First European regulation of online platforms
An EU regulation on promoting fairness and transparency for business users of online intermediation services will enter into effect on 12 July 2020. It will be the first law in the EU regulating platform-to-business (P2B) relationships.
Regulation (EU) 2019/1150 of the European Parliament and of the Council primarily aims to create a safe and transparent environment for small and medium-size businesses using online platforms, which provide unique opportunities in relation to international markets and constitute the basis for carrying out business activities for more than a million of corporations.
According to a survey, these platforms are used by more than 40% of small and medium-size businesses in the EU. The potentially unfair and harmful commercial practices of certain providers have resulted in unresolved disputes and, especially, significant losses incurred by the companies affected by these practices.
The regulation will be directly applicable to the entire ecosystem of online platforms operating in the EU, including, e.g., online e-commerce marketplaces, online software application services, online social media services, price comparison websites, etc. This will not only affect online giants but also the smallest start-ups providing online intermediation services.
The regulation will to some extent apply to online search engines (especially where transparency is concerned); however, it will not affect online shops serving as a direct contact between a business and a customer, provided that the business sells products directly and does not act as an intermediary between the customer and a third party (e.g. online supermarkets, e-shops selling specific brands).
Major changes introduced by the regulation and their impact on relationships between online platforms and businesses:
- Ban on certain unfair and harmful practices:
- The restriction, suspension or termination of services without explanation is not allowed.
- Changes to business terms and conditions must be comprehensible and communicated in advance (at least 15 days).
- Higher transparency of online platforms
- Platforms must disclose parameters according to which products on their websites are assessed.
- If a platform offers on its website its own products apart from other products, it must describe any differences in the treatment of its own products compared with other products.
- New dispute resolution methods:
- Platforms must create internal systems for solving complaints; this rule does not apply to small businesses (turnover of less than EUR 10 million and less than 50 employees).
- Platforms will have to offer businesses a chance to resolve any problems using mediators.
- Access to data:
- Platforms will have to describe in their business terms and conditions under what conditions and to what data (personal and other) businesses will have access.
- Organisations and associations having legitimate interests in representing businesses will be allowed to enforce the settlement of any incompliance with the rules stipulated by the regulation before a court.
It is too early to evaluate the overall impact of the regulation on individual stakeholders and the digital market. However, it is evident that the digital environment is developing continuously. The regulation takes this into account and plans to monitor and assess its impact not only on the online platform economy on a regular basis.
The regulation is directly applicable in all member states. The platforms concerned have less than five months until it becomes effective, so it is high time they updated their business terms and conditions.