Sat, Jan. 05, 2008

Organism Liability of Online Vendors

CK - Washington.   Contributory liability for acts of others has developed into a headache also for so-called affiliate marketing programs on the Internet. In such systems, a vendor contracts with an aggregator that provides access to websites of unrelated parties with whom the aggregator contracts for advertising space, unless the vendor contracts directly with a web space provider, such as a blogger.

The space providers receive from vendors or aggregators payment for sales, leads or clicks on ads generated on their sites. In Germany, the vendor is usually known as the merchant and the referrer website where the ad is placed and where referrals to the vendor website originate is known as the affiliate, whether or not the contractual arrangement provides for an affiliation in a legal sense.

An important issue for vendors is whether they remain insulated from liability for illegal content or omitted or insufficient disclosures on referrers' websites where vendors' ads appear. An overview of recent case law on the issue exists at the Affiliate und Recht website. Its operator relates a new decision on the Dr-Bahr website that holds the vendor civilly liable for infringements on referrer sites.

On December 12, 2007, the Potsdam district court held in the matter Az. 52 O 67/07 that the vendor is not insulated from liability for violations of the unfair competition statute, UWG, by the referrer. The violation in that matter consists of a privacy statement that the court found insufficient under German data protection law. The vendor was unable to defeat the result with general terms and conditions requiring referrers' compliance with the law.

The court dismissed the vendor's argument that it could not practically screen every website on which its ads appear. The court considers the space providers components of the vendor's distribution organism for whose acts and omissions the vendor is responsible. The organism theory obviates the need to examine whether the vendor is liable under theories of direct or indirect liability, the court explained. The reader wonders whether a newspaper advertisement would have produced the same result.

Decisions on contributory, indirect, secondary and vicarious liability, now enhanced by organism liability, validate suggestions frequently expressed in Germany that online activities be moved to offshore locales in order to avoid oppressive regulation. Generally, German law is no worse than others, and in some ways, favorable to business, but some courts display ignorance and fear of Internet matters that they resort to abstruse conclusions and remedies--especially in the unfair competition and consumer protection areas--which effectively discourage Internet business and innovation.

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