Author

Debbie Heywood

Senior professional support lawyer

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Author

Debbie Heywood

Senior professional support lawyer

Read More

18 June 2020

Platform to Business Regulation to apply from 12 July 2020

  • IN-DEPTH ANALYSIS

What's the issue?

The EC has taken steps to redress a perceived imbalance in the relationship between online platforms and the businesses which provide goods and services on them, as well as between online search engines and the websites which appear on their listings, particularly in relation to ranking.

What's the development?

The Regulation on promoting fairness and transparency for business users of online intermediation services (Platform to Business Regulation or P2BR) will apply from 12 July 2020.

It introduces:

  • A ban on certain unfair practices by platforms – for example, suspension or termination of a seller's account without clear reasons, failure to provide terms and conditions in plain and intelligible language, and failure to give adequate notice for changes to terms and conditions. Definitive termination will require 30 days' advance notice (subject to limited exceptions).
  • Transparency requirements for online platforms and search engines which will have to disclose the main parameters used to rank goods and services on their site.
  • An obligation on platforms to disclose any advantage given to their own products over others, and explain what data they collect and how they share and use it.
  • A requirement on all but the smallest platforms to set up an internal complaint handling procedure for their business users. Platforms will need to offer mediation options to businesses.
  • The ability for business associations to sue platforms for non-compliance with the Regulation. Member States will also be able to appoint public authorities with enforcement powers. Businesses will be able to make complaints to those bodies.

What does this mean for you?

The new rules will apply primarily to online platforms and marketplaces, app stores, and social media platforms, and, in relation to rules on ranking transparency, to search engines in respect of their business and corporate users. The P2BR does not cover business to consumer relationships.

Specifically, the rules will apply to online platforms and search engines irrespective of their place of establishment or residence and of otherwise applicable law, where they offer services to business users and corporate website users which are established or resident in the EU and which offer goods or services to consumers located in the EU through the online platforms or search engines.

The Regulation does not apply to online payment services, online advertising tools or 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.

Note that only Articles 5 (ranking) and 7 (differentiated treatment) place direct obligations on online search engines.

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Relationship with other laws (Article 1)

The P2BR applies without prejudice to national rules which (in conformity with EU law) prohibit or sanction unilateral conduct or unfair commercial practices, to the extent that the relevant aspects are not covered in the P2BR.

The P2BR will not affect national civil law, in particular contract law such as the rules on validity, formation, effects or termination of a contract, in so far as those rules conform with EU law and to the extent those aspects are not covered in the P2BR.

The P2BR is without prejudice to EU law, in particular, to EU law in the areas of judicial cooperation in civil matters, competition, data protection, trade secrets protection, consumer protection, e-commerce and financial services.

Article 9 (access to data) is explicitly without prejudice to the GDPR, the ePrivacy Directive and the Data Protection Law Enforcement Directive.

Key definitions (Article 2)

"Business user" – means any private individual acting in a commercial or professional capacity or any legal person which through online intermediation services offers goods or services to consumers for purposes relating to its trade, business, craft or profession.

"online intermediation services" – means services which meet all of the following requirements:

  • they constitute information society services within the meaning of Article 1(1)(b) of Directive (EU) 2015/1535 of the European Parliament and of the Council
  • they allow business users to offer goods or services to consumers, with a view to facilitating the initiating of direct transactions between those business users and consumers, irrespective of where those transactions are ultimately concluded
  • they are provided to business users on the basis of contractual relationships between the provider of those services and business users, which offer goods or services to consumers.

"provider of online intermediation services" – means any natural or legal person which provides, or which offers to provide, online intermediation services to business users.

"online search engine" – means a digital service that allows users to input queries in order to perform searches of, in principle, all websites or 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.

"provider of online search engine" – means any natural or legal person which provides, or which offers to provide, online search engines to consumers.

"corporate website user" – means any natural or legal person which uses an online interface, meaning any software, including a website or a part thereof and applications, including mobile applications, to offer goods or services to consumers for purposes relating to its trade, business, craft or profession.

