The European Platform-to-Business Regulation (Regulation 2019/1150) is applicable as of 12 July 2020. The Regulation imposes obligations on online platforms so that business users of those platforms are better protected. This Whitepaper discusses the most important new rules and implications for both online platforms and business users.
The Regulation also applies to search engines. In this whitepaper we will focus on the rules for platforms.
The European Commission has published an extensive guidance document in the form of Questions & Answers.
Why new rules?
Online platforms (“online intermediation services” in the Regulation) cover a wide variety of business to consumer relationships. They include online ecommerce market places, social media, app stores and collaborative market places on which business users are active.
Online platforms collect and use data about their users, both businesses and consumers. They often enjoy network effects. For businesses that want to offer their products or services on an online platform, it is important to be active on the platform with the most users. Online platforms can be crucial for the commercial success of business users.
As an effect, online platforms can act as gateways, particularly as they become increasingly relied upon for market access. The EU examined the potential for online platforms to act unilaterally, and determined that their role was even turning from gateways to gatekeepers.
The Commission proposed the P2B Regulation as a first step to set rules for the online platform economy. It has taken a co-regulatory approach requiring online platforms to comply with legal obligations and encourages them to take voluntary complimentary steps. If necessary, the EU may take additional steps based on a future evaluation of the Regulation.
To whom do the new rules apply?
A service qualifies as an “online intermediation service” if it meets the following requirements:
- It constitutes an information society service;
- It allows “business users” to offer goods or services to “consumers”;
- Its aim is to facilitate “direct transactions between business users and consumers, regardless of where the transactions are ultimately concluded;
- It is provided on the basis of a contractual relationship between the online platform and the business user.
This includes online e-commerce marketplaces, including collaborative ones if business users are active on them (think Amazon Marketplace, eBay, Booking.com and Airbnb (insofar as business hosts are concerned)), online software applications services (think Apple App Store, Google Play) and social media for businesses (think Facebook company pages).
Since the definition requires the provider to be an information society service, it seems that Uber falls out of scope. The European Court of Justice ruled that Uber is not an information society services but a transport service.
The Regulation explicitly mentions a number of services that are out of scope:
- Peer-to-peer online platforms without the presence of business users;
- Business-to-business online platforms with no offerings to consumers;
- Adtech services such as online advertising tools and online advertising exchanges which do not facilitate direct transactions and do not involve a contractual relationship with consumers;
- Interfaces that merely connect hardware and applications;
- Online payment services, since they do not themselves meet the requirements but are inherently auxiliary to the transaction.
The Regulation only applies if there is EU relevance:
- The online platform is provided to business users establishment in the EU; AND
- Those business users offer their goods or services to consumers located in the EU (i.e. direct their activities towards EU located consumers).
It is not required that the online platform provider itself is established within the EU. Also US platforms that offer their services within the EU are in scope.
The consumers only need to be physically present in the EU when they use the online platform. They do not need to have the nationality of any EU Member State or a place of residence in the EU.
What are the new rules?
The Regulation has two cornerstones: transparency rules and a dispute resolution mechanism.
Terms and conditions must be clear
The Regulation requires that general terms and conditions must be in plain and intelligible language, transparent and easily available.
This means that they must not be vague, unspecific, misleading or lack important detail. The Regulation stresses that many business users of online platforms can be micro and small enterprises with limited legal understanding and know-how.
The terms and conditions must include sufficient information on the following subjects.
- The grounds for decisions to suspend, terminate or otherwise restrict the use of the platform by business users;
- Through what additional distribution or affiliate channels the online platform will offer a business user’s goods or services;
- The type of data that will be shared with business users;
- Why business users may be restricted from offering goods and services on different conditions through other platforms (‘most favoured nation’-clauses (MFN-clauses));
- Information regarding ownership and control of intellectual property rights based on the terms and conditions;
- Information on how and under which conditions a business user can terminate its contractual relationship with the Online platform;
- Information on how business users can use the internal complaint-handling system and how the system operates. Small enterprises are not obliged to provide for such a system;
- The names of two or more mediators with whom the online platform and business users can engage to attempt to reach an agreement to settle, out of court, any disputes that may arise. This obligation does not apply to small enterprises.
What if the terms and conditions do not comply?
Terms and conditions, or specific provisions thereof, that do not comply with the requirements, shall be null and void. That means that those specific provisions will be deemed never to have existed with retroactive effect with regard to all parties, not just to an individual business user.
Changes to the terms and conditions
Modification of the terms and conditions will need to be announced in advance and will typically need 15 days’ notice. Those changes cannot be made retrospectively.
The notice period does not apply if a business user waives the notice period in an unambiguous way. This needs to be done by means either of a written statement or a clear affirmative action. For example, submitting new goods or services during the 15 day period can be considered a waiver of the notice period.
