So far, brands on the Instagram Instagram platform have been able to tag their products in posts and lead users to transactions via links to web shops on their own websites.
The new feature “Checkout on Instagram” greatly simplifies the sales process. Users can now shop directly in the app and order goods without having to go through the company’s homepages. It could hardly be simpler: In the product presentations on the business accounts of companies, for example, users can directly select different colors, sizes and quantities, and then handle the entire purchase process via the app.
According to the company, users only need to enter the name, email address, shipping and billing address, and payment information when they first purchase through the app. All these data are then stored in the app and do not have to be laboriously re-typed in the next purchases. Even information about shipping and delivery, users receive directly as notifications in their Instagram app.
It is still unclear when the feature will be available in Europe and Germany
The feature began with 26 selected fashion and cosmetics brands, including Prada, Dior, Adidas, Nike, Zara, NYX Cosmetics and Kylie Cosmetics. It is still unclear when the feature will be available in Europe and Germany. However, with regard to the prominent partner companies of the beta phase and the enormous potential offered by the function for companies, a rapid expansion is to be expected.
Instagram currently has more than one billion users worldwide. According to company surveys from the first quarter of this year, about 130 million Instagram writers are tapping product labels on shopping posts each month. According to a study from the beginning of 2019, about 39 percent of British online shoppers aged 16 to 24 years old had already used the predecessor feature “Instagram Shopping” to buy a product that was even more complicated to handle the ordering process.
All of this data gives an idea of the enormous range of products offered by companies on Instagram and what a lucrative market they can use with the “Checkout on Instagram” function in the future. Against this background, extending the function beyond the US seems only a matter of time.
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Pitfalls and dangers
But despite all the euphoria and enjoyment of another sales channel lurk for the companies with this tool, the typical pitfalls and dangers of online trading. Here, too, in particular the current national regulations for online product distribution apply to the companies. From the companies’ point of view, it is above all the compliance with the relevant consumer protection regulations whose relevant common leitmotiv is transparency for the consumer that is relevant to the conception of the ordering process.
Since the contracts concluded via the checkout function of the app are distance selling contracts in electronic commerce, the account holder has in the processing of orders via the new feature according to §§ 312c to 312j BGB and Art. 246a to 246c EGBGB and according to the PAngV various pre-contractual information obligations to the buyers as well as to meet certain technical requirements. If he does not do so, it can result in sensitive disadvantages for him.
According to Art. 246a § 1 EGBGB, the company must inform its customers clearly and understandably, among other things, about all costs incurred and about the communication data of the seller before submitting their binding order explanation and informing them of any statutory warranty and revocation rights.
According to Art. 246a § 1 Abs. 2, Abs. 3 Introductory Act to the Civil Code (EGBGB), the entrepreneur must in particular clarify whether a right of revocation according to § § 355 Abs. 1, 312g BGB exists and if necessary on the conditions, deadlines and the Procedure for its exercise. However, as long as he does not comply with these obligations, the period of revocation, which is generally 14 days, does not commence according to § 356 Abs. 3 S. 1 BGB. In this case, according to Section 356 (3) sentence 2 BGB, the consumer can still exercise his right of withdrawal up to a maximum of twelve months and 14 days after conclusion of the contract.
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In the course of the ordering process, all costs, ie the total price of the goods, including all taxes and duties, any freight, delivery or forwarding expenses as well as other costs that can be calculated in advance, must be stated in a transparent, understandable and clear manner. This obligation results from Art. 246a § 1 Abs. 1 Nr. 4 EGBGB as well as from § 1 Abs. 1 and Abs. 2 of the Price Indication Ordinance (PAngV). If the contractor violates this, the claim to these costs is completely eliminated according to § 312e BGB. Moreover, in the case of a violation of the PAngV, there is an administrative offense, which can even be punished with a fine of up to EUR 25,000 pursuant to Section 3 (2) of the German Economic Penal Law (WiStrG).
Furthermore, according to § 312i Abs. 1 S. 1 Nr. 1 BGB technical means have to be made available to the purchaser with whose help the customer makes mistakes in entering the order data, such as the type of product, the quantity, the address data or payment information, easily recognize and correct. According to § 312j Abs. 3 BGB, the order situation must also be designed in such a way that the consumer expressly confirms that he undertakes to make a payment. If the order is placed via a button, this obligation is only fulfilled if the button is legible with nothing other than the words “order it for payment” or a corresponding clear wording. Otherwise, § 312j (4) BGB (German Civil Code) determines that no contract is concluded at all and that the entrepreneur ultimately has no claim to the respective sales proceeds.
In addition, entrepreneurs failing to comply with these requirements, a significant Abmahnrisiko. Thus, there is a danger that they will be claimed by consumer protection associations under § 2 Abs. 1, Abs. 2 injunctive relief law (UKlaG) on omission. In addition, the regulations of the PAngV are at the same time market behavior regulations within the meaning of § 3a of the Unfair Competition Act (UWG), so that their violation simultaneously constitutes a violation of the UWG, which can be warned by both competitors and consumer protection associations.
The same legal requirements apply as in the rest of online commerce
As with other sales channels, companies will also want to base their sales on the sales of their goods via the Instagram app on their sales terms and conditions (GTC). Irrespective of the question of the content of the clauses contained therein, the terms and conditions will only become part of the contract if the requirements of § 305 (2) BGB are observed.
Thereafter, it is necessary that the customer is made aware of the conclusion of the contract by a reference to them, he can take note of the terms and conditions under reasonable circumstances and agree with their validity, with a declared consent is not necessary.
If contracts are concluded with the Instagram app over the Internet, effective inclusion can be carried out in particular in such a way that the entrepreneur grants the customer the opportunity to download the terms and conditions via a clearly visible link free of charge and to store or print locally. Not required, but for reasons of evidence advisable is the Click Wrapping process, in which the customer can only make a declaration of intent after having opened and accepted the terms and conditions by means of a link referring to them.
On the other hand, if the companies do not fulfill these strict requirements when processing transactions via the “Checkout on Instagram” function, their terms and conditions pursuant to Section 305 (2) BGB will not become part of the contract and the contracts with the customers will come rather without the regular benefit of the companies designed conditions.
After all, it becomes clear that the same legal requirements apply to the processing of sales via the “Checkout on Instagram” feature as in the rest of the online trade. It is urgent for companies to use this new feature to carefully design the ordering process in accordance with applicable law so as not to experience unpleasant economic and legal surprises at the end of the day.
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About the authors: Martin Gerecke is a specialist lawyer for intellectual property rights as well as copyright and media law at CMS Germany. He advises companies and individuals in copyright, press and expression law as well as the law of new media (domain and internet law, social media, games, digital business). It assesses, protects and defends the content of publications, assists in the preservation of intellectual property rights (copyrights, trademarks, design rights) and other intellectual property, and, in disputed cases, handles litigation.
Björn Schulz is a trainee lawyer at the Hamburg office of the law firm CMS Deutschland.
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