"Durable medium" – means something which can be personally directed, stored and kept accessible and allows unchanged reproduction

Definition of terms and conditions (Article 2)

Note that "terms and conditions" is defined widely to include any terms and conditions or specifications governing the contractual relationship between the Online Intermediation Service (OIS) provider and the business user, where they are defined unilaterally by the OIS provider. The decision as to whether or not it's the OIS which has unilaterally defined the terms and conditions should be an overall assessment. Factors like the relative size of the parties or whether the contract or elements of it have been negotiated will not by themselves be decisive.

This has the slightly unusual effect of requiring some consideration as to whether provisions in the P2BR which relate to OIS provider terms and conditions apply in a particular instance. They will only be relevant where the terms and conditions are considered to be unilaterally defined by the OIS provider

Terms and conditions (Article 3)

Supply of terms and conditions

OIS providers need to provide their business users with easily available (including pre-contract) terms and conditions which must be written in plain and intelligible language.

Mandatory information requirements

The terms and conditions must include information about:

  • Grounds for decisions to terminate or suspend or otherwise restrict provision of services to business users.
  • Information about any other distribution channels the OIS provider may use to distribute goods and services offered by the business user.
  • General information regarding any impact of the terms and conditions on ownership and control of intellectual property rights.

Changes to terms and conditions

Any proposed modifications of terms and conditions must be provided to the business user on a durable medium. Business users must be given notice prior to changes taking effect which is reasonable and proportionate to the extent of the changes and their impact on the business and which is of at least 15 days. The notice period must be longer than 15 days where the business user needs to make technical or commercial adaptations in order to comply with the changes.

On notification of changes, the business user may terminate the contract before the end of the notice period. Such termination will take effect within 15 days after receipt of the notice (unless the relevant contract stipulates a shorter period).

The business user may also waive the notice period by written statement or clear affirmative action. This may include, for example, submitting new goods or services on the OIS during any 15 day notice period (but not where the notice period is longer).

Notice period requirements will not apply where modifications to terms and conditions are made in response to a regulatory obligation or to address an unforeseen and imminent danger (eg fraud, cyberthreats, data breach).

Non-compliant terms and conditions will be null and void.

Note: Article 3(5) is slightly unclear. It says that OIS providers shall ensure the identity of the business user is clearly visible but provides no details as to what that means. The relevant recitals suggest that OIS providers shouldn't block the business user's identity rather than that they must display it.

Restriction, suspension and termination (Article 4)

In respect of business user's individual goods or services

Where an OIS provider decides to restrict or suspend its services in respect of a business user's individual goods or services, it must provide the business user with a statement of its reasons (including certain mandatory information) on a durable medium prior to or at the time of the termination or restriction. This will not apply where the OIS orovider is subject to a legal or regulatory obligation not to disclose such information, or where the OIS provider can demonstrate the business user has repeatedly breached its terms and conditions.

In respect of providing all services to the business user

Where an OIS provider decides to terminate the provision of its services to a business user, it must give 30 days' notice and supply a statement of reasons for the decision on a durable medium. The 30 day notice period does not apply (but a statement of reasons must still be supplied) where:

  • The business user is in persistent breach of the terms and conditions.
  • There is a legal or regulatory obligation on the OIS provider which means it cannot give 30 days' notice.

Complaints

The OIS provider must allow the business user to go through the Article 11 complaints handling procedure.

Ranking (Article 5)

Ranking on OIS platforms

OIS providers must set out the main parameters determining ranking and the reasons for their relative importance in their terms and conditions with business users.

Ranking on online search engines

Online search engine providers (OSEs) must provide an easily and publicly available description in plain and intelligible language on their search engines of the main parameters which, individually or collectively, are the most significant in determining ranking, and their relative importance.

OSEs also have to offer to show their corporate website users the contents of any third party notice which has led to an impact on their ranking or to their delisting.

Disclosure of influence of remuneration on ranking

Both OIS providers and OSEs must include a description of the influence on ranking of any available direct or indirect remuneration mechanisms.

