The Liability of Intermediary Online Auction Sites

Chapter 7
The Liability of Intermediary Online Auction Sites

Considering intermediary online auction sites liable for the activity of third parties and the goods sold on their sites seems a convenient way of protecting consumers. For consumers this could mean seeking damages or other remedies directly against the intermediary (which could also include administrative or criminal sanctions), rather than against or as well as the seller for products bought on the intermediary website. The advantages here are that the financial might of the intermediary is likely to be far superior to any of its sellers and its identity and location readily identifiable, therefore simplifying proceedings.¹

This chapter explores how the liability of online auction intermediary platforms can be engaged. It looks at the evolution of case law on the subject matter. In particular, it focusses on the decision in L’Oréal v eBay,² which marks a turning point in the way liability is evaluated. This chapter explains how the test devised by the CJEU to assess liability is to be applied to intermediary auction platforms.³ I argue that online auction platforms’ liability can feasibly be extended to areas beyond intellectual property violations and encompass consumer law. As a result, online auction platforms will have to behave more responsibly if they are to avoid liability for third party activity on their site.

1 Rationale for Engaging the Liability of Online Auction Intermediaries

For many, the debate is not about whether or not intermediary online auction sites ought to be liable, but rather to what degree they should shoulder liability. This is a shift from previous perceptions of intermediary liability. In order to encourage the development of the internet, laws were first adopted offering a shield against liability. The reason is that it was feared that if internet service providers (ISPs) were overly burdened with liability for the third party content they carried, development would be hampered. Liability would mean increased running costs passed on to users or smaller profit margins⁴ at a time when most internet service providers were not even profitable. In fact, ‘since the promotion of e-commerce and the information society in Europe depended on a reliable and expanding Internet infrastructure, an immunity regime was in the public interest’.⁵ In the EU, Directive 2000/31/EC of 8 June 2000 on Electronic Commerce (ECD)⁶ was adopted to offer protection from liability for ‘mere conduit’,⁷ caching⁸ and hosting activities⁹ respectively under Articles 12, 13 and 14. The liability of online auction sites is primarily concerned with the liability of a host under Article 14, and it is on this provision that I will therefore focus.

Article 14 ECD offers a defence against damages claims and criminal liability in cases where:

a) the provider does not have actual knowledge of illegal activity or information and, as regards claims for damages, is not aware of facts or circumstances from which the illegal activity is apparent; or

b) the provider, upon obtaining such knowledge or awareness, acts expeditiously to remove or disable access to the information.

For over half a decade, the liability of eBay and other hosts has been tested in many European courts and set in motion, concurrently or alternatively, on the basis of trademark or copyright infringement and by engaging the liability of intermediaries – intellectual property (IP) holders complaining that the online auction site had failed to sufficiently police content. The received wisdom was that while intermediary online auction sites could do more to eradicate dubious practices on their sites, the ECD was simply not forcing them to do so.¹⁰ The liability of hosts seemed limited, rendering any prospects of a successful lawsuit quite illusory.¹¹

However, a general shift towards more liability started to manifest itself back in the mid-2000s. Some judges went to extensive lengths to extract online auction activities from the scope of the hosting immunity under Article 14, in order to find some other liability ‘hook’ in national laws.¹² Other courts, while recognising that eBay was protected under the E-Commerce Directive, also found that it should have some obligation to stop recurring infringements.¹³ Online auction providers were not the only objects of such lawsuits, and more demands for liability were also made on search engines.

1.2 Finding a Balance between Conflicting Interests

Meanwhile, while the rationale for immunity from liability remained strong for traditional intermediaries, scholars were arguing for stronger liability because of the unique position social media intermediaries (online auction sites and search engines in particular) were finding themselves in. Indeed, the fact that eBay and other intermediaries profit financially seemed a compelling reason for rethinking their liability regime under Article 14(1) ECD. Concerning the liability of search engines for the sale of ‘adwords’ in the EU, Verbiest and others thought that:

it is hard to conceive of liability exemptions in a system that is designed to generate revenues for the search engine operator and which is, in principle, controlled by the search engine operator. As far as these systems are concerned, the reason for exempting providers from liability is not applicable, as providers do not act as mere technical intermediaries.¹⁴

