Jeremy Gottschalk, founder of Marketplace Risk and expert in risk management, trust & safety, and legal strategy for marketplace startups.
When starting or scaling a marketplace, terms of service play a crucial role in how you manage risk and provide protection, both for your platform and for your customers. But there is often a disconnect (or a direct conflict) between the provisions in your terms of service and your marketing copy, including on your website and mobile apps. In other words, how you advertise your marketplace to acquire customers often diverges from how you will want to position your marketplace in the face of a claim or an incident. But, there shouldn’t be.
In this blog, I have outlined some common mistakes and conflicts when it comes to marketing language and terms of service agreements. Unfortunately, these mistakes and conflicts often are not realized until something goes wrong and/or a claim is made, by which point, it may be too late. Ensure your marketing copy and your terms of service are shored up against the following pitfalls, however, and you’ll be on the right track to scale and grow with less risk.
As an aside, there are plenty of online terms of service generators and websites that will help you to cover the very basics, but they don’t always provide the specific protections that a marketplace business needs and, as such, many fall victim to pitfalls and oversights which are often avoidable…so be sure to get your terms of service reviewed.
1) Ensure you accurately describe that you are the marketplace, not the service provider
The number one thing I tell people is that you MUST accurately describe your marketplace and ensure it’s clear that you are a marketplace and not the service provider. In practical terms - be transparent! Tell your customers what you actually do and what you do not do. This may seem obvious, but it’s not always…
In order to acquire customers, marketplace marketers oftentimes squarely position their marketplace in the industries they’re disrupting. This tendency is out of efficiency and expediency - it’s easier to explain your marketplace in terms that prospective customers understand, especially when the marketplace, itself, is innovative and yet unseen. This can lead, and often gets quite close, to describing the marketplace in terms of the service that is being transacted, but this is not really the marketplace’s role.
Ultimately, marketplaces aren’t providing the advertised service, they’re providing the platform for supply and demand to transact for the advertised. In other words, your platform allows users to purchase goods and services and, whatever those goods and services are - from childcare to ride share - your platform is not providing those services.
Unfortunately, marketplaces sometimes make the mistake of positioning themselves as providing the services themselves, and if something goes wrong with the service, the marketplace could be held responsible based on the expectation created. That’s why I think it’s really important for marketplaces to describe themselves as the platform and intermediary, and operate as such, so that if something does go wrong, you can avail yourself of protections that come with operating as a passive venue. In the event of an issue, customers should take their claims to the person providing the service, and if you don’t describe the platform properly, you may find yourself amidst that claim or incident and unable to extract yourself.
2) Be careful about making bold platform claims that are open to interpretation
A great example of this is referring to your service providers as “vetted,” “screened,” “background checked,” or any variation of these claims. While vetting, screening and background checking are often necessary for trust & safety and to overcome trust barriers, each of these terms is open to different interpretations. In other words, everyone doesn’t understand each of these words the same way - or even the way you intend.
Beyond that, and more generally, it’s imperative that if you’re talking about safety - how safe your platform is - then you need to describe exactly what you mean by that. Ensure that you clearly and accurately describe what it is that you do with regard to screening and safety so that there is no confusion. If you are screening your supply, explain what goes into that screening step by step. If you are background checking workers, detail exactly what is included in that background check and what types of records that background check is searching for.
In addition to being transparent about trust & safety, I always recommend avoiding representations or copy that include ‘absolutes.’ There is a great tendency to overcome trust barriers and thus, acquire customers, by talking in terms of universally true qualities. This includes “fully vetted,” “safest,” and any safety-related ‘guarantees.’ Any sort of statements like these can get you into trouble simply because they mean different things to different people. While making these statements can be well intentioned and potentially accurate, the reality is that it could be inaccurate to somebody else, and you could end up fighting about that in court.
The best way to overcome this is avoid talking in absolutes or anything that is not 100% universally true (and not open to interpretation). If you are going to talk about screening, trust & safety, or make any bold claims, it’s important that you clearly lay out your screening process. And, be sure to explain in detail exactly how you are accomplishing claims that you make so that you leave no room for interpretation and you aren’t giving any false sense of security.
3) Intermediaries don’t give advice, make recommendations or instruct
Strictly from a liability perspective, it’s important that marketplaces are passive intermediaries and function as such. Intermediaries don’t give advice, make recommendations, or tell customers to undertake certain actions - all of which can come back to bite you if something bad transpires, especially if your customers followed your directions. Instead, offer tools and resources and explain the value of those tools and resources.
In addition, I like to use data and statistics to encourage behavior. For example, if you’re on a platform for pet care and you encourage the pet owners to run a background check on a dog walker or cat sitter, instead of saying, “we recommend this background check,” use data instead. If true, saying that 75% of our pet owners run a background check ensures that this is not a recommendation from the marketplace, allowing you to remain a passive intermediary. This is because this statement is simply a fact and reflective of ‘normal’ customer behavior.
At the end of the day, you want to avoid directing your customers because if something goes wrong, and they followed your direction, your customers will come back to you...potentially in court.