There is no denying that, perhaps now more than ever, online platforms offer incomparable access to cross-border markets. The increasing reliance of businesses on online platforms has led to a shift in the online marketplace, creating new dependencies and imbalances of power. Until recently, although platforms were subject to a myriad of different and piecemeal rules and regulations, the services they provide and activities they carry out had not been regulated in their entirety. This reality was recognised by the European Commission (the ‘Commission') which identified the need to prioritise fairness in platform-to-business relations. Indeed, the EU Digital Single Market strategy confirmed this was one of the areas to be given priority in its mid-term review back in May 2017.
As a result, on the 12th July 2020, the Platform-to-Business (P2B) Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services, which was adopted in July 2019, will apply across the EU.
The P2B Regulation aims to protect businesses that depend on online platforms for reaching consumers, while also protecting the platforms' innovation potential. By means of this Regulation, businesses using third-party online platforms, such as online marketplaces and online search engines, will benefit from a number of new safeguards.
The P2B Regulation is also intended to indirectly encourage consumers to trust the online platform economy which will also increase healthy competition while leading to increased consumer choice.
Who does the P2B Regulation apply to?
The P2B Regulation applies to:
Online intermediation service providers ('OISPs' or ‘Providers'); this refers to online e-commerce market places, including collaborative ones on which business users are active (for instance, Amazon Marketplace, Facebook Marketplace, eBay etc.), online software applications services (such as the Apple App Store, Google Play, Microsoft Store), such as application stores, and online social media services (such as Facebook or Instagram), irrespective of the technology used to provide such services. In this sense, online intermediation services could also be provided by means of voice assistant technology.
Online search engine providers;this refers to a digital service that allows users to input queries in order to perform searches of, in principle, all websites, or all websites in a particular language, on the basis of a query on any subject in the form of a keyword, voice request, phrase or other input, and returns results in any format in which information related to the requested content can be found (this would, for example, include Google Search, Bing, or Yahoo!).
The P2B Regulation applies irrespective of the providers' place of establishment, as long as their services are directed to businesses established in the EU and they offer goods or services to consumers located in the EU.
For clarity, the P2B Regulation does not, however, apply to the following:
OISPs that only connect consumers to consumers, or businesses to businesses;
Online advertising tools and online Search Engine Optimisation (SEO) software services;
Technology and interfaces that connect hardware and applications;
Online retailers which directly sell their own products to consumers without relying on third parties.
What does this mean for OISPs?
In order to create a fair and transparent framework, the following must be adhered to:
- Stricter requirements for the terms and conditions
Under the P2B Regulation, the OISP has a number of obligations when drafting the terms and conditions of its offering namely that,:
The text of the terms and conditions should be drafted in plain and intelligible language.
They should be easily available to business users at all stages of their commercial relationship, even at the pre-contractual stage.
Any changes to those terms should be notified on a secure medium to business users concerned within a set notice period of at least 15 days, provided that this is not in conflict with other legal/regulatory obligations.
The terms should set out the grounds for any decisions to suspend or terminate or impose any other kind of restriction on the use of the service.
They should include reference to additional distribution channels and potential affiliate programmes through which a business user's goods and services will be marketed by the OISP (such as other websites, apps or other online intermediation services used to market the goods or services offered by the business user).
They should include general information regarding the effects of the terms and conditions on the ownership and control of intellectual property rights of business users (such as the general usage of logos, trademarks, or brand names).
In order to protect business users and to provide legal certainty for both sides, terms and conditions that do not comply with the above obligations are null and void, that is, they will be deemed to have never existed, with general and retroactive effects.
- Conditions to restrict, suspend or terminate the provision of the services to a business user
The P2B Regulation introduces restrictions on an OISP's ability to terminate or suspend a business user. In this respect, where an OISP wishes to terminate or suspend a business user, it should fulfil the following obligations, prior to or at the time of the restriction or suspension taking effect, namely:
Provide a statement of reasons justifying the relevant decision on a secure medium;
The justification referred to in (i) should be based on grounds that the provider had set out in advance in its terms and conditions;
The statement of reasons shall also include reference to the relevant specific circumstances, i.e. third-party notifications that led to that decision, where applicable.
The above should be provided at least 30 days prior to the entry into effect of the termination.
