Consumer rights and competition law is spreading its wings, and online platforms are in the firing line. We take a closer look.
Q: What do e-marketplaces, App stores, cab-hailing Apps, search engines, automotive manufacturer-importer platforms, crowdfunding sites, social media sites and food delivery Apps all have in common?
A: They are all potentially affected by the EU’s Platform to Business regulation.
With the EU’s platform to business regulation (P2B) officially becoming law on 12 July 2020, operators of certain online platforms will need to start looking carefully at the impact of the new rules on their businesses and operations.
The focus of the regulations, which apply to online intermediation services (OIS) and search engines, is to ensure that the platforms operated by these types of intermediaries deal with their business users fairly and in a transparent manner. EU legislators have been increasingly concerned about the anti-competitive practices that could arise from the imbalance of bargaining power affecting business users and ultimately the impact on consumers with whom those users transact. This follows a number of reports regarding the power wielded by large platforms such as Amazon and Apple in respect of changes and decisions they make relating to their trader and developer policies.
As an EU regulation, the new rules are directly effective in each of the 27 EU member states, and the UK – but more on that later. A failure to take heed of the regulation’s requirements may result in operators finding that their terms are unenforceable or that they are subject to regulatory or legal proceedings due to breach. We explain below who the regulation affects and why its provisions are a cause for concern for platform operators.
Who does the regulation affect?
The P2B regulation - formally regulation 2019/1150 - applies to OIS and search engines regardless of whether they are established within an EU member state, so long as they offer their services to business users and corporate website users established in the EU, and those users offer products or services to consumers located within the EU.
For the purposes of the regulation, your business will be classed as an OIS if its aim is to allow direct transactions between business users and consumers without the pre-existence of a contract between those two parties, and without requiring the transaction to be fulfilled. The most common examples of OIS are online e-commerce market places, online software services such as app stores, and social media services used by businesses. For the purposes of the regulation, search engines are those platforms which simplify searches online. In that case, if you operate a platform similar to eBay, Just Eat, Amazon Marketplace, the Apple App Store, Google Search, Bing, or Facebook, you should be concerned by the implementation of the regulation.
The breadth of the definition of OIS appears to also potentially cover cab-hailing apps, crowdfunding platforms and arguably even web hosting and cloud service providers, and businesses will no doubt welcome much-needed guidance on the intended scope of the regulation.
Why is the regulation important for platform operators?
As an OIS operator, if you fail to satisfy the requirements detailed in the regulation regarding your terms and conditions with business users, you may find yourself in a situation where the offending provisions are deemed null and void, or potentially the entire set of terms in certain circumstances. Trader, seller or developer policies would all fall within the scope of ‘terms and conditions’. In practice, this would mean the terms and conditions would be unenforceable against a business user, preventing operators from relying on the protections they provide, including in respect of problematic business users or undesirable practices.
Beyond the invalidation of terms and conditions, the regulation itself is silent on the legal consequences for operators where its requirements are not met. Member states have not generally been forthcoming regarding details of enforcement. In the UK, The Online Intermediation Services for Business Users (Enforcement) regulations 2020 (2020/609), which also came into force on 12 July 2020, provides that business users or industry bodies and other qualifying representative bodies may bring claims for loss or damage for breach of statutory duty. Member States may also empower their regulators to bring fines for violating the regulation - the Competition and Markets Authority would seem a good regulatory fit for the regulations in the UK.
Does Brexit prevent the regulation from applying in the UK?
No. The regulation will remain in effect during the entire UK/EU transition period. Once that period ends on 31 December 2020, the regulation will remain in operation with the UK government having the option to amend it or revoke it as desired.
What does the regulation require from platform operators?
The regulation introduces a number of requirements for OIS operators, including to:
- Ensure that their terms and conditions:
- are drafted in plain and intelligible language and easily accessible to business users throughout their commercial relationship with the platform (including in the pre-contract stage)
- set out the grounds for which decisions to suspend, terminate or impose any kind of restriction, to business users are made
- Give business users at least 15 days’ notice of any change to their terms and conditions in a durable medium (in an email or letter for instance, but not merely posting them online). A notice period greater than 15 days may be required depending on whether business users will be required to make significant technical adjustments to comply.
- Business users should be allowed a further 15 days to terminate the contract if the business user does not accept those proposed changes
- Give business users a statement of reasons for any decision taken to terminate or suspend a business user’s ability to use the platform
- Give business users at least 30 days’ prior warning where the decision is to terminate the business user’s ability to use the platform
- Preserve the data associated with the business user’s account, for the purpose of reinstatement should the account have been closed in error
- Set out in the terms and conditions the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters
- Disclose any differentiated treatment which is given to goods or services offered to consumers on one hand, and offered to other business users, which are provided by the operator, or provided by a user controlled by the operator
- Where ancillary goods and services, including financial products, are offered to consumers through the OIS, by the OIS operator or third parties, to set out in the terms and conditions a description of the type of ancillary goods and services offered and a description of whether, and under which conditions, the business user is also allowed to offer its own ancillary goods and services through the OIS.
If the OIS operator has over 50 staff members and generates over €10 million turnover, there are additional requirements for the OIS operator to comply with:
- Provide an internal system for handling the complaints of business users, which should be free and easily accessible. All relevant information concerning the system should be provided with the terms and conditions
- Identify two or more mediators within the operator’s terms and conditions which it is willing to engage to attempt to reach an agreement with a business user out of court where a dispute arises in relation to a matter which could not be resolved via the internal complaints handling system.
Similarly, the regulation sets in place a number of requirements for search engine operators, including to:
- Set out the main parameters which are most significant in determining ranking and the relative importance of those parameters. The operator should do this by providing an easily and publicly available description which is drafted in plain and intelligible language. This must be kept up-to-date.
- Provide a description for any differentiated treatment given to goods or services provided within the operator’s own group of companies.