When Amazon is not liable for unlawful acts of 'affiliates': the German Supreme Court explains

The e-commerce platform Amazon offers an affiliate marketing programme called Amazon Associates. In simple terms, anyone can sign up free of charge as an ‘affiliate’ and place links on her/his website to products sold on amazon.com. If a user clicks on the link and buys a product, the affiliate earns a commission.

The affiliate is an independent contractor and decides autonomously whether, and if so, how to link to products sold on amazon.com. The agreement between Amazon and the affiliate does not provide any specifications for the design of the affiliate’s website. Amazon does not retain any right to issue directions to the affiliate. The affiliate must, however, ensure that the creation, maintenance and operation of the website does not violate the applicable law.

Is Amazon liable for unlawful acts of its affiliates? This question is explored in a recent judgment from the German Supreme Court of 26 January 2023 (case I ZR 27/22).

Background

The case concerned affiliate marketing on www.schlafbook.de. The website deals with sleep and mattresses. At first glance, it appears to be an online magazine. Of interest was a ranking on the site in 2019 of the supposedly three best mattresses of that year. The mattresses so ranked were accompanied by affiliate “buy from Amazon” buttons, which were directly linked to an offer on the Amazon Market Place.

Two of the linked mattresses were sold by third-party retailers. Amazon was responsible for shipping of one of these two mattresses. Another mattress was sold and shipped by Amazon itself.

The plaintiff manufactures mattresses. He objected to the ranking of the “best mattresses of 2019” on www.schlafbook.de because it did not clearly indicate that the ranking had a commercial purpose (i.e. the plaintiff asserted unlawful product placement). This violates German unfair competition law (Sec. 5a(4) German Act on Unfair Competition, which implements Art. 7(2) of Directive 2005/29/EC).

The plaintiff did not sue the operator/owner of www.schlafbook.de but Amazon instead. The alleged violation of the unfair competition rules was not in dispute between the parties. They only disagreed on whether Amazon was liable under Sec. 8(2) German Act on Unfair Competition.

This provision reads:

Where the infringements are committed in a business by a member of staff or an agent, the claim for injunctive relief […] can also be asserted against the owner of the business. (Translation by the author.)

The Supreme Court’s decision

Both the District Court and the Higher Regional Court of Cologne found no liability of Amazon. The German Supreme Court agreed, holding that the affiliates are not ‘agents’ of Amazon within the meaning of Sec. 8(2) German Act on Unfair Competition.

The Supreme Court explained that the rational of this provision is to avoid a situation whereby a business owner can evade liability by ’outsourcing’ an action to employees or agents. The rationale for holding the business owner liable for actions of its employees and agents lies primarily: (1) in an extension of the activities of the business operation that benefits the business owner, and (2) a certain control of the business owner over the risk area in which the employees and agents operate on behalf of the business owner.

The decisive factors with respective to finding liability are that: (1) the employee or agent is integrated within the operational organization of the business in such a way that the business benefits from the success of the commercial activities of the employee or agent; and (2) the business owner has a decisive and enforceable influence over the behaviour of the employee or agent within the zone of activity which is the subject of the legal action.

According to the Supreme Court, it is not important what influence the business owner actually exercises, but what influence should have been brought to bear on the employee or agent. As such, the business owner might also be liable for violations of the law committed by an agent without its knowledge and against its will.

On that basis, the Supreme Court held that Amazon’s affiliate marketing programme and the website www.schlafbook.de did not constitute an extension of Amazon’s business operation. Amazon was not outsourcing one of its activities. The affiliate created its own product (namely the website www.schlafbook.de). It arranged the contents of the website at its own discretion and used the website to earn commissions by placing advertising on them.

Therefore, the Supreme Court found that the affiliate links were part of the affiliate’s product, in the affiliate’s interest and for which only the affiliate is responsible. This did not amount to an extension of Amazon’s business operations.

The Supreme Court distinguished an affiliate from an advertising agency. Although an advertising agency also offers its own service, it does not develop its own product, but rather a product on behalf of its client, even if it has some discretion regarding the content, timing and scope of the advertising.

The Supreme Court also rejected that Amazon had certain control over the potential risk created by its affiliates, or a decisive and enforceable influence on the activity of the agent. Here, the affiliate was deemed to act only within the framework of its own product (the website www.schlafbook.de) and solely in its own name and interest.

Comment

This decision may also have consequences for trade mark, copyright, and design law in Germany. Sec. 14(7) German Trade Mark Act, Sec. 99 German Copyright Act, and Sec. 44 German Design Act are almost identical to the liability provision discussed above. The Supreme Court held that they are to be interpreted identically (case I ZR 29/18 at para. 43). Hence, Amazon will likely not be liable for trade mark, copyright, and design infringement in connection with affiliate links.

Picture is by Arina Krasnikova and is used under licensing terms of Pexels.