Retailer fined over dropshipping disclosure failings

The action taken by the Authority for Consumers and Markets (ACM) comes after previous warnings by the regulator about consumer law obligations arising in relation to dropshipping, according to Amsterdam-based technology law expert Nienke Kingma of Pinsent Masons.

Dropshipping is a term used to describe when a retailer sells products they themselves do not keep in stock but which are instead supplied to customers directly by third parties, usually manufacturers in other countries. In recent years, it has become increasingly common for goods made in China to be sold to European consumers via dropshipping arrangements. There is no law against dropshipping, but a series of disclosure obligations arise under EU consumer laws where that operating model is practised.

In this case, the ACM took action against GT Ecom after it found that consumers were not sufficiently informed about the dropshipping arrangements in place when buying goods from a German website it owned, wolffashion.de. The ACM collaborated with regulators in Germany to investigate and enforce against the failings, which the Dutch regulator said the company had now corrected.

The ACM said: “The fact that the products came from China and also had to be returned to China had not been mentioned on the website in a clear and easy-to-understand manner. This is required however, as this information is important to consumers. With online sales in particular, companies must inform consumers in a clear and timely manner to prevent any false expectations and, consequently, any disappointments.”

Kingma highlighted aspects of the ACM’s ruling which suggest that retailers need to prominently display information about dropshipping arrangements to consumers.

In this case, information confirming that dropshipping would be the method of delivery was provided to consumers on wolffashion.de – but only if they navigated a drop-down menu and actively searched for the information on the product page. Similarly, consumers could access information confirming the return address – but only by clicking an additional link and then entering the product’s name. These disclosures were not considered to meet the consumer law requirements by the ACM.

Kingma said: “Online dropshipping is allowed, but web shops need to be very clear about certain information about delivery and returns. In case of dropshipping from China, consumers need to be informed about the fact that a China-based party directly delivers the product to the consumer and that the return address is in China as well, before the purchase is made.”

“Last year, the ACM published its concerns related to dropshipping. The ACM received lots of dropshipping-related complaints. Now, this case shows that the associated online consumer protection regime is actually being enforced,” she said.