On 14 June 2019 the Council of the European Union adopted the regulation to address relations between online platforms and businesses - Regulation of the European Parliament and of the Council on promoting fairness and transparency for business users of online intermediation services (P2B Regulation). The regulation still has to be signed and published in the Official Journal of the EU. It will enter into force on the 20th day following publication and will apply 12 months from the date of publication.
Online platforms are strong drivers of innovation and play an important role, being an important focus of the EU Digital Single Market strategy. At the EU level the key areas in relation to online platform business are (i) to effectively tackle illegal content online and (ii) to address the issues of unfair contractual clauses and trading practices identified in platform-to-business relationships (including dispute resolution, fair practices criteria and transparency).
By putting in place a harmonised framework for minimum transparency and redress rights, it aims to protect companies that depend on online platforms for reaching consumers, while safeguarding platforms' innovation potential. The regulatory framework provided by the P2B Regulation also aims to indirectly help to improve consumer trust in the online platform economy, where a healthy competition will lead to increased consumer choice.
These rules shall apply to online marketplaces, social media and creative content outlets, application distribution platforms, price comparison websites, platforms for the collaborative economy as well as online general search engines.
The main aspects covered by the P2B Regulation are the following:
The P2B Regulation should apply to providers of online intermediation services or online search engines regardless of whether they are established in a Member State or outside EU, provided that two cumulative conditions are met:
- the business users / corporate website users are established in EU; and
- the business users / corporate website users offer, through the provision of those services, their goods or services to consumers located in the EU, at least for part of the transaction.
We note that the P2B Regulation applies irrespective of the law otherwise applicable to a contract and in addition to other relevant local or European provisions (such as civil law, competition law, consumer protection law, unfair commercial practices etc).
2. Definition of the online intermediation services
Online intermediation services consist of information society services, which are characterised by the fact that they:
- aim to facilitate the initiating of direct transactions between business users and consumers, irrespective of whether the transactions are ultimately concluded (no requirement for any contractual relationship between the business users and consumers as a precondition for online intermediation services falling within the scope of the P2B Regulation).
- are provided on the basis of contractual relationships between the providers and business users which offer goods or services to consumers. Such a contractual relationship should be deemed to exist where both parties concerned express their intention to be bound in an unequivocal manner on a durable medium, without an express written agreement necessarily being required.
For instance, online intermediation services cover online e-commerce market places, online software applications services, such as app stores, and online social media services, irrespective of the technology used to provide such services.
The following are excluded from the scope of the P2B Regulation:
- peer-to-peer online intermediation services without the presence of business users
- pure business-to-business online intermediation services which are not offered to consumers
- online advertising tools and online advertising exchanges which are not provided with the aim of facilitating the initiation of direct transactions and which do not involve a contractual relationship with consumers
- SEO software services as well as services which revolve around advertising-blocking software
- online payment services (i.e. are rather inherently auxiliary to the transaction for the supply of goods and services to the consumers)
3. Key points covered by the P2B Regulation
- Requirements for the terms and conditions of a contractual relationship between business users - online intermediation services
To ensure that the general terms and conditions of a contractual relationship enable business users to determine the commercial conditions for the use, termination and suspension of online intermediation services, and to achieve predictability regarding their business relationship, those terms and conditions shall be drafted so as to comply with the following requirements:
- are drafted in plain and intelligible language;
- are easily available to business users at all stages of their commercial relationship. Moreover, any changes to those terms are notified on a durable medium to business users concerned within a set notice period of at least 15 days;
- set out the grounds for decisions to suspend or terminate or impose any other kind of restriction;
- include information on any additional distribution channels and potential affiliate programmes (eg other websites, apps or other online intermediation services used to market the goods or services offered by the business user).
- include general information regarding the effects of the terms and conditions on the ownership and control of intellectual property rights of business users (eg the general usage of logos, trademarks or brand names).
In order to protect business users and to provide legal certainty for both sides, non-compliant terms and conditions are null and void, that is, deemed to have never existed, with general and retroactive effects.
- Conditions to restrict, suspend or terminate the provision of its services to a given business user
A provider of online intermediation services can have legitimate reasons to decide to restrict, suspend or terminate the provision of its services to a given business user, including by delisting individual goods or services of a given business user or effectively removing search results. Short of being suspended, providers of online intermediation services can also restrict individual listings of business users (eg through their demotion or by negatively affecting a business user's appearance which can include lowering its ranking).
However, given that such decisions can significantly affect the interests of the business user concerned, they should be provided, prior to or at the time of the restriction or suspension taking effect as follows:
- With a statement of reasons for that decision on a durable medium;
- The statement of reasons shall identify the grounds of such decision based on the grounds that the provider had set out in advance in its terms and conditions;
- Include reference to the relevant specific circumstances, i.e. third party notifications, that led to that decision, if the case.
The termination of the whole of the online intermediation services and the related deletion of data provided for the use of, or generated through, the provision of online intermediation services represent a loss of essential information which could have a significant impact on business users. Therefore, the provider of online intermediation services should provide the business user concerned with a statement of reasons on a durable medium, at least 30 days before the termination of the provision of the whole of its online intermediation services enters into effect.
