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INTRO
INSIGHTS

Online Platforms and business users: an EU regulatory first

By
Paul Foley
The Platforms Regulation represents the first action at EU level specifically targeting commercial contracts between online platforms and their business users. It will benefit millions of European companies who rely on online platforms and online search engines to reach their customers.
Summary:

The Platforms Regulation (Regulation (EU) 2019/1150 of 20 June 2019) will require no later than 12.7.2020 that providers of online intermediation services in scope (POIS), word/draft their terms and conditions with business users so that:
  • they are drafted in plain and intelligible language and are easily available to business users at all stages, including in the pre-contractual stage;

  • they include information on any additional distribution channels and potential affiliate programmes through which the POIS might market the goods and services offered by business users;

  • include general information regarding the effects of the terms and conditions on the ownership and control of intellectual property rights of business users (such as the general usage of logos, trademarks and brand names);

  • a description of the technical and contractual access or absence thereof, to the information provided or generated by the business user, which the POIS maintains after the expiry of the contract between the POIS and the business user;

  • a description of the type of ancillary goods and services, POIS propose to consumers alongside a business user's offer and which supplementary goods and services a business user can offer;

  • the main parameters determining ranking (as defined) and the reasons for the relative importance of those main parameters as opposed to other parameters. Where the main parameters include the possibility to influence ranking by paying for it, the POIS must also set out a description (as required by Article 5) of those possibilities and of the effects of such remuneration on ranking so as to satisfy the requirements of Article 5;

  • a description (what the description must deal with, is specified in Article 7) of any differentiated treatment which they give, or might give, in relation to goods or services offered to consumers through those online intermediation services by, either the POIS itself or by any business users which the POIS controls and, on the other hand, other business users;

  • where the POIS restrict the ability of business users to offer the same goods and services to consumers under different conditions through other means than through those services, POIS must include the grounds for that restriction in their terms and conditions and make those grounds easily available to the public. Those grounds shall include the main economic, commercial or legal considerations for those restrictions;

  • a description (what the description must cover is specified in Article 9(1)) and 9(2) of the technical and contractual access, or absence thereof, of business users to any personal data or other data, or both, which business users or consumers provide for the use of the online intermediation services concerned or which are generated through the provision of those services;

  • all relevant information relating to the access to and functioning of the internal complaint handling system required by Articles 11 and 12 is set out. The POIS must also implement the internal complaint handling system. Articles 11(1) to 11(4) set out in detail the operational requirements for this system (which must be provided free of charge). However, these requirements will not apply to POIS that are small enterprises within the meaning of the Annex to Recommendation 2003/361/EC (Article 11.5). Currently this means enterprises with less than 50 staff members and generating less than €10 million turnover;

  • in their terms and conditions, Article 12 requires they identify two or more mediators with which they are willing to engage to attempt to reach an agreement out of court, of any disputes including of unresolved complaints under Article 11.The location of mediators, their status, affordability, ease of access (including remote access), responsiveness, experience and competence, are prescribed by Article 12;

  • the rights of the POIS, to change the terms and conditions and to terminate, suspend, or restrict the POIS services to a business user comply with the requirements of the Platforms Regulation;

  • business users are given defined rights to terminate and are given defined rights where restriction, suspension or termination is notified by the POIS. Additionally the identity of the business user on the online intermediation services must be clearly visible.

The Platforms Regulation, will require no later than 12.7.2020 that providers of online search engines in scope (POSE) to corporate website users must:
  • set out the main parameters, which individually or collectively are most significant in determining ranking and the relative importance of those main parameters, by providing an easily and publicly available description (as required by Article 5), on the online search engines of those providers. That description must be available to the public and be kept up to date. Where the main parameters include the possibility to influence ranking by paying for it, the POSE must also set out a description (as required by Article 5) of those possibilities and of the effects of such remuneration on ranking so as to satisfy the requirements of Article 5;

  • where the POSE has altered the ranking order in a specific case or delisted a particular website following a third party notification, the POSE must offer the possibility for the corporate user to inspect the contents of the notification;

  • set out a description (what the description must deal with, is specified in Article 7) of any differentiated treatment which they give, or might give, in relation to goods or services offered to consumers through those online search engines by, on the one hand, either that the POSE itself or any corporate website users which that POSE controls and, on the other hand, other corporate website users.

