For the wheel’s still in spin – the changing law on online marketplace liability for third-party products in the EU

For the wheel’s still in spin
And there’s no tellin’ who that it’s namin’.
For the loser now
Will be later to win
For the times they are a-changin

Dylan’s famous lyrics were quoted by Steve Jobs when he unveiled the Macintosh in 1984. (Folklore.org – the original Macintosh) Yet, these timeless lyrics could also foreshadow the evolving role of online marketplaces in product liability, as the platform winners start to lose in the courts.

One of the rapidly changing areas in eCommerce law is the liability of online marketplaces for 3rd party products sold online. A recent ground-breaking decision by the Court of Justice of the European Union (CJEU) in December last year may shift the current understanding of online marketplace liability when dealing with intellectual property rights infringement.

The case concerned third-party sellers offering counterfeit Christian Louboutin shoes with the famous trademark-protected red sole through Amazon’s online marketplace. Louboutin alleged that Amazon was advertising the shoes without the brand’s consent. The French designer also claimed that Amazon was storing, organising and facilitating the delivery of the products to customers, as well as dealing with questions submitted by consumers. Amazon argued that it was ‘only’ the operator of the online marketplace and as such, could not be responsible for the third-party products advertised.

The CJEU, in two joined referrals (judgment of 22 December 2022, cases C-148/21 und C-184/21) ruled that online marketplaces can, in theory, be held be liable for trademark infringement if an average consumer, when looking at the ad, could establish a link between the Louboutin trademark in question and the services provided by the marketplace. In other words, in cases where the information displayed give a reasonably informed user the impression that the marketplace is selling the products directly. For this purpose, the CJEU’s decision was based on the following elements:

• the Amazon logo was used with both the third-party products and with its own products;
• Amazon advertised third-party products by including labels such as “bestseller”, “most frequently requested” or “most frequently given as a gift” with no distinction as to their origin; and
• Amazon provided related services such as customer queries, shipping, and handling.

As a result, the average consumer may end up with the impression that the online marketplace (Amazon) is itself offering the third-party products, as they don’t have enough elements to conclude that the products are actually sold by a third-party.

It’s important to note that the CJEU did not issue a final judgment on Amazon’s liability. The decision returns to the lower courts in Belgium and Luxembourg to proceed with a final ruling. Still, the court clarified the elements that should be considered when dealing with online marketplaces’ liability for third-party products sold on their platform. This new ruling also means that trademark owners may now claim damages directly from the platform for trademark infringements in some instances.

The times, they are a-changin’.

One of the cornerstones of digital regulation, the EU’s e-Commerce Directive, does not consider online marketplaces liable for third-party products sold on its platform so long as they do not have actual knowledge of the illegal activity or the ability to control it. But a lot has changed in 20 years.

Recent EU cases have challenged the directive. In December 2020, the French Court of Cassation ruled that Amazon was liable for defective third-party products sold in its marketplace. The court stated that Amazon had a duty of care towards its customers, which it had failed to fulfil. German courts in 2021 ruled that online platforms had a legal obligation to verify the identity of the seller and the safety of the products sold. These rulings confirm the swing of the EU courts to hold such platforms liable when they have active control over third-party offerings.

Key Takeaways

The recent ruling hinged on consumer perception and advertising. It’s not always clear to the average consumer whether a product is offered by a third party or the platform itself. In the Louboutin case, the product was advertised identically to Amazon’s own products without any distinction to its origin. Online platforms may face liability if the average consumer can’t distinguish the separate origin of the product or if it’s used in the platform’s commercial communication. National courts must now interpret how consumer uncertainty will apply to specific cases.

Transparency is key. Platform operators should clearly note the origin of third-party products offered and advertised, particularly if they offer their own products. Trademark infringement is now a business risk that platform operators need to mitigate going forward.

Conclusion

The liability of online marketplaces for third-party products sold on their platform is an evolving issue. The latest court rulings show a shift to holding the platforms accountable for the products sold on their platform when they play an active commercial role, and the products are indistinguishable from their own product offerings.

For more information on how Logan & Partners can help you with ecommerce issues, including how to mitigate your liability, please contact Isadora Werneck and schedule a free 20-minute consultation.

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