E-Commerce Online Platform’s Liability: Payment System Intermediation

Recently, Division III of the Court of Appeals in Civil and Commercial Matters of the Province of Jujuy issued a decision upholding an e-commerce online platform’s liability for failing to release payment after the purchaser has effectively received the goods (Court of Appeals in Civil and Commercial Matters of the Province of Jujuy, Division III, “Ferreiro Pablo Alberto v. Mercado Libre S.R.L.”, Case C-31375-2012, September 15, 2016).

The facts of the case are as follows: Plaintiff bought two cellphones from a third party using the defendant’s e-commerce platform at www.mercadolibre.com.ar. It also used the defendant’s own payment solution called “Mercado Pago” which allows the parties to place the funds in escrow until the product reaches the buyer.

On the basis that plaintiff had not received the agreed cellphones, the plaintiff notified the defendant in order for the funds not to be released. The defendant initiated an internal conflict resolution mechanism and decided in favor of the seller, releasing the funds.

After going through administrative proceedings before Consumer Protection authorities, the plaintiff initiated court action against defendant seeking (i) reimbursement of AR$ 16,100 (price of the cellphones) plus AR$ 2,585, and interest; (ii) moral damages and (iii) punitive damages on the basis of Consumer Protection Law No. 24,240 (“Consumer Protection Law”).

In turn, Mercado Libre filed a reply and held (i) that the plaintiff agreed to the dispute resolution process and  be bound by the decision (even if it were not favorable); (ii) that after the dispute resolution process the plaintiff would inform that same had lost interest in the purchase of the cellphones; (iii) that it is not responsible because of its neutral role as a virtual market (it claimed its platform is merely a virtual platform that allowed third- party users to convene and carry out interactions); and (iv) that the plaintiff failed to use a  safer payment procedure offered by the platform.

After reviewing the case, the Court of Appeals accepted the plaintiff’s claim, assigning judicial costs to the defendant.

In doing so, the Court highlighted that the relationship between the plaintiff and Mercado Libre was a consumer-provider relationship ruled by the Consumer Protection Law. In that connection, the Court stated that Mercado Libre provided an e-commerce service to both the plaintiff and the third party seller in respect to which the defendant earned a commission as an intermediary.

Moreover, the Court affirmed that payment service offered by the defendant was provided negligently, as it released payment without any certainty that the buyer had effectively received the goods he or she had purchased.

On that basis, the Court further argued that the defendant’s argument that it is merely a virtual platform connecting sellers and buyers is not acceptable and is contrary to the users’ trust in the service, including the implied assurance of security. 

On that basis, the Court accepted the claim and condemned the defendant to pay (i) AR$ 28,271 (including interest) as actual damages; (ii) AR$ 40,000 as punitive damages (iii) AR$ 15,000 as moral damages; and (iv) AR$ 4,122.

It is worth noting that the Court of Appeals resolved the case without any mention or analysis of the Supreme Court ISP liability landmark decision in “Rodríguez, María Belén”, which basically established that ISPs are liable if, on the basis of a fault-standard analysis, they are made aware of a possible infringement and they fail to act diligently.