Overseas online businesses beware, your dispute resolution clause could be unfair

Monday 1 July, 2024

The New Zealand High Court (Court) has ordered viagogo AG (viagogo) to correct misleading information on its website and change certain ‘unfair’ customer terms (Terms) in Commerce Commission v Viagogo AG. viagogo is a global online marketplace for the resale of event tickets with no physical presence in NZ.

While the decision primarily focused on viagogo’s false or misleading representations, the decision was novel in that it also considered whether a clause in a standard form customer contract that required disputes to be resolved by the Courts of Geneva and the contract terms to be governed by Swiss law, is an unfair contract term in breach of the Fair Trading Act 1986 (FTA).

viagogo has announced its intent to appeal the decision and the Commission has responded that it intends to defend the judgment. 

T|W Insights

For international online businesses trading in New Zealand, this decision highlights:

• the extra-territorial reach of the FTA;

• the Commerce Commission will hold overseas businesses that carries on business in New Zealand accountable for breaches of the FTA;

• the need to ensure that any terms in standard customer contracts that create a significant imbalance in favour of the business, and to the detriment of the customer, must be reasonably necessary to protect the legitimate commercial interests of the business which is advantaged by the imbalance;

• if there is no clear and compelling justification for including restrictive dispute resolution provisions in a standard form customer contract, then there is a relatively high risk that courts will interpret the clause as an unjustified barrier to the disadvantaged party protecting or asserting its rights; and

• the inclusion of ‘fine print’, including in the form of ‘hover-overs’, to correct otherwise false or misleading representations isn’t enough to avoid liability where the overall effect of the representations misleads or deceives consumers.

While it is common for international online businesses to have governing law and dispute resolution clauses that require its New Zealand customers to enforce their rights in the home country of the overseas business, viagogo’s experience shows that such clauses may be considered unfair and invalid.

Background

viagogo operates an online marketplace where sellers offer tickets to live events around the world. The Commerce Commission has been inundated with complaints relating to viagogo’s NZ operations since at least 2017, with those complaints alleging incorrect or misleading ticket prices, excessive additional fees, and false claims about the validity of tickets being sold. Complaints about viagogo vastly exceeded complaints made about other firms in the business of selling tickets to events, and at times it was the most complained-about company in any industry.

The Commission applied to the Court:

• seeking a declaration under the FTA that the governing law and dispute resolution provision was an unfair contract term; and
• alleged that viagogo engaged in conduct likely to mislead consumers and made false or misleading representations.

Unfair contract terms

In New Zealand, the Commission is empowered to apply to the Court for a declaration that a term in a standard form consumer contract is an ‘unfair contract term’. The process of determination includes looking at the relevant term in the full context of the contract and surrounding circumstances and examining whether it:

• causes a significant imbalance between the parties;
• is reasonably necessary to protect the legitimate interests of the advantaged party; and
• would be detrimental to the consumer if relied on.

There was no dispute that viagogo’s online customer Terms were a standard form consumer contract for the purpose of the FTA.

Clause 7.4 in the Terms set out that:

• any disputes relating to the Terms must resolved by the Courts of Geneva, except viagogo had the unilateral right to take legal action against its customers in the customers’ home jurisdiction; and
• the Terms were to be governed by and interpreted in accordance with Swiss law.

The Court agreed with the Commission that viagogo’s rights were significantly out of balance with its customers due to viagogo’s ability to pursue customers in Geneva or their home courts, but the customers’ only option was to take action in Geneva in order to enforce their rights against viagogo.

viagogo’s argued it had a legitimate interest in confining the resolution of disputes in its home jurisdiction. It referred to several Australian cases where the Australian courts upheld exclusive jurisdiction clauses.

However, the Court distinguished viagogo’s position from the Australian cases on the basis that any sums at issue in a dispute with viagogo would be:

• relatively small, contrasting with the larger scope (and monetary value) of the subject matter of the Australian cases (e.g. personal injury in a Paris hotel room, a class action against a cruise line and business use of Instagram, where Instagram had agreed to meet most of the associated costs); and
• at an appropriate scale to be resolved by New Zealand’s Disputes Tribunal (claims of NZD$30,000 or less).

Along the same lines, the Court found that in any dispute with viagogo and New Zealand customers, all relevant witnesses would be local and there would be no reason why (being a worldwide business which operates solely online), viagogo would not be able to attend a hearing in New Zealand by audio visual link or by appointing a representative.

However, the Court did not find that the governing law component of clause 7.4 also constituted an unfair contract term, on the basis there was no evidence that Swiss law was advantageous to viagogo and disadvantageous to its New Zealand customers. It also discussed the issue that declaring that part of the term unfair would mean the Terms had no governing law provision, and the result would be uncertain and not that New Zealand law would apply.

Other FTA breaches

viagogo’s use of fine-print disclaimers and ‘hover-over’ additional information wasn’t enough to prevent the Court finding that its representations to consumers, as a whole, were misleading  or deceptive.

The Court found that viagogo had misled or deceived consumers by:

• failing to disclose to consumers that it is a resale platform and not an authorised official ticketing agent;

• guaranteeing consumers that it would receive a valid ticket to events when it often sold invalid tickets, with the remedy that only a refund would be given after the event;

• making misleading statements as to the number of, and demand for, tickets, creating a sense of (false) urgency for consumers;

• presenting an initial price and then disclosing significant additional ticket fees at a late stage of the purchase process; and

• creating a misleading impression in its advertising that it was an official ticketing agent for events.

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