I also advocated that:

if the absence of liability seems perfectly justified for intermediaries who do not directly benefit from the illegal activities perpetrated, eBay’s position appears different here. Indeed the site will receive commission even on the sale of counterfeit goods, thus benefiting from illegal activities taking place via its intervention. It should, in my view, be a factor taken into account when considering the liability or absence of liability of online auction sites.¹⁵

It remains that the liability of online auction sites, and ISPs in general, is a thorny issue, principally because conflicting as well as complementary interests are colliding. Indeed, if you consider trademark infringements alone, some consumers may be victims of counterfeiters and buy items they did not suspect were fake, suffering, like IP owners may, from the ‘passing off’ of goods for genuine and thus sharing a common interest in seeing such practices stopped. However, other consumers are actively seeking cheaper status symbols. According to a 2007 survey from the Anti-Counterfeiting Group,¹⁶ just under 3 million UK consumers bought counterfeit versions of luxury goods (from the top 10 brands). In 2013, PwC reported that the purchase of counterfeit goods in all sectors was continuing to increase. The purchase of fake goods was becoming ingrained in society as an acceptable behaviour, especially amongst the younger segments of society.¹⁷ Therefore consumers’ perceived interests in accessing cheaper goods may conflict directly with IP owners’, since ‘it is their [the consumers’] insatiable desire for cheaper goods that arguably inflates the unit value and creates the main market driver for counterfeiting’.¹⁸ It is also, possibly in part, the reason that drives parallel import as a way to sell genuine goods for a lesser price.¹⁹ Those diverging interests also need to be balanced against the interests of the online auction sites that enable the sale of both genuine and fake items, as well as items sold by authorised and unauthorised dealers on their websites, without necessarily being able to tell them apart.²⁰ Out of the buyers of counterfeit goods identified in the Ledbury survey, 29% knowingly or unknowingly did so using eBay.²¹

1.3 Liability of Online Intermediary Websites for Consumer Law Violations?

It is my view that this push towards more liability for intermediary online auction sites can also be extended to areas beyond intellectual property violations. This is because the Electronic Commerce Directive applies horizontally and is not restricted to particular legal subject matters.²² As a result, online auction intermediaries can be held liable not just for IP infringements, but also for other narrowly defined breaches of statutory or common law duties by third parties for the content they host. For example, one can imagine that for sales using unfair terms, the intermediary platform could be held liable and required to police the site more tightly. Similarly, sites could be held liable for the damage caused to consumers buying fake items, alongside the damage suffered by the intellectual property owner.

Although this has not yet been successfully tested in court, some movement towards an even wider liability net being cast are indeed emerging. For example, in the case of eBay v UFC Que Choisir,²³ the French consumer association and 58 individual consumers tried to engage eBay’s liability for unfair commercial practices, claiming that statements relating to the safety guarantees of the PowerSeller programme were misleading as to the controls effectively made by eBay.

In this case, Mobile Destock had gained PowerSeller status and sold various telecoms items to consumers on eBay. Despite the eBay terms and conditions requiring PowerSellers to offer PayPal as a payment method alongside others, Mobile Destock had suspended taking PayPal payments and instead accepted bank transfers. The trader eventually went into administration and was unable to deliver the goods ordered or offer refunds. The claimants argued that eBay was liable for misleading practices under Article L121-1 as well as on the basis of Article L121-20-3 of the French consumer code, which states: ‘professionals are liable towards consumers for the good execution of all obligations resulting from distance contracts whether the obligations are executed by the professional who concluded the contract himself or by other service providers’. Under this provision, the professional is not liable when he can demonstrate that the non-execution (total or partial) is imputable to the consumer or to the unpredictable and insurmountable actions of a third party, or to force majeure. The Consumer Association was also arguing that eBay could not hide behind the Article 14 ECD immunity implemented in French law by Article 6-I-2 LCEN. While in this case the court found no misleading practice or liability under Article L121-20-3, that is not to say that none could be discovered. The question would then be to establish if the intermediary is able to benefit from Article 14 immunity. In this case, the court decided that the control over the PowerSeller programme was unrelated to hosting and could not be examined. In any event, eBay did not seek to rely on the immunity.