The group of experts for the Observatory on the Online Platform Economy established under/arising from Commission Decision C(2018) 2393, will have a key role in informing the evaluation of the Platforms Regulation by the Commission. The intention is that this group will have a dedicated website and business users and corporate website users will be able to address issues relating to POSE and POIS to it. The group will use this information in its work to raise the Commissions awareness of main issues businesses and professional users are facing on online platforms. This will be in addition to the rights of redress provided by Articles 11 and 12.


ANALYSIS IN DETAIL

THERE ARE approximately 7000 online platforms or market places operating in the EU (which include world giants as well as very small startups) [1] and 19,526 global platform businesses. [2]

Today, one (1) million EU businesses are already selling goods and services via online platforms, and more than 50% of small and medium enterprises selling through online marketplaces sell cross-border. [3]

The Platforms Regulation (Regulation (EU) 2019/1150 of 20 June 2019) represents the first action at EU level specifically targeting commercial contracts between online platforms and their business users. [4] It applies in all Member States from the 12th of July 2020.

In an EU context, business users already benefit from the Geo-Blocking Regulation ((EU) 2018/302) and eCommerce Directive ((EU)/2000/31). On the latter, the upcoming Digital Services Act, is expected to change the intermediary protection in the eCommerce Directive.  

While there is some argument as to whether the Platforms Regulation constitutes just a minimum harmonisation measure, the EU Commission argue The Regulation constitutes a maximum harmonisation tool, which applies exclusively in relation to the transparency and redress obligations, which it establishes [5].

National rules which conform to Union Law and which prohibit or sanction unilateral conduct or unfair commercial practices, are allowed, to the extent that the relevant aspects are not covered by the Platforms Regulation.

The Platforms Regulation is also without prejudice to Union law, in particular in the areas of competition, data protection, consumer protection, electronic commerce and financial services.

The Platforms and Search Engines in scope (Article 1)

The Platforms Regulation applies to:

providers of online search engine services [6] (POSE) to corporate website users [7] (such as Google Search, Seznam.cz, Yahoo!, DuckDuckGo, Bing etc.) irrespective of whether they have a contractual relationship with the business user; and

providers of online intermediation services [8] (‘online platforms’ or ‘POIS’) to business users [9],which include third-party e-commerce market places (e.g. Amazon Marketplace, eBay, Fnac Marketplace), App Stores (e.g. Google Play, Apple Apps Store, Microsoft Store etc.), and Social Media for business (e.g. Facebook pages, Instagram used by makers/artists etc). Interfaces which can be directly connected or are ancillary to online intermediation services will also be subject to the transparency requirements of the Platforms Regulation, related to differentiated treatment [10].

Geographic Scope

The Platforms Regulation will apply to online intermediation services and online search engines provided, or offered to be provided, to business users and corporate website users, respectively, that have their place of establishment or residence in the Union and that, through those online intermediation services or online search engines, offer goods or services to consumers located in the Union, irrespective of the place of establishment or residence of the providers of those services and irrespective of the law otherwise applicable [11].

Services out of scope

It does not apply to online payment services or to online advertising tools or online advertising exchanges, which are not provided with the aim of the facilitating the initiation of direct transactions and which do not involve a contractual relationship with consumers. [12] For more detail on in-scope and out of scope services, see Recitals (9) and (11).

