What are the legal challenges when selling cosmetics on marketplaces?

What exactly is a marketplace?

Marketplaces are part of digital platforms and usually refer to platforms that bring together vendors and buyers for the sale of a product. In this respect, marketplaces are a great opportunity for vendors to reach new customers.

These platforms should not be mistaken for multi-brand e-commerce sites, which do not act as intermediaries but are themselves, sellers of the products on offer. Like Amazon, some sites do both, such as Go Ethnyk or Feelunique, which offer both the distribution of cosmetics and a connection between brands and buyers.

Is it important to make a distinction between the two models? Yes, it is certainly, because their respective liability regimes are not at all the same, and the consequences of this qualification, if we take the example of product conformity, are far from trivial in practice, both for operators and consumers.

The marketplaces’ specific legal regime

Indeed, although marketplaces are subject to a certain number of obligations that are specific to their activity as online platforms (particularly in terms of transparency and fair trading), they do not operate as vendors and, as intermediaries, benefit from a limited liability regime that excludes their responsibility (civil or criminal) in the event, products not complying with regulations, were sold on their platform [1].

However, this limited liability regime, which also allows them not to be subject to a general obligation to control contents accessible on their platforms, is subject to conditions. In particular, it implies that they should not be aware of the illicit nature of products and that once they have been informed of their illicit nature, they should immediately remove them from their platform. Above all, this regime is associated with their status as a simple "host", which only passively stores and makes available to the public the offers of vendors, without having any "active role" in the sale, or any control over the products. They are otherwise considered as "publishers" and may be subject to civil or criminal proceedings if a user of their platform sells an illegal product.

The stakes surrounding the concrete role of marketplaces are therefore high, and a string of court decisions exists for the biggest ones (eBay, Alibaba and Cdiscount) to outline the framework that must not be breached to avoid falling on the dark side of the platform...

On the consumer side, the issue of product safety

This is something that has been acknowledged for a long time now: checks by the authorities (in particular the DGCCRF in France) on marketplaces reveal very high rates of product non-compliances- or even dangerousness -, and 2020 has only accentuated the trend. In this light, cosmetics are regularly among the products with the highest rates of non-compliance.

As a matter of fact, large marketplaces offer direct access to the European market to many vendors located outside the EU. But for these vendors, complying with the particularly strict European regulations does not necessarily stand as a priority. As a result, there is, on these platforms, a whole range of products that do not meet the same standards as European products (particularly concerning the composition, claims or the designation of a Responsible Person based in Europe), some of which are dangerous for consumers.

But for the authorities to act, they need access to the vendors. Although contact details of these vendors are compulsory on the marketplaces, they often do not enable the national authorities to contact the infringing vendors, who are established on the other side of the world (and in countries not always willing to cooperate with the European authorities).

A difficult balance to strike

For the authorities, this is a huge challenge: their only interlocutor is most of the time the marketplaces which, in principle, only have a limited responsibility regarding these non-compliances and, even if they comply with their obligations to withdraw from sale any product reported as non-compliant, the number of products on sale is such that the resources of the authorities are not sufficient to control the market.

Relations, therefore, fluctuate between power struggle and cooperation and, despite announcements from both Brussels and Paris on new and increasingly restrictive regulations, it is difficult to strike a balance between the platforms’ responsibility, which cannot go too far without jeopardising the system, and the need to protect the interests and health of European consumers.

In any case, caution is required for any (current or future) marketplace operator, to clearly define his role and interventions in the vendor-buyer relationship. And we can only recommend that the operator be well assisted, because, beyond the question of product safety, many other regulatory constraints will inevitably have a direct impact on this model, such as the new rules on taxation or those relating to the circular economy resulting from the AGEC Law [2].