A Level Platform: The P2B Regulation and its Impact on Online Business

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A Level Platform: The P2B Regulation and its Impact on Online BusinessOn 12 July 2020, EU Regulation 2019/1150 (the “P2B Regulation” or the “Regulation”) became directly applicable across the EU. This Regulation aims to provide protection for businesses that rely on third-party online platforms to reach their customers, whilst simultaneously being designed to preserve the business model of the third-party online platforms themselves.

As such, the Regulation seeks to bring a greater sense of balance to this relatively untamed area of the EU market by ensuring more effective competition and more fairness, thereby contributing to the EU’s vision for the ‘Digital Single Market’.

Application

The provisions of the Regulation will apply to two main categories of platform (together, “Providers”).

Firstly, most provisions apply to “online intermediation service providers” (“OISPs”), which includes online e-commerce market places (Amazon Marketplace, Facebook Marketplace, eBay etc.), price comparison tools (Skyscanner, Google Shopping etc.), online software applications services such as application stores (Apple App Store, Google Play, Microsoft Store), and online social media services (such as Facebook or Instagram), irrespective of the technology used to provide such services (for example, online intermediation services could also be provided by means of voice assistant technology).

The second type of platform within the scope of some provisions of the Regulation is “online search engine providers”, (“OSEs”) or, in more technical language, digital services allowing users to input queries in order to perform searches of, all websites, or all 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 (the most common of which being Google Search, Bing, or Yahoo!)

In terms of scope, the P2B Regulation applies to Providers whose services are directed to businesses established in the EU and offer goods or services to consumers located in the EU. The location of the Provider’s establishment is not relevant, and neither is the law governing the contract between the Provider and the business user.

The P2B Regulation does not apply to platforms that only connect consumers to consumers (such as peer-to-peer platforms), or businesses to businesses, and certain other services are excluded from its scope, such as advertising exchanges and online payment services. The intention behind this overall scope is clear – addressing the commercial relationship between businesses on the one hand, and, on the other, platforms through which those businesses access consumers for the purposes of their trade.

The Regulation’s Main Provisions

The biggest impact of the Regulations on OISPs is in respect of the terms and conditions (“T&Cs”) applying to its relationships with business users, however controls are also introduced on how a business user’s access to an OISP’s platform may be restricted, suspended or terminated.

T&Cs must:

  1. be in plain and intelligible language;
  2. be easily available to traders at all stages of their commercial relationship with the OISP, including in the pre-contractual stage;
  3. explain the circumstances in which the OISP can suspend, terminate or impose any kind of restriction on the trader’s use of the platform;
  4. indicate the availability of other channels for the sale of the trader's goods and services;
  5. explain the effect that the T&Cs have on the trader's ownership and control of their intellectual property (IP) rights;
  6. include a description of the type of ancillary goods and services offered on a platform by the OISP or by third parties, and whether the business user is also allowed to offer its own ancillary goods and services through the platform;
  7. include information on the business user’s right to terminate the contract, a description of the means and terms for access to data provided or generated by the business user, and, where there are exclusivity obligations which restrict the business user selling to consumers through other channels, the grounds for the restriction (and those grounds must also be made public).
  • A 15-day minimum notice period must apply prior to any changes to the T&Cs (and the notice must be given on a ‘durable medium’). Changes cannot normally be retroactive. A longer notice period may apply where ‘this is necessary to allow business users to make technical or commercial adaptations to comply with the change’.
  • Business users will have a right to terminate the contract if they do not agree to the proposed changes, but may also waive the notice period by way of written statement or ‘clear affirmative action’ (which would include submitting new goods or services to the OISP).
  • OISPs shall also ensure that the identity of the business user providing the goods or services on the online intermediation services is clearly visible.
  • Restriction, suspension and termination of platform access:
  1. the OISP must provide a statement of reasons before or when restricting or suspending Platform access to a business user;
  2. a 30-day minimum notice period to be given before terminating platform access, to be accompanied by a statement of reasons for the termination (however, there are exceptions to the 30-day rule (such as when the business user has repeatedly infringed the T&Cs)); and
  3. such reasons must include reference to the specific facts or circumstances that led to the decision and the contents of any relevant third-party notifications.

OISPs must also establish an internal complaint handling system and identify at least two mediators that can be used to settle disputes between the OISP and the business trader (and those mediators must meet certain requirements set out in the Regulation).

The P2B Regulations also contains important provisions relating to ranking of results and differentiated treatment and which also apply to OSEs.

Ranking:

  1. T&Cs must set out the main parameters determining the ranking of the different goods/services offered on the platform and the relative importance of those main parameters as opposed to other parameters (in the case of OSEs, this can be done by way of an easily and publicly available description that is kept up to date);
  2. Where the trader can pay to affect rankings, there must be a description in the T&Cs of how the payment influences the rankings;
  3. If any ranking change or delisting is effected following a third-party notification, the business user shall be entitled to inspect that notification; and
  4. The T&Cs must make clear whether, and if so how and to what extent, the ranking mechanism takes account of the characteristics of the goods and services offered through the platform, the relevance of those characteristics for consumers and, in the case of OSEs, the design characteristics of the business user’s website.

Differentiated Treatment:

  1. T&Cs must include a description (including, in the case of OISPs, main economic, commercial or legal considerations) of any differentiated treatment which the OISP gives, or might give, in relation to goods or services offered to consumers through those online intermediation services by, on the one hand, either that OISP itself (or any business users which that OISP controls) and, on the other hand, other business users (for example, if Amazon were to treat any products developed by it or its related companies differently from those of third party business users on one of its websites).
  2. Such description must also include any differentiated treatment arising from access the Provider may have to personal data/general data it gathers through the provision of its services, ranking, any remuneration charged (whether direct or indirect (such as advertising)) or access to/use of any services that are ancillary to or directly connected with the main services

Any T&Cs or changes that do not comply will the foregoing will be ‘null and void’, i.e. of no effect. Exceptions to these rules are provided for when changes to T&Cs or restrictions/terminations arise from legal or regulatory obligations applying to the OISP or exceptional changes necessitated by unforeseen and imminent dangers (primarily cyber security risks). It is up to individual Member States to ensure adequate and effective enforcement of the P2B Regulation, with the measures laid down by the Member States to be ‘effective, proportionate and dissuasive’.

Impact

The market of today is dominated by online platforms. Despite the inescapable reliance on such platforms by many businesses, they have yet to be fully regulated, allowing these platforms unprecedented influence and control over online trade, a position which clearly runs contrary to the EU’s principles of free trade, open competition and market integration.

There have been a number of issues in this area of the EU market, including;

Lack of transparency:

  1. sudden and unexplained changes to T&Cs
  2. lack of clear communication for termination & suspension of accounts
  3. unclear policies on access to data

Unfair treatment:

  1. unclear ranking rules
  2. favouring of online platforms’ own services
  3. limits on business’ freedom to offer better conditions outside of the platform

Lack of redress:

  1. ineffective or non-existent complaint procedures
  2. absence of out-of-court dispute resolution
  3. hesitancy to report issues due to a fear of retaliation by online platforms towards businesses

The P2B Regulation seeks to tackle these problems, which have created a real imbalance in the market relating to online platforms. It would be desirable to remedy the above issues in order to achieve equilibrium between Providers and the businesses availing of their services, no matter the size or scale of the business. This will, in turn, encourage healthy competition between businesses on these platforms and as such achieve a greater service for the consumers, who will ultimately benefit from this Regulation just as much as the businesses whose services they access.