What the Platforms Regulation mandates [13]

Online Intermediation Terms and Conditions - General Requirements (Articles 2 to 4 and Article 8)

The terms and conditions [14] of a POIS must amongst other things:

set out the grounds for decisions to suspend or terminate or to impose any other kind of restrictions in whole or in part the provision of their online intermediation services to business users

include information on any additional distribution channels and potential affiliate programmes through which the POIS might market the goods and services offered by business users, such as other websites, apps or other online intermediation services used to market the products and services [15]

include general information regarding the effects of the terms and conditions on the ownership and control of intellectual property rights of business users (such as the general usage of logos, trademarks and brand names) [16]

give business users at least 15 days notice of proposed changes to the terms and conditions. Article 3 provides more detail on when notice must be longer or may be shorter and also the rights of business users in such contexts and the specific circumstances when no notice may be given. It also allows for waivers of notice period to be requested from business users and for deemed waivers of notice periods by business users to occur on certain events occurring [17]

ensure that the identity of the business user providing the goods or services on the online intermediation services is clearly visible. Recital (21) clarifies this in a rather negative way, as being able to feature their trading identity as part of their offering or presence on the relevant online intermediation services

provide prior to or at the time of the restriction or suspension taking effect, with a statement of reasons for that decision on a durable medium

give 30 days notice at least of termination: a statement of reasons must be provided (which must reflect reasons already stated in the terms and conditions) and be communicated on a durable medium. However Article 4(4) sets out the specific circumstances where the 30 day notice does not apply. Article 4(5) provides more detail on what the statement of reasons whether restriction, suspension or termination must contain. The second paragraph to Article 4(5) provides for an exception to the requirement to provide a statement of reasons.

give the business user the opportunity to clarify the facts and circumstances in the context of Article 11 [18] where restriction, suspension or termination is notified. An obligation of reinstatement is also provided for, where the restriction, suspension or termination is revoked by the POIS. [19]

Terms and conditions, or specific provisions thereof, which do not comply with the requirements of Article 3(1) as well as changes to terms and conditions implemented by a POIS contrary to the provisions of Article 3(2) will be null and void [20].

Additionally the POIS terms and conditions, must (i) specify the business users' termination rights; and (ii) set out a description of the technical and contractual access, or absence thereof, to the information provided or generated by the business user, which the POIS maintains after the expiry of the contract between the POIS and the business user [21].

More complex additional requirements for terms and conditions (Articles 5, 6,7 and 9)

Ranking (Article 5). ranking is defined in Article 2(8) [22]. The ranking obligations that apply to POIS services differ somewhat to those imposed on POSE.

POIS must set out the main parameters (see also Recital 24) determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters [23]. Where the main parameters include the possibility to influence ranking against payment of remuneration, the POIS must also set out a description of those possibilities and of the effects of such remuneration on ranking.

POSE must set out the main parameters, which individually or collectively are most significant in determining ranking and the relative importance of those main parameters, by providing an easily and publicly available description, on the online search engines of those providers. That description must be available to the public and be kept up to date [25].

Where the main parameters include the possibility to influence ranking against any direct or indirect remuneration paid by business users or corporate website users to the respective provider, that provider must also set out a description of those possibilities and of the effects of such remuneration on ranking in accordance with the requirements set out in Article 5(1) and Article 5(2).

Where the POSE has altered the ranking order in a specific case or delisted a particular website following a third party notification, the POSE must offer the possibility for the corporate website user to inspect the contents of the notification [26].

The descriptions must be sufficient to enable an adequate understanding of whether, and if so how and to what extent, the ranking mechanism takes account of the following:

(a) the characteristics of the goods and services offered to consumers;

(b) the relevance of those characteristics for those consumers;

(c) as regards online search engines, the design characteristics of the website used by corporate website users [27]. Software developers should specifically note Recitals (24) to (27).

POIS and POSE shall, when complying with the requirements of this Article 5, not be required to disclose algorithms or any information that, with reasonable certainty, would result in the enabling of deception of consumers or consumer harm through the manipulation of search results. This Article is without prejudice to Directive (EU) 2016/943 (the Trade Secrets Directive). [28] However in this context Recital (27) should additionally be noted [29]

To facilitate the compliance of POIS and POSE with and the enforcement of, the requirements of this Article 5, the Commission are required to accompany the transparency requirements set out in Article 5 with guidelines [30].

