UKFT associate member Fox Williams takes a look at the legal issues and commercial benefits for brands using digital concessions.

Taking a concession on an online platform has become a way for a brand to reach new customers, whilst retaining control over price and presentation. In addition, the digital concession is a flexible model, as the brand and online platform can decide how much involvement each of them has in the customer order process.

The legal issues concerning digital concessions depend on the law governing the agreement between the online platform and the brand. As a result, determining the governing law of the agreement must be the starting point for any brand considering an agreement sent to it by an online platform.

The online platform may be based in and focused on another country, and indeed may have been chosen by the brand for that very reason, as the brand wishes to gain exposure to international customers. Whilst the brand should press for its own country’s law to govern the agreement, whether this attempt will be successful will come down to the brand’s negotiating strength.

However, a brand which accepts an agreement governed by another country’s laws is also likely to be accepting that all disputes will be heard by that country’s courts. Brands should be aware that in this situation if a dispute arises with the online platform, they could be faced with having to pursue or defend legal proceedings in another country under an unfamiliar legal system.

Where English law applies, if the online platform is to handle fulfilment of orders, then stock will need be transferred by the brand to the online platform’s distribution centre.

As a result, it will be necessary for the agreement between the online platform and the brand to address the issue of when ownership of the stock and the attendant risk of loss or damage will pass from the brand to the online platform.

Whilst ownership of the product will usually transfer to the online platform immediately before the product is sold to the end customer, it will be important to the brand that risk in the product transfers at the latest when the product reaches the online platform’s distribution centre. The brand will also want the agreement to contain robust obligations on the online platform to insure and take care of the products whilst they are held at the online platform’s distribution centre prior to their sale to the end customer.

Fox Williams has also outlined the legal issues relating to:

• Fulfilment of orders by the brand
• Ensuring the smooth operation of the online platform’s website
• Reporting on sales and stock levels:
• Maintaining stock levels
• Intellectual property right protections for brands
• Personal data
• Termination

For full details, read more here.