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Marketplaces and their ability to facilitate high volume business means they are at an even higher level of legal risk.
With so many terms and relationships to manage, it’s hard to keep everything straight. In fact, online marketplaces are generally at a higher risk of class action lawsuits because of the sheer volume of users they serve daily. Without a streamlined way of managing terms, marketplaces can easily find themselves in hot water.
Online marketplaces need to be able to maintain records of terms acceptance if they want to be able to enforce their terms in court. Also, with the many changes in data privacy regulations and laws that affect businesses, marketplaces need to be able to meet the mandates they are served. A legal-specific content management system will allow legal to maintain control (as said above) and adjust to these changes in landscape as they occur.
Recently, several data privacy regulations have passed in the states, EU, and elsewhere. Each is designed to protect the privacy of its citizen consumers. These regulations require businesses to be more forthcoming about their data collection practices, including by requiring privacy policies and mandating the ways they are presented to users.
In 2018, the General Data Privacy Regulation was enacted in the EU. It required all businesses transacting with EU citizens needed to meet certain criteria that protects their privacy. Specifically, a user must provide clear and unequivocal consent to having their information processed and used in the way the company intends to. The consent must be documented and tracked, especially in case the customer comes back later and withdraw consent. Using a legal center can help manage these consents.
In January 2020, the California Consumer Privacy Act was passed. Like the GDPR, it required businesses transacting with citizen consumers to have certain practices in place to protect the data privacy of consumers. One example of how legal centers can help with compliance is the “Do Not Sell My Information” button that companies must present to customers to allow them to opt out of having their information sold. Companies must be able to retain that information and to track and honor the requests of their users. A legal center can be used to present the opt out button and manage the requests in compliance with the CCPA regulation.
Not only do businesses need to track acceptance to their agreements, they also need to be able to track versions. As these regulations are increasingly enacted in certain states and countries, businesses need to be able to prove that their terms were updated to include the necessary mandates.
Even more, while adhering to these regulations, businesses have to be able to prove acceptance of updated terms. When a marketplace’s terms are scattered all over their digital assets, this is no easy task. In particular, as marketplaces have globalized terms and render conditional portions based on where people are accepting them, version control and excellent recordkeeping are mandatory.
More and more, storing your agreements in a centralized location makes sense. All updates can be pushed at once, and versions can be tracked and managed centrally.
Specifically, Dillon v. BMO Harris Bank showcases how crucial back-end records and excellent recordkeeping - specifically by a third-party vendor - are to the enforceability of your terms. BMO Harris tried to compel arbitration, relying on a provision contained in an online loan agreement.
However, while BMO Harris submitted a declaration describing the online application process and argued why the agreements needed arbitration, the court argued that the evidence presented was not sufficient.
The court argued: “When one of the contracting parties has exclusive control of the electronic record, which is the case in many consumer online transactions, that party is in a position to produce a document that meets its current preferences and needs. Even absent fraud, there is risk of error in the production of a document from the bowels of an electronic record-keeping system, which may include agreements whose terms and electronic click-through procedures vary over time.” (Emphasis ours)
A legal center from a third-party vendor could have helped BMO Harris avoid this judgement in court and have their terms enforced.
To learn more about how a legal center can help your legal team keep apace with the many changes in regulations, check out our eBook: Guide to Legal Content Management Systems for Online Marketplaces.