However, the leap is easily made. According to the court, the PowerSeller status is not linked with the passive hosting of content, but is an additional service offered to users. This indicates that the court could have denied immunity to eBay in this instance had they found some liability under the aforementioned provisions. In any event, there will undoubtedly be situations where online auction sites’ activities relate to their hosting functions and, for those, they ought to shoulder some responsibility when third parties make untruthful or exaggerated claims or impose onerous terms on consumers if they do not fulfil the requirements for immunity under Article 14 ECD. Therefore, as a principle, it is possible to envisage liability for unfair contract terms or content that amounts to an unfair commercial practice for example.

1.4 Shrinking the Frontiers of ‘Immunity’

Trying to reconcile the varied interpretation of Article 14 ECD across the Member States, two key decisions from the CJEU came to shake the liability regime of hosts, shifting towards more responsibility for intermediaries, not just online auction sites. The first decision concerned Google²⁴ and its AdWords service whereby advertisers draft short adverts that are matched with a choice of keywords.²⁵ The second decision targeted eBay and the sale of counterfeit items via its intermediary.²⁶ Both concerned trademark infringements (amongst other issues) and called into question whether or not the intermediary could shield from liability under Article 14 ECD. These CJEU decisions significantly reduce the scope of protection granted to hosting intermediaries.²⁷ This is because the Court devised a liability test adding new requirements to the pre-existing wording of Article 14 ECD. First, it opted for a restrictive application of Article 14(1) requiring that only ‘neutral hosts’ are granted immunity. Second, if it can be demonstrated that a host is neutral, and thus within the scope of protection, it also needs to behave like a ‘diligent economic operator’ in its discovery and removal of litigious materials. This imposes a higher threshold for protection under the Electronic Commerce Directive than was previously envisaged. Third, it is now possible to impose some restricted monitoring obligations on online auction intermediaries under Article 11 of Directive 2004/48/EC on the enforcement of intellectual property rights.

2 Selective v Distributive Application of Liability Regimes

Before scrutinising the test put forward by the CJEU to test liability, one needs to define the way the immunity applies. The Electronic Commerce Directive provides exemptions concerning mere conduit, caching and hosting. Yet it is unclear if what is exempted under the Directive is an activity or the overall function of an intermediary. At the time the Electronic Commerce Directive was adopted, clearer lines existed between the functions exercised by various internet service providers, and one could point to an operator acting as a mere conduit or as a host more easily. With the evolution of technology, those lines have become blurred. On online auction sites a variety of content and activities of different origins coexist and can trigger different types of liability. On eBay for example, while listings are user-generated content hosted by the site, some view the general architecture of the site, the categorisation of items for sale and the selection of items that are featured on the front page to boost sales and attract users to eBay within the control of the online auction site acting as an editor,²⁸ an activity subject to its own autonomous liability regime. Furthermore, the purchase of keywords on third party search engines to direct traffic to the online auction platform is a further function undertaken by online auction sites, not as an editor but as an advertiser.²⁹

For consumers, the legal classification adopted can have important consequences on the protection they can expect. Depending on the liability regime applicable, online auction intermediaries can have direct responsibility for the content carried on their website, offering consumers an obvious target to seek redress from. It appears therefore critical to be able to determine if several liability regimes can coexist (what I call a distributive application) or if one necessarily needs to prevail and decide the fate of the intermediary (selective application).

2.1 Selective v Distributive Application in National Law

A number of French cases have favoured a selective application of the liability regime to online auction sites. In Société Christian Dior Couture SA c/ eBay Inc et eBay International AG³⁰ (Christian Dior Couture) and SA Louis Vuitton Malletier c/ eBay Inc et eBay International AG³¹ (Louis Vuitton), the French Commercial Court rejected the legal classification of eBay as a host. It considered that the hosting activities were an integral part of eBay’s role as an intermediary and noted that the hosting service was only offered in order to broker auctions. As a result, eBay’s primary legal status was that of a broker and not that of a host. It could not benefit from the protection of Article 6.I.2 LCEN (implementing Article 14 ECD), but was subject to the general liability regime under Articles 1382 and 1383 of the French Civil Code. The Court did so, carefully considering the role eBay plays in the posting and the control of content on the site and evaluating which role was most prominent and should dictate the overall liability regime. The earlier decision from the Tribunal de Grande Instance of Troyes in Société Hermès International c/ Cindy F., SA eBay France et eBay International AG³² (Hermès) also found eBay liable (jointly with the seller) for the sale of counterfeit Hermès handbags, despite the fact that it had acknowledged that eBay played two different roles: host and this time ‘editor’ of the service (not a broker). Although distinguishing between two types of liability, the Court concluded to the application of the most prevalent role. It decided that eBay was no ordinary hosting service and that the stringent liability regime of an editor should apply. In all cases, the Court stated that eBay could not benefit from the protection of Article 6.I.2 LCEN because the site ‘did not limit its activities to that of a host, which would entitle eBay to benefit from the provisions applicable to hosting services’.