Contents of ranking parameter descriptions

The descriptions of ranking parameters must allow business users or corporate website users (as appropriate) to understand the extent to which ranking takes account of:

  • The characteristics of the goods and services offered to consumers.
  • The relevance of those characteristics to consumers.
  • For OSEs, the design characteristics of corporate website users' websites listed on online search engines.

No requirement to disclose

OIS providers and OSEs are not required to disclose algorithms or any information which would be reasonably certain to cause consumer harm or deception. This is without prejudice to the Trade Secrets Directive.

Further guidance on transparency requirements will follow.

Ancillary goods or services (Article 6)

Where the OIS provider or a third party offers ancillary goods and services to consumers, a description of the types of goods and services offered and whether and under what conditions the business user is also allowed to offer their own ancillary goods through the relevant OIS provider, must be included in the terms and conditions.

Differentiated treatment (Article 7)

OIS providers and OSEs must include in their terms and conditions a description of any differentiated treatment they give or may give in relation to goods or services they (or a business they control) offer to consumers on the one hand, and those of their business users/corporate website users on the other hand.

The description must cover, in particular, any differentiated treatment relating to:

  • Access to personal and/or other data by the OIS provider or OSE generated by the business users/corporate websites or their consumers.
  • Rankings or other settings which influence consumer access to goods or services on the platform/search engine.
  • Direct or indirect remuneration charged for use of the platform/search engine.
  • Access to, conditions or any direct or indirect remuneration charged for the use of services, functionalities or technical interfaces relevant to the business user/corporate website user connected to their use of the platform/search engine.

Specific contractual terms (Article 8)

OIS providers shall:

  • Not impose retroactive changes unless they are required to do so due to regulation or they are beneficial to business users.
  • Ensure terms and conditions include termination provisions for the business users.
  • Explain what access if any business users have to information provided or generated by them but retained by the OIS provider after termination.

Access to data (Article 9)

OIS providers must include a description in their terms and conditions of the access of their business users to personal and/or other data generated by business users and/or consumers through their provision/use of services on the platform.

This must cover:

  • Whether the OIS provider has access to the data and if so to which categories of data and under what conditions.
  • Whether a business user has access to the data and if so to which categories and under what conditions.
  • Whether the business user also has access to personal or other data, including in aggregated form, generated by other business users and their consumers and if so, to which categories and under what circumstances.
  • Whether data to which the OIS provider has access is provided to third parties and, if such provision is not necessary to provide the OIS, the purpose of the sharing and any opt-out provisions available to the business user.

Restrictions on selling through other means (Article 10)

Where OIS providers restrict business users from offering the same goods and services to consumers under different terms and conditions through other means, they must include the reasons for the restrictions in their terms and conditions and make the grounds for the restriction publicly available, except where they are required by EU or Member State law to make such restrictions.

Internal complaints handling system (Article 11)

OIS providers must provide an internal complaints procedure for business users. This must be easily accessible, free, provide resolution within a reasonable time, and operate on the principles of transparency and equal treatment for equal situations.

The process should deal with complaints in relation to non-compliance by the provider with the P2BR, technological issues interfering with the platform, measures taken or behaviour by the provider which relate to the provision of their services and directly affect the relevant business user.

Outcomes must be conveyed to the complainant in plain and intelligible language and relevant information about the procedure must be included in the terms and conditions. Details must also be made available to the public about the system at least annually including information about the number of complaints, the main types of complaint, the average time period to process a complaint and aggregated information about the outcomes.

Article 11 does NOT apply to OIS providers which are small enterprises (Article 2(2) of Annex to Recommendation 2003/361/EC).

Mediation (Article 12)

OIS providers must identify two or more mediators with whom they are willing to engage in their terms and conditions. Where mediation is used, the OIS provider must bear a reasonable proportion of the costs.

Legal action by representative organisations, associations and public bodies (Article 14)

Organisations and associations legitimately representing business users and/or corporate website users (which comply with specified conditions), as well as public bodies, have the right to take action before competent courts to enforce the P2BR.

Remaining provisions

The rest of the P2BR places obligations on Member States and the Commission. These relate to enforcement, specialised mediators, best practice exchanges, codes of conduct, and to monitoring and review of the functioning of the P2BR.

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