Did you hear what happened to Zappos.com – one of the most successful websites in the world? Have you made the same mistake with your Website Disclaimer as they did?
In a recent US case Re Zappos.com (Sept 2012), there was a security breach by a hacker which resulted in Zappos being sued. Zappos wanted to arbitrate in accordance with their Terms and Conditions to save costs, rather than go to court.
But it was argued that their Terms and Conditions were invalid as they had:
- No user agreement with their customers, and
- No ‘click through agreement’ for the Terms and Conditions (where the requirement to arbitrate prior to going to court was an agreed procedure).
The startling result of this case is that the US court held that you cannot assume that users agree to your Terms and Conditions when they are buried in your website and there is no requirement to read them. In the Zappos case, the links to the Terms and Conditions were at the bottom of every web page – as is the standard for the majority of website businesses.
This case is an unusual and disconcerting potential precedent for all website and online business owners. It is basically stating a new principle that all visitors need to agree to Terms and Conditions before entering a site. In practice, it is not only unlikely they will actually read the Terms but is also a barrier to entry and doing business for all websites!
Past attempts to require active visitor agreement …
In the UK, they interpreted a recent EU directive on ‘cookies’ as requiring all visitors to a website to agree to accept ‘cookies’ in order to view the website.
Yet when the date of final compliance for all online businesses arrived in the UK, they realized this was not a real and commercial option for online businesses – plus they were the only EU country that interpreted the new regulations this strictly!
The result? The UK retracted the requirement to have visitors actively agree to ‘cookies’ and it’s now just a notification rather than active visitor acknowledgement.
But wait, there’s more …
As if that was not enough, US courts are now hinting that online businesses cannot state that their Terms and Conditions are “subject to change from time to time” but will require existing customers to re-read and accept any new Terms and Conditions.
This standard is very onerous and in practice would mean almost all website Terms and Conditions are considered potentially unenforceable.
One wonders if this is all another “shot across the bows” at Amazon, the owner of Zappos.com. Amazon has been under fire for “evading” sales taxes in various US States and have been forced to close distribution warehouses and discontinue affiliate relationships in order to keep their low prices. State Governments argue Amazon should be contributing more, particularly given the size of the business. And then maybe existing “bricks and mortar” businesses – under pressure with the slow economy – are lobbying to put pressure on Amazon and level the playing field.
Will Australia follow the US approach?
This US approach to online business and requirement for Terms and Conditions to be actively agreed to by visitors is not commercial and un-workable for online businesses. It will be seen as an impediment to business, just like the UK ‘cookies’ requirement, and if enforced, ensure online businesses move out of the US and set up elsewhere.
In addition, it is next to impossible to require any updates to Terms (often a requirement due to legislative changes) to be actively agreed and acknowledged by existing (or former) visitors and customers, as the case decision suggests. If you, as an online business owner, were to send out updates to any of your Terms and Conditions, how likely would it be that your customers would respond and agree?
Will Australia move in this direction? Its unlikely, in my view, that this approach is sustainable or that it will even be upheld in the US. It is not realistic contractual behaviour and it is unlikely to be followed by other courts or countries. Online business is bigger than ever and besides, no one goes into a physical store to agree to Terms before they shop, so why make that a condition of buying online?
How to protect your online business
One thing that you can do is check your Website Disclaimer and make sure that it has a clause stating that any visitor continuing to browse your website automatically agrees to your Terms and Conditions. Of course, here at Legal123, our Website Disclaimer template is up-to-date and has this provision. Why not update your Disclaimer and make sure you’re protected.