The advantage of such a system favouring the most prevalent role is that it enables better clarity in the legal regime applicable. Only one will apply. However, deciding on which one should apply is where the challenge and uncertainty remains. The French courts have indeed struggled and opted for different overall regimes for situations that were somewhat similar.

By contrast, the Brussels Tribunal de Commerce, in Lancôme Parfums et Beauté & Cie c/ eBay International AG³³ (Lancôme), opted for a distributive application of the liability incumbent to online auction sites, concluding that eBay was not liable for any IP infringements occurring on its site. The Court reached this outcome noting that despite Directive 2000/31/EC, section 4 being entitled ‘liability of intermediaries’, the formulation of Articles 12 to 14 clearly shows that the exemption concerns some types of services rather than identifying rigid categories of intermediaries. Lancôme was pointing to eBay’s activities which include assisting in redacting advertisements, directing users to other similar products or products from the same seller, and editing terms and conditions, and the advertising on its website,³⁴ arguing that it would be erroneous and artificial to classify eBay as a host when it is clear that the activities of this economic agent go grossly beyond the scope of a simple hosting service for third parties. The Belgian court rejected such a view and demonstrated that if at the outset of e-commerce it was possible to conceive that services of mere conduit, caching and hosting could be provided by specialised providers, services now have to be envisaged as aggregate services. The court explained that eBay was an editor liable for the site’s graphic and commercial environment surrounding the listings, but was also, at the same time, a host for the information contained in the listings themselves. Proust observes that it is potent that some internet sites have a composite nature that it would be completely arbitrary to want to reduce to a sole classification.³⁵ A mixed classification has to prevail under Belgian law and the judge should apply the special legal regimes in a distributive manner.

In the UK, the courts have also taken a position for a distributive application of Article 14 (implemented via Regulation 19 of the Electronic Commerce (EC Directive) Regulations 2002)³⁶ in cases concerning defamatory materials published online. For example, in Karim v Newsquest Media Group Ltd,³⁷ the court found that a website containing a mixture of content that is user-generated and material that is written by or is proactively chosen by the operator of the website does not preclude the operator of the website from relying upon Regulation 19 so far as the user-generated content is concerned. Further, in Kaschke v Gray and another,³⁸ Stadlen J commented:

It is not necessarily a bar to entitlement to the protection conferred by Regulation 19 (…) that the provider of an information society service consisting of storage of information is also engaged in an activity on the same website which is either not an information society service or, if it is, which does not consist of the storage of information.³⁹

A distributive application seems more sensible as it enables apportioning liability for composite activities. However, such a system runs the risk of creating complicated liability patchworks for which each action or service needs to be dissected and assessed differently. This in turn could lead to some uncertainty in the law.

2.2 Distributive Application Favoured by the CJEU

In the case of L’Oréal v eBay,⁴⁰ the High Court of England and Wales asked the CJEU if the use of trademarks in connection with offers for sale on eBay could ‘consist of or include the storage of information provided by a recipient of the service within the meaning of Article 14(1) of Directive 2000/31’.⁴¹ In question 9(b) it more specifically addressed the issue, asking:

if the use does not consist exclusively of activities falling within the scope of article 14(1) ECD, but includes such activities, is the operator of the online marketplace exempted from liability to the extent that the use consists of such activities and if so may damages or other financial remedies be granted in respect of such use to the extent that it is not exempted from liability?

