Companies
Watchdog forces Jumia to be liable for defective goods
Monday February 27 2023
A Jumia outlet shop at Emperor Plaza in Nairobi. FILE PHOTO | NMG
E-commerce firm Jumia will now be liable for the safety and quality of products sold on its platform by third-party merchants after the competition watchdog in the Common Market for Eastern and Southern Africa (Comesa) forced it to overhaul its terms and conditions.
The Comesa Competition Commission, which has been investigating the conduct of Jumia Group since September 2021, has now forced Jumia to make the changes in a move aimed at protecting consumers.
The watchdog found that Jumia had excluded itself from being party to the contract for sale or purchase between customers and its agents, effectively shielding the e-commerce firm from any liability arising from the transactions.
Product liability cases have dogged e-commerce firms, including Amazon, in recent years as they turned their stores into an online bazaar fuelled by millions of third-party vendors.
The e-commerce firms have always held that they are not legally responsible for defective products sold by third-party merchants on their sites.
The Comesa settlement could force Jumia to recall defective and unsafe products sold by third-party agents.
“The Commission’s observation was that Jumia was dissociating itself from the transaction when in an actual transaction the consumer deals only with Jumia, in that it is the one that receives the orders, payments and delivers on behalf of the seller,” said the Commission.
Jumia offers e-commerce services through a marketplace and first-party sales, food delivery, logistics services as well as payment services through its fintech JumiaPay.
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The watchdog noted that Jumia was, in some cases, not providing the consumer with any documents that connected the transaction to the third party as the seller.
About 90 percent of the items sold on the Jumia platform in 2021 were offered by third-party sellers.
Now Jumia, which has a presence in 23 countries that fall under Comesa, including Kenya, Uganda, Egypt and Tunisia, will be held responsible when customers cannot trace the vendors.
“Jumia was cooperative and in compliance with the Commission’s recommendations, reviewed its terms and conditions to the Commission’s satisfaction,” said the watchdog.
Jumia says it has 8.4 million active customers in Africa, with over four million customers in Kenya alone, making it one of its largest markets that are served by over 100,000 sellers.
Jumia Africa’s gross merchandise value – the value of goods sold via its e-commerce platform— was at $1.05 billion (Sh132.9 billion) last year as it processed 38.9 million orders.
About 40 percent of Jumia sellers in Kenya make more than Sh50,000 a month, according to the information available on the Jumia Kenya website.
Jumia has agreed to start disclosing to customers details such as the name, location and contact of the entity to be served for legal purposes in case of a dispute and to also be directly liable if the vendor cannot be traced.
“Where the seller cannot be traced in the case of a dispute, Jumia shall be liable as there is a legitimate expectation by consumers that Jumia should have adequate terms and conditions for engaging the sellers,” says the Commission.
Online marketplaces in general are known to have a high risk for scammers, counterfeiters and products that are misrepresented especially where they rely on third parties as suppliers.
Jumia in its 2019 prospectus, which led to the firm’s listing on the New York Stock Exchange, said it was hard for it to police its third-party vendors and would in future have no grounds to stop litigation over product liability claims.
“As the goods offered through our marketplace are manufactured by third parties, we have only limited control over the quality of these goods,” Jumia said in the 2019 IPO prospectus.
“We cannot always effectively prevent our sellers from selling harmful or defective goods, which could cause death, disease or injury to our consumers or damage their property.”
The problem of quality control has affected other online shops as well.
Safaricom in November 2019 announced a reduction in the number of products available on its e-commerce platform, Masoko, and cut ties with several vendors citing quality concerns. It now stocks mobile phones and accessories only.
Jumia has also had to amend its terms and conditions to reflect that where it is the seller, they are a party to the contract of sale and “therefore liable if the product is not fit for the purpose.”
The firm has further committed to ensuring information posted on the platform is complete, accurate and up-to-date and that customers who demonstrate that they have relied on wrong information to purchase any item can return it.
“Any person affected by the inaccuracy of the information published on the platform can return the product to the extent that it is affected by the inaccurate information that was bought through the platform,” states the Commission.
The Comesa commission also took issue with Jumia’s return policy which allows consumers only 15 days for the Jumia Mall platform, and seven days for Jumia Express and Global platforms to return defective goods.
The watchdog considered the return policy as unfavourable to Jumia customers, especially for defective products which may manifest after the period provided. No variation to the policy was, however, ordered.
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Jumia has also committed that should it ever want to shut down the platform for reasons not relating to force majeure, it will give a public notice at least 15 days prior to the decision.
The firm will then have to offer clear guidance on the way forward for consumers who will have pending transactions on the platform or other existing liabilities at the point of shutting down.
