A new EU Regulation imposing transparency, fairness, predictability and trustfulness upon online platforms and search engines has just been adopted.
WHY THE NEED FOR A NEW REGULATION?
Online intermediation services present an opportunity for businesses to expand their market scope and commercial prospects. They benefit consumers, who are exposed to a higher choice of goods and services. However, they also raise challenges, particularly the need to protect the interests of business users, who might find themselves in a position of dependence, especially medium- or small-sized companies.
The balance of power in the "P2B – Platform to Business" is ultimately comparable to that in the business to consumer relationships.
In particular, the following issues may arise:
- Online engines and platform rankings can have a strong impact on consumer choices, and platform owners have the power to unilaterally harm (or favour) the business websites using them;
- In some cases online intermediaries gain extraordinary power as all the market users concentrate on and only use the most popular platform, de facto excluding the competition, so that online platform behaviour might basically dictate the market success or failure of the undertakings using them;
- Platforms are liable to occupy dominant positions – which makes it paramount to prevent them from any possible abuse from a competition law viewpoint.
The aim of the new Regulation is to grant businesses a more predictable relationship with online platforms and provide access to effective and swift means of redress.
WHO IS AFFECTED?
The new rules will apply to online intermediation services, such as e-commerce market places (e.g. Amazon, eBay), search engines (e.g. Google Search, Bing), price comparison and booking websites (e.g. Airbnb, Skyscanner, TripAdvisor), app stores (e.g. Apple App Store, Microsoft Store) as well as social media (e.g. Facebook, Instagram) (hereinafter, jointly, the "Providers").
The Regulation does not apply to online advertising, payment services, search engine optimisation and services that connect hardware and applications that do not intermediate direct transactions between businesses and consumers, as well as intermediaries that operate between businesses only. Online retailers, to the extent that they sell only their own products (e.g. Zara.com), are also excluded.
The new Regulation only applies to "information society services". It might be argued, therefore, that services such as those offered by "Uber" will not be covered by the Regulation as, according to the CJEU, they do not fall within the definition of "information society services" but are rather "transport services" (case C-320/16, Uber France).
The territorial application of the Regulation depends on the business users. If they: (i) are established in the Union and (ii) offer their goods or services to consumers (natural persons) located in the Union at least for part of the transaction – then the Providers are subject to the new provisions.
WHAT DO THE NEW RULES PROVIDE?
Terms and Conditions
The new Regulation provides that the Terms and Conditions of intermediaries should:
- be drafted in plain and intelligible language and be always available;
- set the grounds for the decisions to impose any kind of restriction, suspend, (including by delisting and lowering in the ranking) or terminate the provision of the online intermediation services;
- where restriction decisions are imposed, add to those restrictions a statement of reasons and means for the businesses to clarify their positions;
- indicate the provision of at least 15 days-notice of any change in the terms and conditions. During the notice period the business users can withdraw from the contractual relationship without further obligation;
- include information on the effect of the terms and conditions on the ownership or exploitation of the Intellectual Property rights of the business users. Also, intermediaries should not completely prevent their business users from featuring their trading identity as part of their offering or presence on the relevant platform.
- Any Terms and Conditions that do not comply with the above will be considered null and void.
Providers should outline the main parameters determining ranking beforehand. This should improve predictability and allow business users to compare the ranking practices of various providers.
The description should also include an explanation of any possibility for business users to actively influence ranking against - any kind of – compensation.
However, Providers are not required to disclose the technical details, such as their raking algorithms. In this respect, Luxembourg-based readers will note that the new law on the protection of trade secrets, transposing Directive (EU) 2016/943, has very recently been adopted in the Grand Duchy. Henceforth an instrument of positive law will finally provide for protection, including enforcement instruments, for know-how, commercial information and technological information.
When a Provider itself offers certain goods or services to consumers through its own engine, it might compete directly with its business users. Transparency is therefore paramount.
The Regulation provides that the Providers must act in a transparent manner and provide a description of any differentiated treatment, whether through legal, commercial or technical means, that it might give to its own goods and services.
From the opposite angle, Providers are also required to set grounds for the possible restrictions to business users to offer goods or services under more favourable conditions through other channels.
The Regulation requires that users should be provided with a clear description of the scope, nature and conditions of their access to and use of certain categories of data (personal and non-personal).
Platforms must inform business users if they share with third parties any data which has been generated through the use of the intermediation services.
In particular, any data sharing with third parties for purposes which are not necessary for the actual functioning of the online intermediation services – namely when the Provider makes economic gains with such data sharing - should be notified to the business users.
Redress and Dispute Resolution
One of the most impactful provisions introduced by the new Regulation is that Providers should establish an internal complaint-handling system, allowing business users to have access to immediate, suitable and effective possibilities of redress, namely cases of restriction, suspension or termination of the service. This, of course, is not prejudicial to resorting to normal judicial proceedings in the case of an unsatisfactory result of the internal process. Providers who are "small businesses" are not subject to this requirement.
Also, the Regulation encourages the use of mediation, requiring Providers to indicate two mediators with whom they are willing to engage.
The Regulation imposes a general requirement to provide adequate and effective enforcement.
In particular, organisations, associations representing business users or corporate website users, as well as certain public bodies can take action before national courts. In other words, "class actions" are possible against the Providers.
WHAT'S THERE TO SAY?
This Regulation should be welcomed as intermediaries and online engines have a very powerful role in today's economy. It was necessary that they be subject to transparency and fairness requirements and that their business users be granted appropriate means of redress.
Thanks mainly to the intervention of the European Parliament, the Regulation is marked by the principle of technological-neutrality. This means that the provisions apply regardless of the specific technology used by Providers and business users, with an express mention of voice-activated applications. The legislature is aware of the fact that the quick pace of innovation should not hamper the application of the law's principles.
Member States and stakeholders will have one year from the publication of the Regulation in the Official Journal to prepare themselves to be compliant with the new rules. It will be interesting to follow closely how the sector will react and what will be the changes in practice.
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.