This was a position also supported by Advocate General Jääskinen⁴² because ‘it is difficult to see that Directive 2000/31 would impose three distinct types of activity which would only be exempted if each of them is exercised in a watertight compartment’.⁴³

The CJEU proceeded with examining the liability of hosts, having acknowledged that eBay plays a number of roles: assisting sellers and advertising some of the products sold on the marketplace on search engines.⁴⁴ The Court also indicated that it was not disputed that the operator of an online marketplace is an advertiser when selecting keywords in the Google search engine and providing advertising links back to the eBay site,⁴⁵ and moved on to analysing its liability as a host. This is an acknowledgement that eBay’s service is more complex than simple storage, and thus recognises the composite nature of the service. Because the Court proceeded with a dual analysis of eBay’s liability, as an advertiser and as a host, it is obvious that the CJEU supports a distributive application.

The liability of intermediary online auction sites is therefore a patchwork. For each role exercised, a different liability regime may apply, subject to national law. However, every time the online auction site acts as a host it can find a shield to liability under Article 14 ECD. To do so, it needs to satisfy the test defined by the CJEU and explored chronologically below.

3 The Application of the ‘Neutrality Test’ to Online Auction Sites

Imposing a ‘neutrality’ test on hosts was somewhat surprising at the time it was first adopted in the Google case.⁴⁶ But this position was reiterated by the CJEU in L’Oréal v eBay, confirming a restrictive interpretation of Article 14. Up to this point, Article 14 could be seen to require demonstration of the existence of a hosting activity and an absence of knowledge or awareness followed by prompt removal on gaining such knowledge or awareness to escape liability. In the wake of the Google and L’Oréal v eBay cases the protection of Article 14 can only be granted to hosting activities that are first and foremost ‘neutral’, before the other requirements under Article 14 can be applied. It is therefore this requirement that I will investigate first.

According to the CJEU, eBay carries out a storage ‘operation’ each time a customer opens a selling account and provides data concerning its offers for sale.⁴⁷ A similar finding was reached in Google, where the court decided that the:

referencing service provider transmits information from the recipient of that service, namely the advertiser, over a communications network accessible to internet users and stores, that is to say, holds in memory on its server certain data, such as the keywords selected by the advertiser, the advertising link and the accompanying commercial message as well as the address of the advertiser’s site.⁴⁸

However, the CJEU did not see the fact that Google or eBay stored information as a sufficient ground for concluding that the service fell within the scope of Article 14(1) ECD. Indeed, in both cases, the Court adopted an interpretation that went beyond the literal wording of the Directive and searched for the meaning of ‘intermediary’ intended by the legislature in the context of section 4 of chapter II of Directive 2000/31.⁴⁹ According to the CJEU, an intermediary is not the one intended by the legislator when:

instead of confining itself to providing that service neutrally by a merely technical and automatic processing of the data provided by its customers [the intermediary], plays an active role of such kind as to give it knowledge of, or control over, those data.⁵⁰

In other words, hosting services do not benefit from an automatic exemption of liability, but rather from an exemption on condition that they are ‘neutral’.

Under the CJEU’s interpretation in the Google case, the term ‘exemptions’ (plural) is being understood to refer to all three exemptions covered by the Directive, namely mere conduit, caching and hosting. By directly citing the wording adopted in Google,⁵¹ the CJEU, in the case of L’Oréal v eBay, endorsed its previous finding, rejecting the proposition made by Jääskinen AG to disregard the ‘neutrality test’ adopted for search engines for a more adequate standard applicable to online auction intermediaries.⁵² Indeed, The Advocate General pointed out that he would find it ‘surreal that if eBay intervenes and guides the contents of listings in its system with various technical means, it would by that fact be deprived of the protection of Article 14 regarding storage of information uploaded by the users’.⁵³ As an alternative, the Advocate General offered a new reading of Directive 2000/31/EC under which neutrality was not an appropriate test to determine the liability of an online auction host. Rather, he suggested that the interpretation of Article 14 be subject to Recital 46 and not Recital 42. This is because:

Even if recital 42 of the directive speaks of ‘exemptions’ in plural, it would seem to refer to the exemptions discussed in the following recital 43. The exemptions mentioned there concern expressly – ‘mere conduit’ and ‘caching’. When read this way recital 42 becomes clearer (…).⁵⁴

The exemptions referred to in Recital 42 do not concern hosting, which is directly tackled in recital 46. Recital 46 states:

