From 12 July 2020 onwards, the Regulation of the European Parliament and of the Council on promoting fairness and transparency for business users of online intermediation services (2019/1150) (the “Regulation”) will directly apply in EU member states. With the Digital Single Market being a focus point of the European Commission, this Regulation aims to strengthen the rights of commercial users of online platforms by addressing the issues of unfair contractual clauses and trading practices identified in platform-to-business relationships.
To whom does the Regulation apply?
The Regulation will apply to online platforms and search engines, online marketplaces, application distribution platforms, reservation and price comparison websites as well as platforms for the collaborative economy. These businesses are subject to the Regulation if (1) they provide their services to business users/corporate website users that are established in the EU, and (2) these businesses offer goods or services to consumers located in the EU. It does not matter where the provider of the platform service is established.
By contrast, pure business-to-business platforms that are not offered to consumers and peer-to-peer intermediation in which no commercial providers are involved are not covered by the Regulation. Online payment and advertising services are not included either.
Key Requirements under the Regulation
The Regulation will require platform operators to be more transparent and fair. This will affect, among other things:
Terms and Conditions, and information to be provided therein:
- Terms and Conditions (“T&Cs”) must be written in clear and understandable language, and be easily available, failing which such terms are void. Moreover, any changes to those terms have to be notified at least 15 days before taking effect.
- Platform providers should inform the business users about any additional distribution channels and potential affiliate programs available to market those users’ goods or services.
- The T&Cs must also set out the reasons for which platform access may be terminated, suspended, or restricted. Generic wording will no longer meet the requirements of the Regulation.
- If the business user’s use of the services is terminated, the platform provider has to provide a statement of reasons for that decision on a durable medium and at least 30 days before the termination comes into effect.
- Platform providers must also specify in their T&Cs whether and to what extent their own products or products from their group are given differential treatment.
Disclosure of ranking parameters:
- Platform operators must disclose the main parameters determining the ranking of search results in a plain and intelligible manner in their T&Cs, i.e. it must be clear from the T&Cs which criteria are used to list products and how these criteria are weighted.
- If platform users can influence the ranking against payment, this also needs to be disclosed – this includes both direct payments and indirect fees, such as the use of auxiliary services or premium features.
- The detailed functioning of the ranking methods — including the algorithms — does not need to be disclosed.
Dispute resolution out of court:
- Platform providers need to set up an internal complaint-handling system for their business users. This internal complaint-handling system should provide the opportunity for resolving disagreements between platform users and platform operators, for instance, if the user’s access to the platform was restricted in some way or if a ranking was downgraded, in a quick and individualized manner.
- Platform providers also have to identify in their T&Cs at least two mediators that can be used to settle disputes with the business users. It should be pointed out, however, that in practice it is not mandatory to conduct mediation.
- The requirements for setting up an internal complaint-handling system and identifying mediators do not apply to small businesses with fewer than 50 employees and annual turnover and/or an annual balance sheet totals of less than €10 million.
This Regulation is expected to create more transparency in the operation of online platforms and to safeguard the interests of companies that depend on online platforms for their business operations. Platform providers should assess now whether their internal procedures and their terms and conditions need to be adapted to comply with this new Regulation