take reasonable steps to ensure that its sellers do as well. You can do this by including clauses in your terms and conditions with sellers that they must abide by all their legal obligations.
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