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AMAZON.COM, INC.

(AMZN)
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Amazon com : The Dark Side Of Platforms, Profiteers Of The Covid-19 Crisis

06/07/2021 | 04:11am EDT

Online scams, especially on e-commerce platforms, are sadly commonplace.

In 2018, we already talked about the abuses of certain online platforms and the means deployed by the French Direction Générale de la Concurrence, de la Consommation et de la Répression des Fraudes (DGCCRF), the General Directorate for Competition Policy, Consumer Affairs and Fraud Control of the French Ministry of the Economy, to deal with fraudulent practices on airline ticket sales or even on subscription traps.

In 2019, in a report entitled "Marketplaces, too many non-compliant and dangerous products", the DGCCRF published the results of several investigations conducted on eight popular marketplaces such as Amazon, Ebay, Cdiscount, Aliexpress or Wish.

The report denounced in particular the fact that e-commerce favored international sales of products that sometimes did not comply with European standards, or even were dangerous. Thus, after analyzing 152 products, 43% were dangerous and 24% did not comply with the regulations in force. This concerned jewelry, cosmetics, lighters, toys or even electrical garlands. In other words, two thirds of these objects should never have been sold.

This is surely one of the reasons why the French government opened negotiations with major online platform players in order to make them sign, during 2019, a charter of good conduct.

Nine sales platforms have signed this charter, including Boulanger, Cdiscount, Ebay and Fnac. We can, however, note that Amazon didn't wish to be among the signatories.

At the end of 2019, a report published by the French Ministry of the Economy already announced positive results for this charter. According to this report:

<ul
  • Contractual relations between marketplaces and sellers became more systematic;
  • The legibility of the conditions of use of online marketplaces has improved.
  • However, the onset of the health crisis and the sudden change in consumer purchasing habits (due to the closure of non-essential businesses) has led to the emergence of new fraudulent practices, likely to threaten consumer safety.

    1. The health crisis, a closely watched source of profit

    Many brands have changed their communication strategy in order to adapt to the health crisis: some wipes have suddenly become effective against bacteria AND against COVID-19, while some soap brands emphasize the effectiveness of their product against the virus.

    If taking advantage of the current situation remains legal, some have not hesitated to implement unfair - or even fraudulent - commercial practices, to generate more sales.

    On November 18, 2020, an alarming press release from the DGCCRF indicated that out of 180 hydroalcoholic gel solutions, 21 were dangerous due to insufficient alcohol content.

    We can also cite surgical masks, whose "Made in France" label was misleading as the products actually came from Asia.

    The French Ministry of the Economy reacted by increasing its controls by 40% in 2020. For instance, the Wish platform is currently under investigation for suspected misleading commercial practices.

    1. Risks for fraudsters

    Those acts are mainly punished as misleading commercial practices, defined in Section L121-2 of the French Consumer Code. These practices are numerous, but those that are most often found on platforms are commercial practices based on false or misleading claims, indications or presentations concerning one or more of the product's essential characteristics, such as its composition (as in the case of the hydroalcoholic gel with insufficient alcohol content), its origin (as for the abovementioned "made in France" masks), its properties, or even its price and, more frequently, its promotional nature.

    Section L132-2 nevertheless provides for dissuasive sanctions: 2 years' imprisonment and a €300,000 fine. This fine may also be increased, in proportion to the benefits resulting from the offence, to 10% of the average annual turnover, or 50% of the expenses incurred in implementing the practice constituting the offence.

    However, fines are rather rare, as the DGCCRF usually prefers a more educational approach. This will not be the case of the masks, where the profits linked to the extra cost that the company justified by the French origin are estimated at several million euros, and which has been transmitted to the judicial authorities according to the DGCCRF.

    Finally, it should be stressed that if fraudulent practices are spreading on certain online platforms, the Digital Services Act, a European regulation, is currently being discussed and will aim to provide a better framework for these platforms, to promote the removal of illicit content and to improve fraud detection.

    The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

    Haas Avocats
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    © Mondaq Ltd, 2021 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing

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