In order to benefit from a limitation of liability, the provider of an information society service, consisting of the storage of information, upon obtaining actual knowledge of awareness of illegal activities has to act expeditiously to remove or to disable access to the information concerned (…). [emphasis added]

Because this recital makes a specific reference to hosting, there was, according to Jääskinen AG, a clear link between this recital and Article 14. As a result, the ‘limitation of liability of a hosting provider should not be conditioned and limited by attaching it to recital 42’.⁵⁵ The Advocate General warned that if it was not the case, ‘the objectives of the Directive 2000/31 would be seriously endangered and called into question’ because the limitation of hosts’ liability is ‘an essential element in the development of electronic commerce services of the information society’.⁵⁶

This interpretation, more sympathetic towards online auction service providers, was not followed by the CJEU in L’Oréal v eBay. Instead, the CJEU decided to entrench that neutrality was a key requirement to benefit from the exemption of liability offered to hosts by Article 14 ECD.

From a legal analysis perspective, the CJEU’s approach rests uneasily with some commentators and judges. For example, Van Eecke explains:

the poor wording of recital 42 of the e-Commerce Directive had previously induced the ECJ to erroneously require hosting providers to be neutral (similar to what is required for mere conduit and caching providers), even though no such requirement is found in Article 14.⁵⁷

In addition, in Kaschke v Gray and another,⁵⁸ Stadlen J commented obiter that:

The suggestion in recital 42 that mere knowledge of the information which is transmitted or stored is sufficient to exclude the exemption from liability which the Directive requires Member States to ensure goes further than the exclusions in Article 14 and Regulation 19.⁵⁹

Yet, and while I share some of the concerns regarding a potentially misguided interpretation of the recitals of the Directive, I have to acknowledge some of the clear benefits such a position is likely to bring to consumers. The focus on the ‘active or passive role’ of the intermediary places a lower threshold of involvement to trigger liability than was previously envisaged. This forces online auction intermediaries to police their sites much more closely, creating a safer environment for consumers. It is also in line with opinions (including mine) leaning towards more liability for intermediaries.⁶⁰ Conversely, exposure to increased liability can also bring detriment to consumers, if the right balance is not struck. Any disproportionate liability placed on online auction intermediaries could push prices up as intermediaries impose higher fees on sellers and seek to recoup their additional costs to guard against this liability risk.⁶¹ Indeed, in the UK case of L’Oréal v eBay referred to the CJEU, Arnold J had expressed having ‘considerable sympathy with the suggestion that eBay could and should deal with the problem of infringement by accepting liability and insuring against it by means of a premium levied on sellers’.⁶² Whereas this would be of clear benefit for intellectual property owners, it may not have the desired impact because any rise in commissions and premiums being levied would no doubt be passed on to consumers. It may also force smaller sites out of business and distort the market as a result. Yet, at this point, it is important to note that the online auction intermediary market is already strongly skewed towards sites benefiting from network effects.⁶³ Because of this, smaller sites are already natural casualties of the operation of competition. It is not certain that an increase in liability would have more of an effect on their demise than the market has already placed on them. In any event, it is a fine balance between the interests of consumers, IP owners and online auction intermediaries that needs to be struck.

Following in the footsteps of the Google decision, the CJEU in L’Oréal v eBay decided that Article 14 ‘must be interpreted as applying to the operator of an online auction marketplace where that operator has not played an active role allowing to have knowledge or control of the data stored’.⁶⁴ As a result, no protection under Article 14 can be granted if the intermediary played an active role. Activity is therefore the nemesis of neutrality. It is on the definition of such ‘active’ role that the legal protection applicable to online auction intermediaries turns. The CJEU left it to national courts to proceed with such interpretation.⁶⁵ This presents important challenges because the notion of what is an active role (or a neutral one) is not defined by the ECD and only briefly sketched out by the CJEU. The section below details the way in which I understand the test to work, and how it ought to be applied to online auction platforms.