Ancillary goods and services (Article 6)

The Impact Assessment [31] reported that the terms of, including price or commission payable to the POIS for auxiliary services were not transparent and in the case for example of payment services, appeared to require that the POIS own payment services were used.

The Platforms Regulation uses in this context, the words ‘ancillary goods and services’ [32]. See Article 2(11) and Recital (29) for the definition and additional detail.

The Platforms Regulation provides that, where ancillary goods and services, including financial products, are offered to consumers through the online intermediation services, either by the POIS or by third parties, the POIS 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. [33]

Differentiated treatment (Article 7)

Online platforms sometimes play a dual role, for example by both providing the online market place and sell their products and services on their own market place. When such online platforms apply differentiated treatment to their own products or services such treatment is generally not made transparent to their business users. The favouring of own products or services by online platforms was identified as one of three most commonly experienced problematic trading practices by business respondents to the public consultation on platforms [34]. Recital (30) provides further background as regards POIS and Recital (31) as regards POSE.

POIS must include in their terms and conditions, a description of any differentiated treatment which they give, or might give, in relation to goods or services offered to consumers through those online intermediation services by, on the one hand, either by that provider itself or by any business users which that provider controls and, on the other hand, other business users.

POSE must set out a description of any differentiated treatment which they give, or might give, in relation to goods or services offered to consumers through those online search engines by, on the one hand, either that provider itself or any corporate website users which that provider controls and, on the other hand, other corporate website users [35].

The descriptions provided by a POIS and a POSE must cover, any differentiated treatment through specific measures taken by, or the behaviour of, a POIS or a POSE relating to any of the following:

(a) access that the provider, or that the business users or corporate website users which that provider controls, may have to any personal data or other data, or both, which business users, corporate website users or consumers provide for the use of the online intermediation services or the online search engines concerned or which are generated through the provision of those services;

(b) ranking or other settings applied by the provider that influence consumer access to goods or services offered through those online intermediation services by other business users or through those online search engines by other corporate website users;

(c) any direct or indirect remuneration charged for the use of the online intermediation services or online search engines concerned;

(d) access to, conditions for, or any direct or indirect remuneration charged for the use of services or functionalities, or technical interfaces, that are relevant to the business user or the corporate website user and that are directly connected or ancillary to utilising the online intermediation services or online search engines concerned. [36]

Access to data (Article 9)

Recital (33) explains that the ability to access and use data including personal data, can enable important value creation for each of business users and for the online intermediation services. Article 9 sets out the POIS obligations.

POIS must include in their terms and conditions a description of the technical and contractual access, or absence thereof, of business users to any personal data or other data, or both, which business users or consumers provide for the use of the online intermediation services concerned or which are generated through the provision of those services. [37]

Through the description referred to in Article 9(1), POIS must adequately inform business users in particular of the following:

  • (a) whether the POIS has access to personal data or other data, or both, which business users or consumers provide for the use of those services or which are generated through the provision of those services, and if so, to which categories of such data and under what conditions;
  • (b) whether a business user has access to personal data or other data, or both, provided by that business user in connection to the business user’s use of the online intermediation services concerned or generated through the provision of those services to that business user and the consumers of the business user’s goods or services, and if so, to which categories of such data and under what conditions;
  • (c) in addition to point (b), whether a business user has access to personal data or other data, or both, including in aggregated form, provided by or generated through the provision of the online intermediation services to all of the business users and consumers thereof, and if so, to which categories of such data and under what conditions; and
  • (d) whether any data under point (a) is provided to third parties, along with, where the provision of such data to third parties is not necessary for the proper functioning of the online intermediation services, information specifying the purpose of such data sharing, as well as possibilities for business users to opt out from that data sharing. [38]

This Article is without prejudice to the application of Regulation (EU) 2016/679 (GDPR) and certain other specified EU directives. [39]

Restrictions to offer different conditions through other means (Article 10)

The Impact Assessment [40] reports that “Issues have also arisen in the context of so-called 'most-favoured nation' ('MFN') clauses, also known as 'parity' or 'price-parity' clauses. MFN clauses require the supplier to offer a product or service on an online platform at the lowest price and/or on the best terms offered either through its own distribution channel(s) ('narrow' MFN clauses) or on all sales channels ('wide' MFN clauses)”. They have been the subject of regulatory action in many Member States in specific sectors. The Platforms Regulation does not prohibit them, but Article 10 requires where restrictions are imposed, the grounds (as defined) for such restrictions must be set out in the terms and conditions.

