Fairness and transparency in online business-to-business relations
On 26 April 2018 the European Commission proposed a draft EU Regulation (hereafter: “draft Regulation”) on fairness of platform-to-business (P2B) trading practices in the online platform economy. Complementing EU competition and consumer protection law, this proposal would be the first legislation that provides rules for relations of internet platforms, such as Ebay, Google and Amazon, with business and corporate website users.
Why?
Online platforms and search engines play an unprecedented role in facilitating the creation and development of market opportunities, including for small and medium sized enterprises (SME’s). In it’s press release the European Commission states that according to a survey almost half (42%) of respondent SME’s use online marketplaces to sell their products and services. Online marketplaces are basically transaction platforms. In the view of the European lawmakers, providers often have superior bargaining power which enables them to harm the legitimate interests of their users and leaves the latter with ample possibilities to seek redress.
What?
The new rules tackle these concerns by the following requirements, for example:
- Providers of online intermediation services shall ensure that their terms and conditions are drafted in clear and unambiguous language, are easily available and set out objective reasons to suspend or terminate a commercial relationship with professional users. They also need to take into account a reasonable notice period for implementing modifications to their terms and conditions;
- When deciding to suspend or terminate what a business user offers, providers of online intermediation services shall state their reasons to the business user concerned;
- Providers of online intermediation services shall set out in their terms and conditions the main parameters determining ranking, any differentiated treatment afforded to goods or services offered by their or other professional users and what data generated through their services can be accessed.
The general objective of the initiative is to establish a fair, predictable, sustainable and trusted online business environment, while maintaining and further encouraging an innovation-driven ecosystem around online platforms across the EU. Hereby, the draft Regulation shall apply to online platforms and search engines, regardless of whether they are established in a Member State or outside the EU, provided that two conditions are met: a) the business or corporate website users should be established in the EU, and b) the business or corporate website users should offer their goods or services to consumers in the EU. The draft Regulation does not apply to online advertising nor to online payment services. While the objectives are clear, the rules set out have many ‘open norms’ by using terms such as ‘reasonable’ or by demanding transparency without actually prohibiting certain behavior (such as ranking own services higher than a competitors). Therefore, one may question if the proposal will actually change anything in practice. On the other hand, if buyers are better informed, this may indeed change purchasing behavior and thus ultimately platform choices.
Dispute settlement
With regard to the effective resolution of disputes, the proposal requires online intermediation services to establish an internal complaint-handling system and offers recourse to mediation. Also associations representing corporate and commercial enterprises will have the right to initiate court proceedings on their behalf.
Impact
This draft regulation may have limited impact, but the question is whether it will lead to further regulation of business to business contract in the on line enconomy. Platforms can be powerful business partners that tend to work withtemplate agreements, and many are vertically integrated. They collect (consumer) data and provide a wealth of free services. Rules determining so far what internet platforms can do on the market mostly concern consumer law and privacy/data protection laws. Some attempts to regulate have been made by competition authorities such as the European Commission in the Google Shopping case regarding higher ranking of own search results than a competitor’s, and the investigations of the European Commission and Bundeskartellamt into Amazon. For abuse of dominance in the economic sense to be present, hard evidence can be difficult to obtain.
When?
The proposal is just the first step in the EU legislative process. The proposal now lays with the European Parliament and Member States where amendments are negotiated and can be adopted.
For more information, please contact Martine.de.Koning@kvdl.com, partner and attorney-at-law of the section International Trade and Commerce of Kennedy Van der Laan.