3.2.1 ‘Assistance’ as a key factor to assess neutrality

The key factor used by the CJEU to define the role played is the notion of ‘assistance’. In Google, the CJEU had already started to spell out that ‘assistance in drafting of the commercial message which accompanies advertising links’ was relevant in determining whether or not the search engine played an active role.⁶⁶ The Court in L’Oréal explained that when assistance is provided, the online auction platform ‘must be considered not to have taken a neutral position’ [emphasis added].⁶⁷ It continues, making clear that where assistance is provided, eBay ‘cannot then rely, in the case of those data, on the exemption from liability referred to in Article 14(1) of Directive 2000/31’.⁶⁸ But the notion of ‘assistance’ is not neatly packaged in the decision; nor is it neatly defined.

In the L’Oréal v eBay case, one finds clues as to how to interpret ‘assistance’, dotted around. It is defined through a non-exhaustive list of examples and by opposition to neutral activities. For example, the CJEU noted that:

the mere fact that the operator of an online marketplace stores offers for sale on its server, sets the term of its service, is remunerated for that service and provides general information to its customers cannot have the effect of denying it the exemption from liability provided by Directive 2000/31.⁶⁹

This is consistent with the findings in Google where the CJEU also noted that:

the mere facts that the referencing service is subject to payment, that it sets the payment terms⁷⁰ and that it provides general information to its client cannot have the effect of depriving Google of the exemptions from liability provided for in Directive 2000/31.⁷¹

By contrast, the CJEU found that where:

the operator has provided assistance which entails, in particular, optimising the presentation of the offers for sale in question or promoting those offers, it must be considered not to have taken a neutral position between the customer seller concerned and potential buyers, but to have played an active role of such kind as to give it knowledge of, or control over, the data relating to those offers for sale.⁷²

‘Assistance intended to optimise or promote certain offers for sale’ therefore tip the balance towards an active role.⁷³ Strictly speaking the Court identified four ways in which eBay assists sellers:

In some cases eBay assists sellers in order to enhance their offers for sale, to set up online shops, to promote and increase their sales. It also advertises some of the products sold on its marketplace using search engine operators such as Google to trigger the display of advertisements.⁷⁴ [emphasis added]

Considering the task at hand and its outcome (namely the liability of intermediaries), this is a rather slim set of general guidelines from which national courts will need to define the contours of the ‘neutrality’ test on a case-by-case basis. It is in assessing different types of services offered that national courts may come to conclude that the online auction platform was active in some cases while neutral in other. Indeed, it is unclear if a combination of neutral services can amount to an active role being played, or if one particular activity will automatically tip the provider into ‘activity’. Although the accumulation of activities is likely to make a more convincing case for an online auction intermediary being active rather than neutral, the outcome of such determination is uncertain. What is also ignored by the Court is the fact that, out of those categories where a user receives assistance, not all ought to command the same response. The intensity in the assistance that is provided is an important factor that ought to be assessed. Such freedom of the national courts seems justified but will come with its own sets of problems, most of all the fact that divergent interpretation would still lead to legal uncertainty as to what activities are or are not protected under Article 14 ECD. Already, divergent applications in the French courts attest for potential conflicts in the interpretation of what is an active or neutral role.⁷⁵

The CJEU suggests that assistance which entails optimisation of the offers gives the online auction intermediary an active role, barring immunity. The concept of ‘optimisation’ however is not explained. Worse, it seems to be used as a synonym of ‘enhancement’. Indeed, at para 31, the CJEU states that ‘eBay assist sellers in order to enhance their offers for sale, to set up online shops, to promote and increase their sales’.⁷⁶ Although it is only at a later stage in the decision that the use of the word ‘optimising’ is introduced, it is done with a reference made to para 31 and thus the notion of enhancement. Yet, according to the Oxford Dictionary, to ‘optimise’ is to make the best or most effective use of something. By contrast, to ‘enhance’ means to ‘intensify or improve’. Both terms convey a similar idea, but they are different degrees of improvements. Optimisation is a higher form of enhancement in my view. A distinction between ‘optimisation’ and lesser degrees of improvement therefore needs to be made in order to test neutrality, although I infer from the indiscriminate use of both ‘optimisation’ and ‘enhancement’ by the CJEU that the Court sees the two notions as synonymous or, at the very least, sufficiently close so as not to offer a viable demarcation line between activity or neutrality. It results that any activities below the enhancement threshold, so to speak, should remain neutral. Anything above will potentially render the intermediary active. The question therefore is to define what services or activities carried out by an online auction site will provide assistance in optimising (or enhancing) the presentation of an offer of such nature that they will give the intermediary an active role of such a kind so as to give it knowledge or control over the data held. For example, can services such as gallery upgrades,⁷⁷ listing designer services⁷⁸ or the status of PowerSeller on eBay, none of which were discussed by the CJEU, be deemed to optimise or enhance the presentation of the offer? Similar questions are raised by the issue surrounding the interpretation of the notion of ‘promotion’, since assistance in the promotion of the offers is equally damaging to the online auction hosts’ immunity according to the CJEU. Promotion may include the sending of email newsletters as well as advertising particular sales on the intermediary’s front page or on third party websites. Will all of those activities necessarily mean that the online auction platform is no longer neutral and has knowledge or control over the data hosted?