Showing business users’ identity
Online platforms should not prevent a business user from making its trading identity visible as part of the business users’ offer (e.g. logos or brand names). This does not mean however, that business users should be able to unilaterally determine how their offer should appear.
Controls on suspension and termination of business users
There are rules to follow when deciding to terminate, suspend or restrict a business user’s account.
If an online platform decides to entirely close an account, this constitutes termination. This is considered the most severe measure. Suspension and restriction are considered less severe and may consist of delisting individual goods or services of a particular business, or effectively removing a good or service of a particular business from search results. Instead of suspending, online platforms can also restrict accounts. For example through demotion or actions that negatively affect the business’ appearance (known as ‘dimming’), such as lowering their ranking.
Before doing so the online platform must:
- Give the business user a statement of reasons for that decision on a durable medium;
- Give at least 30 days’ prior warning in case of termination (unless it can show that the business is a repeat-offender (and certain other exceptions);
- Give the business user the opportunity to clarify the facts that led to the decision; and
- Preserve the data associated with the business users’ account, so this can be reinstated if the business users’ account was closed in error.
Ranking of a business user’s goods or services has a big impact on their sales. Therefore, the online platform must inform businesses how they treat and rank goods or services. They must do so either in the terms and conditions or in a publicly available document.
“Ranking” is defined as the relative prominence given to the goods or services offered through online platforms as presented, organised or communicated by the provider irrespective of the technological means. This can be the result of the use of algorithmic sequencing, rating or review mechanisms, visual highlights or other tools.
Online platforms need to:
- Describe the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters;
- Set out a description of the possibility, if this exists, to influence ranking against any direct or indirect remuneration paid by business users and the effects of such remuneration on ranking.
Examples of possible main parameters are:
- The indicators used for measuring the quality of goods or services of business users;
- The use of editors and their ability to influence the ranking of those goods or services;
- Elements that do not or only remotely relate to the good or service itself, such as presentational features of the online offer.
The European Commission will adopt guidelines on the ranking transparency requirements. Check https://ec.europa.eu/digital-single-market/en/news/ranking-transparency-guidelines-framework-eu-regulation-platform-business-relations-explainer.
Ancillary goods and services
If ancillary goods and services, including financial products, are offered to consumers through online platforms, either by the online platforms or by third parties, the provider must clarify in its 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 ancillary goods and services.
Ancillary goods and services should be understood as goods and services offered to complement the primary good or service. Ancillary goods and services typically depend on, and are directly related to, the primary good or service in order to function. Goods and services that are merely being sold in addition to the primary good or service, rather than being complementary, are excluded.
Examples of ancillary services include repair services for a specific good or financial products such as car rental insurance.
If online platforms also offer goods or services to consumers themselves, or through business users that they control, they might compete directly with other business users. They may be inclined to use this ability to give their own offers technical or economic, which they could deny to competing business users.
Online platforms must therefore include in their terms and conditions information on how they treat and rank goods or services offered by themselves or by business users they control compared to third party business users. Business users controlled by the online platform are those which the provider owns or over which it can exercise decisive influence.
The description should refer to the main economic, commercial or legal considerations for such differentiated treatment and should refer to specific measures taken by the online platform relating to, in particular:
- Access of the online platform to data that business users, websites or consumers provide for, or generate through, their use of the services;
- Ranking or other settings that influence consumer access;
- Direct or indirect payment charged for the use of the online platform (monetary or otherwise); and
- Access to, conditions for, or any direct or indirect payment charged for the use of services or functionalities, or technical interfaces, that are directly connected or ancillary to the use of the online platform, such as operating systems.
Access to data
The ability to access and use data, including personal data, has great value in the online platform economy, for the business users as well as for the online platforms.
Online platforms must therefore include in their terms and conditions information on the access (both technical and contractual) to personal data or other data, which business users or consumers provide for use of the online platform or which are generated through the online platform. This includes the obligation to inform if no access to data is given.
The description should in particular refer to the scope, nature and conditions of their access to and use of the relevant categories of data such as for instance ratings and reviews.
The description should be proportionate and might refer to the general conditions of access, rather than be an exhaustive list of actual data points or categories of data. However, identification of and specific access conditions to certain types of actual data that might be highly relevant to business users could also be included in the description.
If data is shared with third parties and the sharing of data with those third parties is not necessary for the proper functioning of the online platform, the description in the terms and conditions needs to explain the purpose of such data sharing and how business users can opt out.
The terms must also describe any access the online platform has to that data after expiry of the contract with the business user.
Restrictions on selling through other channels
Where an online platform restricts business users from offering the same goods and services to consumers through other channels (for instances, by means of the so called ‘most favoured nation (MFN) clauses’), it must include those restrictions in its terms and conditions and set out the main economic, commercial or legal considerations for those restrictions.
