Introduction

Following a complaint filed by an individual against Kaymu (an online shopping platform) for deceptive marketing practices, the Competition Commission conducted an enquiry and found that:

  • Kaymu had been involved in the dissemination of false and misleading information to consumers, which lacked a reasonable basis regarding the character, properties and quality of its services; and
  • these actions had resulted in Kaymu having a competitive advantage over other undertakings in the same line of business, leading to a prima facie violation of Section 10 of the Competition Act 2010, which restricts deceptive marketing practices.

Facts

Kaymu provides an online shopping platform that enables buyers and sellers to engage in and conduct transactions. The complainant relied on Kaymu's assurance that it would act as a mediator in the event of any dispute arising between buyers and third-party sellers and used Kaymu's online shopping portal to order a wristwatch through a third-party vendor. However, a different wristwatch was delivered to the complainant and Kaymu failed to take any responsibility to resolve the matter.

Kaymu's claims

Kaymu claimed that it was neither the manufacturer nor the seller of the product and that it had no responsibility to ensure the product's quality. Further, it claimed that the product's distribution, development, design, marketing and supply were not part of its customer obligations. In addition, the Kaymu website had specified that when making a purchase on the website, the buyer was entering into a contract with the seller, rather than with Kaymu.

Kaymu also stated that its website and the terms and conditions appearing therein included disclaimers discharging it from all liabilities. The disclaimer read as follows: "you will not hold Kaymu.pk responsible for other users' content, actions, or inactions, or items or information they list or post".

Kaymu had also developed a seller rating system to assist buyers in the evaluation of a seller's credibility before engaging in a transaction, which the complainant had failed to check at the time of purchase.

To provide a fair and honest buying experience for the buyer, Kaymu had also established a system in which sellers were required to create their own return policies. In the return policy section, Kaymu had clearly declared that it would only facilitate the returns process and act as a mediator. It had also clarified that it could not guarantee the return of a product by the seller and further reiterated that a buyer did not buy directly from Kaymu, but rather from the seller.

Further, Kaymu maintained that the returns section had clearly stated that "Kaymu cannot guarantee that all sellers will actually perform the requested refund or replacement. We therefore strongly recommend to buy from sellers with high ratings and positive comments".

Findings

The Competition Commission's enquiry report underlined the negligence of the complainant and Kaymu in the matter at hand and also stressed the principles to be followed by buyers, sellers and online service providers.

Complainant's negligence

As regards the complainant's negligence, the Competition Commission relied on guidelines issued by the New Zealand Commerce Commission for buying and selling online and concluded that the complainant had failed to follow the guidelines and assume the responsibility through which he might have been able to avoid the issue.

The commission noted that Kaymu's returns section had explained to buyers how to avoid fraud. It had also reminded buyers to check the seller's ratings before making any purchase, as it is a vital indicator of whether the seller is a trustworthy entity.

Further, before agreeing to proceed with a transaction, buyers should:

  • fully inspect the forum's mechanism;
  • understand the level of commitment that they are about to make; and
  • acknowledge the distribution of rights and responsibilities.

Kaymu had advised the buyer to examine the seller's rating and return policies before confirming the purchase. However, when interrogated, the complainant admitted that it had checked neither the seller's rating nor its returns policy before making the transaction. Kaymu had also mentioned on its website that in the case of a dispute, its duty was limited to acting as a mediator and that it could not guarantee the seller's compliance.

Kaymu's negligence

As regards Kaymu's negligence, the Competition Commission contended that service providers must make clear and conspicuous disclosures of their terms and conditions and other necessary information that could affect a buyer's decision-making process. In the absence of specific legislation in this regard, the Competition Commission relied on guidelines issued by the US Federal Trade Commission in relation to disclosures in digital advertising.

The Competition Commission further observed the following:

  • Links to the returns policy had existed on only a few pages of Kamyu's online shopping portal. The returns policy is one of the most important aspects of the website's rules and should have been displayed prominently, instead of being written in a small font in the top right corner of a few pages that could be easily ignored by users.
  • Repeated reminders should have been given to buyers to check Kaymu's returns policy before committing to making a purchase.
  • Kaymu had declared itself to be a mediator on its website in the event of a dispute. Relying on the definition of a 'mediator' in the Oxford English Dictionary, the commission concluded that it is the responsibility of a mediator to conclude a dispute. However, Kaymu had withdrawn from all responsibilities when a dispute arose.
  • Kaymu's buyer protection section had suggested that it invested significant time and energy into ensuring the presence of quality sellers. However, there was no proof of whether it had investigated the validity of sellers and their services as opposed to the claims that it made to convince users to trust 'Kaymu.pk' as a safe platform. When the complainant and the Competition Commission's enquiry committee had requested the seller's contact information, Kaymu had failed to provide it.
  • The promises made and the impression given by Kaymu on its website had led consumers to believe that it was a safe and cooperative forum before they reached the terms and conditions section – provided that consumers chose to go through such section. However, in its terms and conditions, Kaymu had abrogated all responsibility. This indicates that Kaymu had had no intention of resolving any dispute, as it should have presented the information clearly on its website instead of initially presenting the website as helpful and then hiding the real information in the dense text of its terms and conditions. As such, in accordance with the misleading actions specified under the UK Consumer Protection from Unfair Trading Regulations 2008, Kaymu's conduct, along with the contradictory promises made by it, could be construed as a misleading action.
  • Kaymu received a share of the profits from sales through its online shopping platform and therefore should not be allowed to separate itself completely from the responsibility of who sells what on its platform. Further, Kaymu's conduct fell under the definition of 'assisting others', as relied on by the Federal Trade Commission, and therefore, the onus of appropriate dispute resolution remained on Kaymu.

In view of the above, the Competition Commission decided that Kaymu had been involved in deceptive marketing practices and has accordingly initiated proceedings against it.

For further information on this topic please contact Sanaya Vachha at Vellani & Vellani by telephone (+92 21 3580 1000) or email (sanaya.vachha@vellani.com). The Vellani & Vellani website can be accessed at www.vellani.com.

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