3.2.2 ‘Neutrality’ is a two-pronged liability test

In the case opposing MACEO to eBay,⁷⁹ the Paris Tribunal de Grande Instance considered, for the first time after the CJEU decision, this invisible line between neutrality and activity. In this case, a number of garments produced by MACEO – a company creating, manufacturing and retailing clothing – were sold on eBay without authorisation. MACEO sued for infringement of their trademark ‘APRIL 77’. The Court discussed the tools eBay puts at users’ disposal to evaluate sellers (feedback); classification tools destined to categorise, enhance listing and facilitate the use of the service offered by eBay; email or text alerts on listings; payment via PayPal; the automatic promotion of listings; and the provision of management tools to sellers.⁸⁰ The Paris Tribunal applied the neutrality test but found that the technical operations consisting in presenting and organising the data as well as classification tools did not imply a selection and a control over the data put online and were inherent to the provision of hosting services. In this case, eBay was considered a neutral host because the Court considered that those tools sought to ameliorate the visibility of listings, facilitate the search and sale of items and inform buyers on the content of listings and the reliability of sellers. But such features did not, according to the Court, confer on eBay an active role able to give it knowledge or control over data it hosts. The sum of those features therefore did not appear sufficient to tilt the balance towards activity. From this decision, it appears that the demarcation line is very fine indeed. The Paris Tribunal did find eBay neutral despite noting that it provided technical tools to ‘enhance’ listings. The decision to declare eBay neutral can be explained by the fact that the court understood the neutrality test to be two-pronged. An active stance needs to be characterised and procure for the online auction site knowledge or control over the data held. In this case the court failed to see how the activities and features offered enabled eBay to have the required knowledge or control. As a result, if the activity fails to give knowledge or control, the overall assessment will be one of neutrality.

When listing items on intermediary websites, some basic services are free. Other, more advanced features and services need to be paid for. For example, listing an item under one category with a limited number of photos and a simple strap line is normally a free service. By contrast, a fee is normally charged if additional categories or extra photos are selected, or if the user wishes to ensure more visibility for their listing.⁸¹

At this stage, it is useful to pause and go back to the Google case to draw a parallel with the way the listings of results in the search engine are generated. On Google, the same keyword entered by an internet user will return two types of result: natural results and AdWords results.

When an internet user performs a search on the basis of one or more words, the search engine will display the sites which appear best to correspond to those words, in decreasing order of relevance. These are referred to as the natural results of the search.⁸²

The AdWords results are those which, based on the same search, are displayed alongside the natural results, either at the top of the page or on the right-hand side. They are, however, results generated because an economic operator has selected and paid for the use of one or more keywords accompanied by a short commercial message.

In Google, Advocate General Poiares Maduro pointed out that Google’s search engine is neutral when it comes to natural results, i.e. results that are the product of automatic algorithms to generate links of interest to the user. This is because those results are ranked and presented by reference to their relevance to the keyword searched. They are not based on Google’s interest in bringing any particular site to the user’s attention. By contrast, this is not the case concerning AdWords, where the advertiser pays Google so that its results are prominently displayed. The AG noted:

Google’s display of ads stems from its relationship with advertisers. As a consequence, AdWords is no longer a neutral information vehicle: Google has a direct interest in internet users clicking on the ads’ links (as opposed to the natural results presented by the search engine).⁸³ [emphasis added]

The notion of a ‘relationship’ is not a criterion discussed in L’Oréal. Yet, it appears a viable alternative to the notion of optimisation. In any event, to draw a parallel with L’Oréal