What is the EU Platform-to-Business Regulation?
The EU’s Platform-to-Business Regulation 2019/1150 (P2B Regulation) is the first regulation aimed at creating a fair and transparent business environment for smaller businesses and traders who make use of third-party online platforms to drive their digital sales and delivery channels. With its entry into force on 12 July 2020, the P2B Regulation became directly applicable across all EU Member States, as well as the UK, in accordance with the terms of the Brexit transition agreements.
Background to the regulation – why is it needed?
Online platforms continue to play a significant role in the EU’s digital economy, with more than one million EU enterprises estimated to currently trade through online platforms to reach their customers. Moreover, economic surveys estimate that around 60% of private consumption and 30% of public consumption of goods and services are transacted via online intermediaries. This market trend has led to an increased dependency of businesses on online platforms acting as quasi ‘gatekeepers’ between, on the one hand, such businesses and, on the other, the market and end-consumers.
With the promulgation of the P2B Regulation, the European Commission aimed to resolve several roots causes to the persistent imbalance in the online platforms market. Over the years, certain harmful trading practices have contributed to the limitation of sales to end consumers and have risked undermining trust in such platforms. For instance, the Commission noted multiple reoccurrences of practices whereby platforms unilaterally imposed unforeseeable changes to its terms and conditions for business users, delisted goods or services, terminated or suspended accounts without a clear reason, among other questionable practices. In addition, it was troubling to see a general lack of transparency concerning the ranking of goods and services and the business undertakings offering them, together with lack of transparency concerning favouring providers’ own competing services and the so-called most-favoured nation (MFN) clauses, which limit the ability of business undertakings to offer more attractive services through other channels other than that of the online intermediation service provider.
What type of platforms are subject to the P2B Regulation?
The P2B Regulation applies both to EU and non-EU online intermediation services and search engines in those instances where the business users (including private individuals acting in a commercial or a professional capacity) of the services are established in the EU, or if the business users offer their goods or services to consumers located within the EU. This means that the location of the provider’s establishment, as well as the law governing the contract between the provider and the business user, are irrelevant to the scope of applicability of the P2B Regulation.
Apart from online search engines, the types of online intermediation services covered by the P2B Regulation include online platforms which have a contractual relationship with business users. The most common examples of online intermediation services are e-commerce marketplaces, price comparison tools, hotel and travel booking websites, app stores and social media services on which businesses can offer or advertise their goods and services to consumers.
Salient features of the P2B Regulation
Among other requirements, the P2B Regulation requires platforms captured within its scope to adhere with the following:
– Terms and conditions and changes thereto: all online intermediary service providers must ensure that their terms and conditions are drafted in a plain and intelligible language and must be also easily available to business users at all stages of the commercial relationship. Business users must be informed within a minimum of 15-day prior notification period of any changes which may be implemented, granting them the right to terminate the contract in case of disagreement.
– Access to data: platforms must include in their terms and conditions a description of what type of data is collected through their services, who can access it and under what conditions.
– Termination/suspension of accounts: platforms must provide business users with a reasoned statement for restricting, suspending or terminating their services.
– Ranking search results: platforms’ terms and conditions must expressly state and describe the main parameters utilised in ranking goods and services, as well as their relative importance.
– Platforms giving preferential treatment to their own products: platforms must include in their terms and conditions a description, referring to the main legal, economic and commercial considerations of any differentiated treatment given to their own products and services offered through their platforms. Search engines are also obliged to disclose descriptions of any differentiated treatment they apply.
– Restriction on business’ freedom to offer better conditions outside the platform: the imposition of restrictions on business users from offering different conditions outside the platform must be grounded in economic, commercial or legal considerations that are to be explained.
– New redress mechanism: unless exempt under the de minimis threshold, service providers must implement an internal system dealing with complaints, free of charge and within a reasonable time, as well as an out-of-court dispute settlement mechanism.
Impact on consumers
The digital marketplace that has come to permeate our daily lives is influenced and shaped significantly by the proliferation of, and role played by, online platforms. Indubitably, the overreliance on such platforms by businesses has allowed them to abuse or misuse their position, resulting in a departure from some of the very basic principles dealing with market integration, free trade and open competition.
Against the background, the P2B Regulation seeks to re-establish equilibrium between providers and businesses offering their services online, regardless of their size. It is aimed at strengthening and promoting competition and, in turn, empowering consumers to be better served when interacting with businesses via platforms.
For further information on the implications of the EU’s P2B Regulation and how it may impact you, please do not hesitate to contact us at [email protected].
Author: Stephanie Marinova
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