Rationale for European commission’s proposal of a regulation to increase fairness and transparency for online platforms

Online platforms offer access to cross-border consumer markets and have become the go-to interface for millions of businesses, big and small, in sectors ranging from online retailing, professional services and app development, to transport and hospitality.

Online search engines and platforms generate the vast majority of internet traffic for big businesses as well as SMEs. However, the current position of the online platforms as intermediators of business customer relationships allows them to engage in unfair trading practices that can cause significant economic harm to the businesses that use them. Moreover, the online visibility of small businesses can depend on their position in search results, whether on online platform intermediaries or in the results of general online searches.

The Regulation covers online platform intermediaries and general online search engines that provide their services to businesses established in the EU and that offer goods or services to consumers located in the EU. A consumer may, for example, directly subscribe to an online service on a platform (e.g. download an app), she/he may be redirected to the website of an airline, or use a platform to locate a physical restaurant or shop in his/her proximity (e.g. by using Google’s My Business).

Such online platform intermediaries include third-party e-commerce market places (e.g. Amazon Marketplace, eBay, Fnac Marketplace etc.), app stores (e.g. Google Play, Apple App Store, Microsoft Store etc.), social media for business (e.g. Facebook pages, Instagram used by makers/artists etc.) and price comparison tools (e.g. Skyscanner, Google Shopping etc.). Whereas online platform intermediaries are covered to the extent that they have a contractual relationship with both the businesses trading via them and the consumers using them, general online search engines are covered irrespective of whether they have a contractual relationship.

The proposal excludes online advertising and payment services that do not intermediate direct transactions between businesses and consumers, as well as intermediaries that operate between businesses only.

Businesses will be made aware of the principles that affect their ranking position in general online search results or in the search results on a particular online intermediation platform. In the case of online intermediation platforms, this also includes the circumstances under which businesses can influence their ranking position, for example, through payments of additional commissions. Additionally, these businesses will also be informed on how online intermediation platforms treat and rank goods or services offered by themselves compared to other “external” businesses, on the type of data that will be shared with them (i.e. data which businesses or consumers provide when using the online intermediation services), and why they may be restricted from offering goods and services on different conditions through other intermediation platforms.

Secondly, businesses will also now have clarity on when their use of an online intermediation platform can be suspended or terminated, including delisting and removing of goods and services from search results. They will also be informed about the reasons should a platform decide to do so.

Finally, the Regulation also provides effective and quick means to resolve disputes between businesses and online platform intermediaries. This includes for online platform intermediaries the obligation to establish internal complaints handling systems by the larger platforms or through mediation in the cases of smaller enterprises. In addition, in cases of court disputes, the Regulation now enables businesses to be represented by associations or organizations in cases against online platform intermediaries or online search engines to stop or prohibit any non-compliance with the requirements of the Regulation.

Online platform intermediaries are required to make their standard terms and conditions more transparent, and easily available. The terms and conditions will now have to state the reasons for suspending or terminating a business’ account. In addition, they will need to include a description of any differentiated treatment given to goods or services offered by the platforms themselves, the access the platform gives to personal or other data which businesses or consumers provide through them, and how they may restrict the ability for those that use their platform to offer different conditions through other means (so called ‘most favoured nation’ clauses). Any changes to terms and conditions will have to be announced and businesses given a reasonable time to adjust before the changes come into effect. Both online platform intermediaries and online search engines will need to set out their general policy on ranking of businesses in search results in their terms and conditions or in a publically available description.

Online platform intermediaries will be required, unless they are a micro or small enterprise (i.e. less than 50 staff members and generating less than €10 million turnover), to have in place an internal complaints handling system and to report annually to the general public on its functioning (e.g. number of complaints, their subject matter, time taken to process complaints and the decision taken). In addition, all online platform intermediaries shall need to name at least one mediator with whom they are willing to engage in settling disputes out of court.

The instrument chosen is a directly applicable Regulation, preventing Member States from setting additional rules in the areas explicitly covered by the Regulation. The Regulation constitutes a maximum harmonisation tool which applies exclusively in relation to the transparency and redress obligations which it establishes. The Regulation only applies to the contractual relationships between platforms and businesses, excluding commercial practices law pertaining to general business-to-business relations. Member States’ fairness standards that are independent from contractual relationships would therefore continue to apply.