This transparency obligation shall not affect any prohibitions or limitations on the use of such restrictions that result from the application of other EU or Member State law. It should not be understood as affecting the assessment of legality of such restrictions.
Finally, the Regulation provides for means to resolve disputes between businesses and online platforms. In particular:
- All platforms, except for the smallest, must set up an internal complaint handling system in order for business users, including those business users whose use of the online platform may have been restricted, suspended or terminated, to have a means to resolve potential problems;
- Online platforms shall be required to report to the general public on its functioning (e.g. number of complaints, their subject matter, time taken to process complaints and the decision taken);
- Platforms will have to provide businesses with more options to resolve a potential problem by naming specialised mediators they agree to engage with in their terms and conditions.
There is a reasonable degree of flexibility in setting up and operating the internal complaint handling system. The system can be set up as part of the operations of the online platform or they can delegate this task to an external service provider or to another part of its corporate structure.
The complaint handling system needs to ensure handling within a reasonable time frame and needs to be, in particular:
- Easily accessible to business users;
- Free of charge; and
- Based on the principles of transparency and equal treatment.
Specifically, the complaint handling system should be set up in a way so as to enable the online platform to:
- Duly consider complaints lodged and the follow-up which they may need to give to the complaint in order to adequately address the issue raised;
- Process complaints swiftly and effectively, taking into account the importance and complexity of the issue raised; and
- Communicate to the complainant the outcome of the internal complaint-handling process, in an individualised manner and drafted in plain and intelligible language. This must relate to the individual complaint and not be a standard generic response.
The complaint-handling system should allow business users to lodge complaints in relation to the following rather wide range of matters:
- Alleged non-compliance by the online platform with the obligations in the P2B Regulation;
- Technological issues which relate to the services provided; and
- Measures taken by, or the behaviour of, the online platform that relate directly to the services provided by the online platform.
The use of the complaint-handling system is not compulsory for business users. Business users cannot be forced to use it for example, as a condition for providers of online platforms to engage in good faith in any attempt to resolve a dispute using a mediator. However, if a business user does lodge a complaint, a provider of an online platform must respond to that complaint in line with the conditions set out above.
Any attempt to reach an agreement through the complaint-handling system does not affect the right to go to court or to use an alternative dispute resolution mechanism to resolve the same problem, at any time during or after the complaint-handling process.
Finally, there is a new option for organisations and associations representing business users’ interest to take action before competent national courts to stop or prohibit non-compliance by online platforms.
Various factors, such as limited financial means or a fear of retaliation might keep indivudal business users from taking an onlone platfocm to court. . Therefore, organisations and associations representing business users have the possibility to take action before national courts. Such action before national courts should aim to stop or prohibit infringements of the rules in the Regulation and to prevent future damage.
Such organisations or associations do need to meet certain criteria. In particular, they must be properly established, be of a non-profit making character and pursue their objectives on a sustained basis. Those requirements should prevent any ad hoc establishment of organisations or associations for the purpose of a specific action or specific actions, or for the sake of making profits.
There is a list of organisations and associations that have been appointed by the Members States as to fulfil the requirements laid down in the Regulation. The list can be consulted here. So far, only Austria seems to have submitted its list of organisations.
What can you do?
If you are acting on behalf of an online platform:
- It is likely necessary to amend your general terms and conditions;
- You should determine whether you should set up an internal complaints procedure and appoint two or more mediators. Note that mediators must meet certain legal requirements;
- You should align your procedures on termination, suspension or restriction of services towards business users.
If you are a business user:
- You have the right to be clearly informed on the aspects described above and you should check compliance. It he platform does not comply, the relevant terms and conditions are null and void;
- You have the right to adequate redress in case of termination, suspension or restriction of your account;
- You should not fear the platform’s power. With the correct legal assistance, the P2B Regulation is there to help you maintain your rightful ground.
P2B, not B2C
The Regulation protects businesses dealing with online platforms (P2B). It does not directly protect consumers (B2C). The Regulation can of course indirectly benefit consumers. It should help to provide fairer conditions and more transparent and competitive marketplaces.
New consumer protection rules
Additional consumer protection will apply as of May 2022, when the EU Member States have to implement the Enforcement and Modernisation Directive (Directive 019/2161). It will amend 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). Through these amendments, among other things:
- There will be more transparency obligations regarding search functions on online marketplaces and steps taken to ensure that consumer reviews are genuine;
- There will be a requirement on traders to disclose whether personalised pricing is used;
- There will be an obligation on online marketplaces to disclose information, such as whether the consumer is dealing with a trader or another consumer;
- There will be additional transparency requirements for price reduction claims.
There will also be much higher sanctions on breaches: fines of up to 4% of annual turnover.
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