Almost 90% of all Britons shop on Amazon UK with 70% of those customers buying from the online giant at least once a month! Selling products on Amazon UK is big business in 2023 and can be very profitable for savvy entrepreneurs. So much so that there has been an explosion in specialist private equity firms buying up highly profitable businesses built on the Amazon UK platform. While selling on Amazon can be a lucrative venture, there are a few things to consider before you dive in. In this article, we will go through the key legal considerations you need to think about before starting your Amazon business in the UK.
What is the Amazon Services Europe Business Solutions Agreement?
The Amazon Services Europe Business Solutions Agreement is an agreement between Amazon UK and you, as a business owner, which sets out the key terms and conditions governing your use of the Amazon marketplace platform.
Below we summarise the key provisions of the Amazon Services Europe Business Solutions Agreement that all Amazon sellers need to be aware of.
Intellectual Property (IP) licence
Sellers should be aware that they are required to grant Amazon UK a broad licence in respect of their business’s intellectual property (including trade marks and designs) when selling on the platform.
Term and termination
Amazon may terminate (ie end) the agreement without cause by giving a seller 30 days’ notice, or immediately in circumstances where an Amazon seller has materially breached the agreement and has not fixed the breach within 7 days (eg if the seller fails to pay Amazon its service fees or engages in fraudulent behaviour).
You, as the seller, must indemnify Amazon UK in relation to any claims made against it that relate to your non-compliance with relevant laws, failure to pay applicable taxes, or claims made against you by a third party.
If your business makes £4,000 or more per month for three consecutive months, Amazon UK requires you to take out public third-party liability insurance (at your cost).
In most cases, Amazon UK will provide at least 15 days’ advance notice of any changes to the agreement. However, Amazon may also change or modify the agreement with immediate effect in certain circumstances (eg for legal, regulatory, fraud and abuse prevention, or security reasons).
It is crucial that you stay up to date with any recent changes to avoid breaching the terms of the agreement and being slapped with a suspension or ban of your Amazon account.
In addition to the Amazon Services Europe Business Solutions Agreement, Amazon UK also has several policies that Amazon sellers should be aware of, and comply with, when conducting their business on the platform.
The Amazon UK Selling Policies and Seller Code of Conduct are both in place to ensure that all sellers act fairly and honestly on the Amazon marketplace to maintain a safe buying and selling experience for all.
Failing to adhere to these policies can lead to an account ban or suspension.
Which business structure is best for selling on Amazon?
Importantly, Amazon UK does not require its sellers to operate under a particular business structure. Choosing the right business structure when starting an Amazon business in the UK can be a daunting process. But with a little planning and guidance, the process can go very smoothly.
There are four main types of business structures for Amazon UK store owners to choose from:
Each of these structures has its pros and cons, so it’s important to understand the key differences before making your choice.
Here’s a quick summary of the key characteristics of each business structure:
As a sole trader, you are personally responsible for the day-to-day running of your business and liable for repaying any debts or liabilities incurred by the business. Setting up as a sole trader is a relatively simple process. A sole trader business is typically cheaper to set up than other common business structures and this does not require a large amount of ongoing compliance work.
A business partnership is similar to a sole trader because you will be personally liable in relation to all aspects of the business. With a business partnership, the difference is that you will be sharing this responsibility with one or more partners. A business partnership may be suitable if you are starting a business with a friend or family member. Because other parties are involved, it is crucial that the rights and obligations of each party are documented in a Partnership agreement.
Private limited company
A private limited company is a separate legal entity that is distinct from the owner(s) of the business (ie the shareholders). Ownership of the company is divided into shares, which shareholders hold. Decisions relating to the day-to-day operation of the company are typically left to the directors of the company.
A company is usually more time-consuming and costly to set up than a sole trader operation. There are also a lot more ongoing compliance obligations and administration with a company. A company can be a good option for businesses that are looking to raise capital for growth, as this is typically simpler with a company structure.
An alternative to a business partnership is a limited liability partnership (LLP).
Similar to a private limited company, an LLP is a separate legal entity. However, instead of shareholders, an LLP is owned and run by the partners. Typically, under an LLP each partner’s liability is limited to their interest in the partnership. In practice, if a claim is made against the partnership, the claimant cannot go after a partner’s personal assets.
The specific rights and responsibilities of the partners under the LLP should be documented in an LLP agreement.
How can I protect my IP on Amazon UK?
Like any business, your brand on Amazon UK is likely to carry significant value and you should take steps to protect it. The best way to protect your intellectual property is by registering it with the UK Intellectual Property Office (IPO).
Registering a trade mark
If you have a logo or colour scheme that distinguishes your brand from other brands on the Amazon UK marketplace, it makes sense to register these as trade marks.
Broadly, you can register words, sounds, logos, colours, or a combination of these items as a trade mark. Typically, a trade mark registration will last for 10 years, but this can be extended. For more information, read How to register a trade mark.
For straightforward trade mark applications, it can take around 3 to 4 months before your trade mark is granted. For this reason, it is worth lodging your application in the early stages of setting up your Amazon business to ensure you are protected when you launch.
Registering A design
Selling your own unique products on Amazon UK can be very profitable and it makes sense to protect the design of those products to prevent others from copying them.
You can typically register a physical shape, configuration, pattern, decoration, or colour if it is new. Typically, a design registration will last for 5 years, but this can be extended. The application process usually takes around 5 weeks. For more information, read Design rights.
What is UK consumer law and does it apply to Amazon businesses?
UK consumer law protects consumers’ rights when they buy goods or services. This includes purchases made online through marketplaces like Amazon UK.
UK consumer law protects consumers from a wide range of unfair, misleading, and deceptive business practices and provides consumers with certain rights that aim to remedy any breaches of UK consumer law by businesses.
Under certain circumstances, this may include consumers being entitled to a refund, repair, or exchange in relation to a product or service.
As an Amazon UK seller, it is essential that you understand your obligations under UK consumer law to make sure you are complying with your obligations when selling your products on the Amazon UK marketplace.
What legal agreements do I need for my Amazon business?
The specific legal agreements needed for an Amazon business will depend on several factors, including the type of business you have and the types of products you sell. For example, if you are sourcing products from a manufacturer or supplier, it makes sense to have a Distribution agreement in place to protect your rights.
Some other legal agreements you may need for your Amazon business include:
- employment agreements – if you have employees helping you out with your business, it is worth formalising the arrangement with an Employment contract
- commercial lease agreements – if you are leasing office or warehouse space you will need to enter into a Commercial lease
- finance agreements – if you require capital to grow and fund your business, you may consider making a Loan agreement
Before you sign any legal agreements, make sure you seek legal advice and don’t feel pressured to sign anything until you’re comfortable doing so.
Sounds great, how do I become an Amazon seller?
The first step you should take is to read through the material on the Amazon UK site to make sure starting an Amazon business is the right option for you.
If you have any questions or concerns about starting your Amazon business, do not hesitate to Ask a lawyer for assistance.