Does Lebanese Law consider online retailers to be sellers or service providers?
The answer to this question helps determine liability.
‘Shopping made easy’ is almost the slogan of every online market place. Indeed, online platforms have made the act of shopping as wink is to an eye, yet even the softest rose has thorns.
As a matter of fact, the abundance of online retailing has stretched its diameters widely to include vast items, but have further compounded in recent times especially after the global pandemic. They have transformed the perception of commerce and enhanced its notion. Legislation lags behind market innovation, causing disputes.
It is deemed obvious that laws are never applicable for every possible scenario, an exception might always pop up. However, it is crucial that recent matters be regulated especially if its madly endorsed by the public. Online markets have been the subject of public scrutiny ever since the lockdown, thereby leaving numerous issues dysregulated. For instance, to identify the ability to sue e-tailers for purported liability of defective products, one shall determine the realm of online marketplace and its scope liability. Are they virtual stores? Or more like a channel that allows the flow of information between parties? 1
Lebanese Legislative Framework
Legislators should positively respond to rapid technological developments by passing convenient laws comprising of relative provisions to the matter per se. Had it been regulated with a specific law, it would have prevailed. However, the case is otherwise, thus, the general civil laws – that are the Lebanese Obligations & Contract Code and Consumer Protection Law- shall plea.
In fact, article 2 of the Lebanese Consumer Protection Law has defined a consumer as one who buys, rents, uses, or benefits from a good/ service for non-commercial reasons. Moreover, the so called ‘professional’ is defined as a physical or legal entity…that distributes, sells, or rents goods/ services. It can be deduced that professionals include retailers, distributors, suppliers, merchants and so forth. Therefore, professionals are the persons supposed to comply with the provisions of this law, where as consumers are the group under protection.
The likelihood of online retailers being held liable under Lebanese law before end users for defective products (purchased form the formers’ platforms) is fully dependent on whether online retailers are classified as ‘sellers’ or mere service providers, thereby requiring a law that clarifies the issue in particular to provide justice and further protection to victim consumers.
The Case for E-Tailers being Sellers
Despite the fact that neither a law nor a court ruling has yet categorized online retailers as ‘sellers’, tracing the legal rationale behind the concept of a seller is inevitable in this regard. Under Lebanese Obligations & Contract Code stipulates a seller is one who shall assign their possession and/or rights in an item sold to the buyer. (Section 2, Article 337, Lebanese Obligations & Contract Code). This strictly implies that the seller shall have possession or at least hands on the item sold in order to transfer so to the buyer. In fact, this is where the nemo dat rule is perfectly manifested. Therefore, a plaintiff can argue, as the court held in State Farm Fire & Cas. Co. v Amazon.com Servs.,2 that the online retailer exercised sufficient control over the defective product to be considered a member of the product distribution chain (i.e. retailer or distributor). This makes online marketplaces sellers and thus liable before injured customers for alleged defects in products sold on their online platforms.
Defect product liability, in this context, is underpinned by the concept of breach of warranty. Both the Consumer Protection Law and the Lebanese Obligations & Contract Code ensure that a seller/professional is culpable before the buyer/consumer for breach of warranty when the product sold mismatches the title/ quality assured by the seller, thereby being defective (Article 29, Section 1, Consumer Protection Law; Article 442, Lebanese Obligations & Contract Code).
Further to the afore pattern, online marketplaces often offer a service of processing and delivering a vendor’s product to the shopper once it’s purchased. This service is referred to as fulfilment providing where the supplier’s products are placed in fulfilment centres ready to be shipped upon a shopper’s order. For instance, amazon.com has Fulfillment by Amazon and so does FedEx (FedEx Fulfillment). This suggests that the online marketplace has taken possession of the product. In this case, it is seemingly impossible for the defendant to escape liability whenever the defective product is said to be stored in the former’s fulfillment centre where the former had full ‘custody’ of the ware.
The Case for E-Tailers being Service Providers
Verily, the law might signify a narrowed compass by confining ‘professionals’ to entities that distributes, sells, or rents goods for commercial purposes. However, the intent of the legislator is rather directed toward the general idea of ‘inserting’ a product into the general market provided that it falls within the public scope.
This gives rise to an important rhetoric that assists in determining the role of e-tailers. Do online marketplaces actually ‘thrust’ products in the market, in the stream of commerce or are these products already present in the market and the latter simply encompass the commercial transaction by providing a platform that hosts products of third party merchants?
Online retailers can argue that they are merely service providers. They solely are information conduits that facilitate the surge of commerce. Unlike sellers, they are not directly involved in the business of selling merchandise but rather make it ‘a walk into the park’ for customers to access information about the product (e.g. its picture and features) and purchase it from its actual vendor. Just like advertising agencies, online retailers enable the introduction of products and services –that are actually in the market already- to the general public and still not considered as the sellers.
Albeit, a service provider can also ‘sell’ products yet remain merely a service provider. Had the latter been engaged in the matter of selling in a subsidiary or secondary manner to providing services, service providers would continue to preserve their description. For instance, a clothing store does produce its own paper bags, yet every time you shop at their store you walk out with a couple bags. However, no one casually walks into their store to buy paper bags. This production is a minor and supplementary service to selling clothes. The rationale of deciding whether or not an entity is a seller or a service provider lies in its purpose and dominant activity but rather its major activity vs ancillary services it provides.
Furthermore, a defendant can simply dodge liability by proving that as an online retailer, the defendant has no title to the defective product nor physical possession to it. The products are entirely the vendor’s and the online retailer solely presents it on its platform.
To avoid such clashes, prestigious and professional e-markets often resort to declaring irresponsibility and no warranties for vendor’s products in their terms and conditions policy. For example, Amazon includes a ‘Disclaimer of Warranties and Limitation of Liability’ on their ‘Conditions of Use’ which is a kind of waiver a user must agree upon to have access to purchasing via Amazon.
The significance of limpid laws that tackles this issue shall be notable in the consistency of rulings, for courts, injured consumers, and e-tailers will continuously grapple before the absence of a collective rule that defines, categorizes and decides the scope of liability for defective products of online retailers and marketplaces.
Moreover, if the public tendency is directed towards considering e-tailers as sellers and thus are liable before injured consumers then the latter are left with no legal protection in a world where online markets are a need, for they dominate simple life aspects as grocery shopping.
Speaking for e-tailers, courts are given a margin of discretion to rule against e-tailers in the absence of a law that might as well consider the latter a service provider, a channel between a shopper and a seller. This vacancy might possibly be a crack in the shield that permits abuse towards e-tailers.
Had it been declared by law, all the controversies would have vanished in a heartbeat, yet legislators haven’t dusted their commitment to pass such law. Until then, the tussle will continue to be.