In order to ensure proportionality, providers of online intermediation services should, where reasonable and technically feasible, delist only individual goods or services of a business user, termination of the whole of the online intermediation services constituting the most severe measure.
- Ranking - algorithmic 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 providers of online intermediation services or by providers of online search engines, resulting from the use of algorithmic sequencing, rating or review mechanisms, visual highlights, or other saliency tools, or combinations thereof.
- Providers should outline the main parameters determining ranking beforehand.
- The description of the main parameters determining ranking should include an explanation of any possibility for business users to actively influence ranking against remuneration, as well as an explanation of the relative effects thereof.
- The provider should provide business users with an adequate understanding of how the ranking mechanism takes account of 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.
- Similarly, the ranking of websites by the providers of online search engines, notably of those websites through which undertakings offer goods and services to consumers, has an important impact on consumer choice and the commercial success of corporate website users. In addition to the characteristics of the goods and services and their relevance for consumers, this description of the main parameters determining the ranking of all indexed websites should also allow corporate website users to obtain an adequate understanding of whether, and if so how and to what extent, certain design characteristics of the website used, such as their optimisation for display on mobile telecommunications devices, is taken into account.
- Providers of online intermediation services or of online search engines are not required to disclose the detailed functioning of their ranking mechanisms, including algorithms.
- Differentiated treatment
Where a provider of online intermediation services itself offers certain goods or services to consumers through its own online intermediation services, or does so through a business user which it controls, that provider might compete directly with other business users of its online intermediation services which are not controlled by the provider, which might give the provider an economic incentive and the ability to use its control over the online intermediation services to provide technical or economic advantages to its own offering, or those offered through a business user which it controls, which it could deny to competing business users.
Such behaviour could undermine fair competition and restrict consumer choice. In such situations, the provider of online intermediation services acts in a transparent manner and provides an appropriate description of, and sets out the considerations for any differentiated treatment, whether through legal, commercial or technical means, such as functionalities involving operating systems that it might give in respect of goods or services it offers itself compared to those offered by business users. To ensure proportionality, this obligation should apply at the level of the overall online intermediation services, rather than at the level of individual goods or services offered through those services.
Specific contractual terms are addressed in the P2B Regulation, in particular in situations of imbalances in bargaining power, in order to ensure that contractual relations are conducted in good faith and on the basis of fair dealing.
- Ancillary goods and services
Where ancillary goods and services, including financial products, are offered to consumers through the online intermediation services, either by the provider of online intermediation services or by third parties, the provider of online intermediation services shall set out 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 its own ancillary goods and services through the online intermediation services.
- Access and use of data
The ability to access and use data, including personal data, can enable important value creation in the online platform economy, both generally as well as for the business users and online intermediation services involved.
Business users should in particular be made aware of any sharing of data with third parties that occurs for purposes which are not necessary for the proper functioning of the online intermediation services (eg where the provider monetises data under commercial considerations).
- Dispute resolution
- Internal complaint-handling
Providers of online intermediation services shall provide for an internal system for handling the complaints of business users.
The internal complaint-handling system shall be based on principles of transparency and equal treatment applied to equivalent situations, aimed at ensuring that a significant proportion of complaints can be solved bilaterally in a reasonable period of time.
It shall allow business users to lodge complaints directly with the provider concerned regarding any of the following issues: (a) alleged non-compliance by that provider with any obligations laid down in the P2B Regulation which affects the business user lodging the complaint; (b) technological issues which relate directly to the provision of online intermediation services, and which affect the complainant; (c) measures taken by, or behaviour of, that provider which relate directly to the provision of the online intermediation services, and which affect the complainant.
Providers of online intermediation services shall provide in their terms and conditions all relevant information relating to the access to and functioning of their internal complaint-handling system.
- Mediation can offer providers of online intermediation services and their business users a means to resolve disputes in a satisfactory manner, without having to use judicial proceedings which can be lengthy and costly. Therefore, providers of online intermediation services should facilitate mediation by, in particular, identifying at least two public or private mediators with which they are willing to engage.
- Judicial proceedings by
representative organisations or associations and by public
Organisations and associations that have a legitimate interest in representing business users or in representing corporate website users, as well as public bodies set up in Member States, shall have the right to take action before competent national courts in the Union, in accordance with the rules of the law of the Member State where the action is brought, to stop or prohibit any non-compliance by providers of online intermediation services or by providers of online search engines, with the relevant requirements laid down in the P2B Regulation.
- Codes of conduct
The preamble of the P2B Regulation mentions that Member States shall encourage adoption of codes of conduct, drawn up either by the service providers concerned or by organisations or associations representing them, to contribute to the proper application of the P2B Regulation. When drawing up such codes of conduct, in consultation with all relevant stakeholders, account should be taken of the specific features of the sectors concerned as well as of the specific characteristics of SMEs.
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.