Where in the provision of their services, POIS restrict the ability of business users to offer the same goods and services to consumers under different conditions through other means than through those services, they must include the grounds for that restriction in their terms and conditions and make those grounds easily available to the public. Those grounds shall include the main economic, commercial or legal considerations for those restrictions [41].

The obligation set out in paragraph 1 (ie Article 10.1) does not affect any prohibitions or limitations in the imposition of such restrictions that result from the application of other acts of Union law or the laws of Member States to which the providers of online intermediation services are subject [42].

Redress Rights Generally (Article 11 and Article 12)

The Impact Assessment reports that POIS generally use exclusive choice of law and forum clauses [43]. A business user would then face the difficult issue and cost of convincing its home court that it is competent to deal with the case. Additionally, the Impact Assessment found that there is (a) lack of knowledge of judicial redress possibilities due to the small size of the companies, (b) disproportionate costs of seeking international judicial redress, and (c) judicial redress is too lengthy [44]. In effect redress rights are inadequate.

To address these issues, the Platforms Regulation requires a POIS:

to implement an internal complaint handling system (system) for handling the complaints of business users. Articles 11(1) to 11 (4) set out in detail the operational requirements for this system (which must be provided free of charge) and also what must be specified in the terms and conditions in relation to the system [45]. (Article 11) However, the provisions of this Article will not apply to POIS that are small enterprises within the meaning of the Annex to Recommendation 2003/361/EC (Article 11.5). Currently this means enterprises with less than 50 staff members and generating less than €10 million turnover; (Article 11.5)

in their terms and conditions to identify two or more mediators with which they are willing to engage to attempt to reach an agreement out of court, of any disputes including of unresolved complaints under Article 11 [46]. The location of mediators, their status, affordability, ease of access (including remote access), responsiveness, experience and competence, are regulated. [47]

In this context, POIS must:

bear a reasonable proportion of the total costs of mediation in each individual case as explained by and set out in Article 12.4;

make available, to the business user, information on the functioning and effectiveness of mediation related to its activities (if requested by a business user, before entering into or during mediation) [48].

Judicial proceedings by representative organisations or associations and by public bodies (Article 14)

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, to stop or prohibit any non-compliance by a POIS or POSE with the relevant requirements laid down in the Platforms Regulation. [49]

Enforcement (Article 15)

Each Member State must ensure adequate and effective enforcement of the Platforms Regulation. Member States must lay down the rules setting out the measures applicable to infringements of the Platforms Regulation and must ensure that they are implemented. The measures provided for must be effective, proportionate and dissuasive. [50]

Member States have the option to entrust existing authorities, including courts, with the enforcement of the Platforms Regulation. [51]

Monitoring and Review (Article 16 and Article 18)

The Commission, in close cooperation with Member States, shall closely monitor the impact of this Platforms Regulation on relationships between online intermediation services and their business users and between online search engines and corporate website users. To this end, the Commission must gather relevant information to monitor changes in these relationships, including by carrying out relevant studies. Member States shall assist the Commission by providing, upon request, any relevant information gathered including about specific cases. The Commission may, for the purpose of this Article and Article 18 (Review and not reproduced here save the reference below), seek to gather information from POIS.

Article 18(4) provides that in this context, the Commission shall take into account inter alia, the opinions and reports presented to it by the group of experts for the Observatory on the Online Platform Economy. It shall also take into account the content and functioning of any codes of conduct referred to in Article 17 (not reproduced here), where appropriate.


For advice on Online Platforms and Online Search Engines regulation, contact Paul Foley via the Contact Page >

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