MHC | Platform to Business Regulation Comes into Effect – But What Does it Mean for eCommerce?
The Platform to Business Regulation (2019/1150) ('P2B Regulation') addresses the perceived imbalance between online platform providers and traders, as well as between online search engines and corporate websites by promoting fairness and transparency for business users. This new regulation came into effect on 12 July 2020. Platform providers and search engines must now comply with the new P2B Regulation obligations, and traders should check out how the Regulation will benefit them in their dealings with platforms and search engines.
Which online platforms are affected?
The P2B Regulation only applies to the relationship between online platforms and 'business users' who are resident or established in the EU and that transact with consumers located in the EU. The platform provisions will apply to thousands of online market places, app stores, hotel and travel booking platforms, and price comparison websites in the EU that meet the criteria of an "online intermediation services" ('OIS'):
It comprises an "information society service" under EU law
It allows business users to offer goods or services to consumers and facilitates transactions that are entered into between buyers and sellers, and
It is provided to business users on the basis of a contract
Some types of services are excluded from the scope of the P2B Regulation e.g. online advertising tools or online advertising exchanges that do not involve a contractual relationship with consumers.
There are several new rules for the contractual terms between platform providers and traders, and which will likely mean a review and update of the platform's standard terms and conditions. The terms and conditions must:
Be drafted in plain and intelligible language, i.e. not vague, unspecific or lacking in detail on important commercial issues
Be made easily accessible for business users
Inform business users how they can terminate the contractual relationship with the platform, and the implications for the trader's data
Set out the grounds for the platform deciding to suspend, terminate or impose any kind of restriction on the trader's use of the platform
Explain the effect that the terms and conditions have on the trader's ownership and control of their intellectual property (IP) rights, and
Where applicable, publish the grounds for restricting business users when selling through other channels
Platform providers must give business users at least 15 days' notice of future changes to terms and conditions, apart from in the exceptional circumstances set out in the Regulation.
Terms and conditions which do not comply with the above requirements will be null and void.
Termination and complaints
The P2B Regulation sets out rules that apply where a platform seeks to "restrict, suspend or terminate" the provision of the OIS to a business user. These include where:
In the case of suspension, the platform provider must provide a statement of reasons at the time of suspension, or before the suspension.
If a decision is made to terminate a business user's access to the service, the platform provider must provide at least 30 days' notice of termination along with a statement of reasons. However, it should be noted that there are exceptions to the 30 day notice period e.g. where the trader has repeatedly infringed the platform's terms and conditions.
Also, the platform is required to have a detailed internal complaints-handling process. This process should make the option of mediation available "for any dispute" between the platform and the business users in relation to the performance of the OIS.
The complaints process must be easily accessible, free of charge, must deal with trader's complaints promptly, and the platform must publish an annual report on the effectiveness of its complaint process in resolving disputes.
In addition, the platform is obliged to publish details of at least two independent mediators that the platform will engage with in good faith if the trader wants to refer a dispute to mediation.
Transparency requirements
The P2B Regulation obliges platforms to explain how they rank goods and services i.e. the main parameters determining ranking and the reasons for their relative importance. Where the business user can pay to affect rankings, there must be a description of how the payment can influence the rankings. A description of any differentiated treatment given to the platform provider's own goods and services must be provided.
The P2B Regulation states expressly that platforms are not required to disclose algorithms or other sensitive information that, with reasonable certainty, "would result in the enabling of deception of consumers or consumer harm through the manipulation of search results".
In order to help platforms better understand the scope of this requirement, the EU Commission has consulted on guidelines on this ranking transparency obligation. While the guidelines have not yet been published, they are expected to clarify what is meant by 'ranking', 'relative importance', 'main parameters, 'adequate understanding' and assist platforms in complying with the new ranking transparency obligation.
The platform provider must ensure that the identity of the trader providing the goods or services through the platform is clearly visible.
The P2B Regulation requires that platform providers set out for business users "a clear description of the scope, nature and conditions of their access to and use of certain categories of data".
Carve-out for SMEs
SMEs with fewer than 50 employees and generating less than €10 million turnover are exempted from the obligation to set up internal complaint-handling mechanisms, and from the obligation to name mediators.
Search engine provisions
The top 5 search results attract 88% of clicks, and if a trader's page is outside the top 10 results, it has only a 1.2% chance of being clicked on. The P2B Regulation obliges search engines to inform traders of the main parameters that influence or determine results, and whether direct or indirect payments to the search engine affect rankings. The description of any ranking parameters must be in plain and intelligible language, and in an easily accessible location on the relevant search engine.
Platform providers should without delay check what changes they need to make to:
Their terms and conditions with business users
Their practices around suspension and termination of trader's accounts / access
Transparency on their ranking mechanisms
Their complaint handling processes
Their use of mediators
and more generally to comply with the provisions of the P2B Regulation.
For traders on eCommerce platforms, the P2B Regulation will bring many benefits. They will be entitled to a better understanding of product rankings and search results, clearer and fairer terms in their dealings with platforms, access to an effective complaints-handling system, and more clarity on intellectual property ownership and access to data. Traders who receive revised terms from the platforms their goods are displayed on should take the time to review the terms, and to inform themselves of their new rights under the P2B Regulation.
Wendy Hederman
Compliments of Mason Hayes & Curran LLP – a member of the EACCNY.