In order to ensure proportionality, providers of online intermediation services should, where reasonable and technically possible, exclude only individual goods or services of a business user. Termination of the whole of the online intermediation services, given its severity, should be a last resort.
- Ranking and transparency
Ranking refers to the relative prominence of the offers of business users or relevance given to search results as presented, organised or communicated by OISPs, resulting from the use of algorithmic sequencing, rating or review mechanisms, visual highlights, or other saliency tools, or combinations thereof, also referred to as ‘parameters' in the Regulations. In essence OISPs must provide a description of these parameters in their terms and conditions which should state whether business users are able to actively influence ranking against compensation, as well as an explanation of the relative effects. The provider should give business users an adequate explanation of how the ranking system takes into consideration the characteristics of the actual goods or services offered by the business user, and their relevance to the consumers of the specific online intermediation services.
OISPs are, however, not required to disclose the detailed functioning of their ranking mechanisms, including relevant algorithms.
- Differentiated treatment
In the event that an OISP also competes with its customers i.e. it offers its own goods and services to consumers through its own platform, or through a business user which it controls, the OISP must provide a description of any differentiated treatment given to its own group's goods and services. This must be provided in the OISPs terms and conditions.
This is a welcome introduction as to date, the lack of control of such activities meant that the OISP provider had clear economic incentives to use its control over online intermediation services to provide advantages to its own products or services over those of competing business users. This kind of behaviour undermines fair competition and limits consumer choice and is in fact the subject of a formal investigation presently being conducted by the Commission in relation to tech giant Amazon, where the Commission is assessing whether Amazon's use of data from independent retailers which sell on its marketplace is in beach of EU Competition rules, and an abuse of its dominant position in the market.
In such situations, the provider should act in a transparent manner and provide a suitable description of any differentiated treatment afforded in relation to goods or services offered to consumers through them or by them or by other business users or corporate website users that they control.
- Access to data
OISPs must set out in their terms and conditions how business users can access personal data or other data generated through the provision of those service to the business user. These must also describe any access the OISP has to that data after the expiry of the contract with the business user.
- Restriction to offer different conditions through other means
Some business users offer the same product to consumers at a different price or on different conditions. Where OISPs restrict this practice, they must include the grounds for that restriction in their terms and conditions, and make those grounds easily available to the public. Those grounds shall include the main economic, commercial, or legal considerations for those restrictions.
- Dispute Resolution
OISPs must offer a variety of methods to resolve disputes, such as internal complaint-handling systems and provide business users with the option of mediation.
What does this mean for online search engines?
The obligations of an online search engine are less onerous when compared to OISPs. These mainly concern obligations in relation to ranking and differentiation. The online search engine provider must provide, in its terms and conditions, details of the main parameters used to rank results, including the treatment of search results which are paid for. The P2B Regulation also requires online search engines to include in such terms and conditions to describe any differentiation they apply to their own goods or services in online search engine results.
What about consumers?
While the P2B does not directly protect consumers, it offers measures which indirectly benefit consumers by helping provide a fairer and more transparent marketplace. However, additional consumer protection will be provided through other means, such as the Enforcement and Modernisation Directive (2019/2161) which was adopted last year. This provides a range of new protections for consumers and amends the Directive on unfair commercial practices (Directive 2005/29/EC), the Directive on consumer rights (Directive 2011/83/EU), and the Directive on Consumer Price Indications (Directive 93/13/EEC). Member States must implement these changes by May 2022.
What should OISPs and Online search engines do?
OISPs and Online search engines should take this regulation as an opportunity to review their platform structure to avoid unfair design in line with the P2B Regulation. As a first step, in order to ensure they are compliant with the new Regulations, it is recommended that OISPs and online search engines carry out a thorough assessment and modification of their terms and conditions in accordance with the Regulations, which is one of the most prevalent requirements introduced by this Regulation.
OISPs should also adopt new procedures for changes to their general terms and conditions. Furthermore, a review of their practices should be carried out, in particular with respect to their procedures in relation to restrictions, suspensions, and termination of business users from their service.
Finally, the Regulations provide that a more comprehensive approach should be adopted for receiving and handling complaints from business users such as the requirement to offer the option of mediation. This in turn means that they will have to implement the relevant mediation procedures in practice either internally or by engaging an external mediation service provider.
Originally published by GVZH Advocates, July 2020
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.