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Navigating Online Marketplace Contracts: A Guide for SMBs 

Navigating Online Marketplace Contracts: A Guide for SMBs 

(Note: This post was initially published on LinkedIn, and the following iteration is a syndicated version of the same.)

In contrast to the online marketplaces, many of which are some of the largest global companies – Amazon has 1.5m employees and $1t in assets – third-party sellers are generally SMBs, including entrepreneurs and start-ups, lacking the commercial knowledge, resources and experience of the large-scale online marketplaces they do business with.

Among the questions we most often get from small business owners is what’s in the contract they have with the online marketplace, what provisions they need to watch for, and whether can they negotiate these provisions.

Understanding User Agreements: What to Look For

At a minimum, an online marketplace generally has a privacy policy, terms and conditions, returns and refunds, and a cookies policy. This information may be found in the marketplace’s user agreement.

And while user agreements are continually updated and revised, unfortunately, third-party sellers as a rule can’t negotiate them. If you’re disappointed, take it up with Jeff Bezos.

But actually, you’ll find that these well-developed user agreements cover the most applicable areas of commerce, especially for SMBs.

Crucial Elements: Privacy Policies and Data Protection

Any time an online marketplace collects or handles personal information, it must comply with all applicable privacy and data protection laws, many of which require them to maintain accessible legal agreements on their websites and apps.

A privacy policy describes how personal information is collected, used, shared, and protected.

A privacy policy typically includes a provision letting users know what personal information the online marketplace collects, whom the information will be shared with, and what privacy rights are given to the website or app’s users.

In addition to a privacy policy, terms and conditions may also be found in the user agreement. Terms and conditions generally give online marketplaces control of their websites and apps.

For example, they protect against abuse of the website and may even close accounts for any users who violate the provisions. They may also set forth payment and refund policies, as well as determine how and where disputes will be resolved.

Financial Considerations: Fees and Payment Policies

Terms and conditions may also include the fees the online marketplace can collect from the third-party seller. The online marketplace is a middleman that collects fees from sellers.

Accordingly, small business owners need to be aware of this provision and the cost of doing business with online marketplaces, including the collection of taxes, so they’re not upset and don’t unreasonably dispute the fees when the online marketplaces collect them.

SMBs don’t generally have control over fees. Similarly, SMBs don’t generally have access to established global marketplaces like Amazon without paying a fee. Still complaining?

Terms and conditions may provide that the online marketplace’s services are provided “as is” and that it will not be held liable for damages because of inaccurate content, financial damages caused by service downtime, or malware, among other events.

Listing Responsibly: SMBs and Product Information

Finally, SMBs should be aware of the online marketplace’s listing conditions. To list their products, third-party vendors generally agree to assume responsibility for the accuracy of the listing, including its description, price, and terms of the listing.

The online marketplace typically reserves the right to terminate the vendor for violating this provision.

Cookies Policies: Balancing User Experience and Compliance

A cookies policy typically provides how small blocks of data left by users when browsing will be used by the online marketplace, as well as how long they will remain on the user’s computer or mobile device.

Although a cookie can allow an online marketplace to identify users, optimize their experience and create personalized ads, users may object to them remembering things like passwords and shopping history.

Navigating Global Data Protection Laws: GDPR and CCPA

There are several state, federal and global laws and regulations that require online marketplaces to collect or process personal information and inform users how they handle the data that they collect.

These laws include the General Data Protection Regulation (GDPR) and the California Consumer Privacy Act (CCPA).

For example, the GDPR – the European Union’s primary privacy regulation – applies to online marketplaces that are either based in the EU or that collect or process personal data belonging to citizens of the EU.

The GDPR requires them to inform users about how they process the personal data they collect.

Likewise, the CCPA requires online marketplaces to maintain updated information on their websites and apps about how they treat the personal information they collect and to inform California consumers about what their rights are concerning their personal information.

Speaking of applicable regulations, on larger online marketplaces SMBs may find other sellers are offering similar or identical products. The responsibility for enforcing copyright rests with the seller, not the online marketplace, so SMBs should have their copyright protection.

Some online marketplaces have provisions providing how to report copyright infringement or state that violations should be directed to the third-party seller.

Conclusion: Successfully Selling on Online Marketplaces

In summary, an established online marketplace gives an SMB the brand, reach and consumer base that it otherwise could never access.

In exchange for that opportunity, vendors have little to no negotiating power over user agreements.

In any event, small business owners wishing to use online marketplaces like Amazon and eBay – and so many more – should review their respective user agreements to understand and comply with the applicable policies for privacy, terms and conditions, returns and refunds and cookies, among others, to see what they’re getting into, to avoid surprises, and focus on selling their products.

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