New business to business (B2B) fairness and transparency rules apply to ‘online platforms’ and search engines from 12 July 2020
15 June 2020
New EU rules requiring online platforms (including e-commerce marketplaces and price comparison sites) and search engines to deal with their business users fairly and transparently, come into force in the UK and across the EU on 12 July.
New obligations on platforms include the provision of clear terms and conditions for business customers, suitable notice periods and reasons for changes to or termination of services, and suitable internal complaints procedures and external mediation services. Search engines as well as platforms are also subject to new transparency requirements regarding how they determine rankings for listed services/goods and search results.
Who does the Regulation apply to?
The intended beneficiaries of the Online Platforms Regulation are businesses, in particular SMEs who are reliant on online platforms and search engines to reach their consumers, who may find themselves on the wrong end of unfair trading practices. Examples given by the EU Commission when introducing the legislation were of arbitrary changes being made to terms and conditions, and suspension or changes in service provision without sufficient notice.
Consumers are (indirectly) expected to benefit from the new rules, but (this time) they are not the direct concern of these new rules.
The new obligations are targeted at two types of online service provider:
- “online intermediation services” (which we refer to as “platforms”), which include
- e-commerce marketplaces
- app stores
- social media sites (where they are serving businesses)
- price comparison sites
- booking sites that act as a shop window for third party businesses
- search engines (intended to be a technology-neutral term), in respect of parts of the Regulation.
The Regulation applies to these platforms or search engines, whether or not established in the EU, IF they provide services to businesses in the EU who are using the platforms or search engines to reach customers in the EU.
Some types of online platforms are excluded from the Regulation, including those who don’t act as an intermediary between businesses and their end customers. Examples of excluded platforms include online advertising services and ad exchanges, payment services, and online retailers/brands selling direct to customers.
What are the new obligations on platforms?
- Standard Terms and Conditions: platforms must provide their business customers with Ts & Cs that are plain, intelligible and easily available, and give reasonable and proportionate notice of any changes (usually at least 15 days) (although there are narrow exceptions, including in relation to fraud, malware, data breaches and other cybersecurity risks); business users must be given a right to terminate rather than accept such changes.Non-compliant Ts & Cs or changes are null and void.
- Transparency of particular Ts & Cs: the Regulation requires platforms to set out and explain in their Ts & Cs details of specified aspects of the relationship with their business customers, including the types of reason that may be relevant to suspending or terminating accounts; how data may be accessed, and potentially shared with third parties; the applicability of any most favoured nation (MFN) pricing clauses; and (interestingly) any differentiated treatment that the business may receive (compared to other businesses).
- Visibility of business identities: platform providers must ensure that the identity of the third party business users providing goods or services via their platform is clearly visible.
- Restriction, suspension or termination of business accounts: these actions by platforms are now subject to a duty to give a statement of reasons (with at least 30 days’ notice in the case of termination), with associated rights for the business to use the platform’s internal complaints procedure and to seek reinstatement of service without delay.
- Complaints and mediation: platforms (except for “small” enterprises) to provide: a) an internal complaint-handling system, offering free, timely and proportionate treatment of complaints; and b) identify at least two nominated mediators with whom they are willing to engage in an attempt to resolve disputes.The rights of businesses and platforms to take their disputes to court is not affected.
What are the new obligations that apply both to platforms and search engines?
- Rankings: Both platforms and search engines are under a duty to tell their business users how they rank (or treat differently) the goods or services of one business compared with another, either in their Ts & Cs or in another publicly available document.While technical/confidential details of algorithms do not have to be disclosed, the Regulation requires that the most significant parameters determining rankings must be disclosed, the relative importance of those parameters, and details of any means of influencing rankings by direct or indirect payments to the relevant third party provider.When search engines de-list or alter rankings based on third party notifications, a business user can ask to inspect the contents of the notification.The EU Commission is due to publish guidance to help ensure compliance.
- Differentiated treatment: There is also a requirement of transparency about any differentiated treatment that the platform or search engine gives its own goods or services (or those of related companies) when compared to those of their business users.
Enforcement by representative organisations: While each EU Member State is required to ensure that the Regulation is effectively enforceable through its usual national mechanisms, there is a provision facilitating the bringing of court proceedings by bodies representing groups of business users or corporate website users.This is intended to redress the balance in favour of SMEs who might otherwise, if acting alone, have insufficient financial means or fear commercial retaliation if they were to take on a major platform or search engine.We expect to see several trade bodies taking advantage of this.
What about Brexit?
Despite the UK’s exit from the EU on 31 January, the withdrawal arrangements mean that EU law continues to apply as if the UK were still an EU Member State until the end of the so-called “transition” or “implementation” period (currently, 31December 2020).
As the new Online Platforms Regulation comes into force during the transition period, it will apply immediately and directly in the UK from that date. The law will be converted into UK law, as “retained EU law” at the end of the transition period, and will remain part of UK law unless the UK government decides to amend it.
Given that platforms and search engines will still have to comply with the Regulation across the (rest of the) EU, it seems pretty unlikely that the UK will take a different approach.
1 The first step for all ‘online intermediaries’ is to check if they fall within the relevant definitions, or can take advantage of an exemption.
2 Where caught, a detailed checklist approach should be followed to address what changes need to be made both to a) internal policies and b) terms and conditions.
3 The EU Commission is due to issue guidance to help with the interpretation of the requirements regarding rankings, and is also encouraging the development by relevant industry players of codes of conduct, to help with implementation.
4 Meanwhile, for businesses who use online platforms and search engines, they may wish to ensure they understand the information to which they are entitled and the new redress that is available.
Please get in touch with James Gill or Geraint Lloyd Taylor if you need any help.