Online platforms will face new European legislation in 2019. New rules are on the drawing board that will have a major impact. For example, the EU is introducing far-reaching information obligations. Among other things, online platforms must become transparent about their ranking algorithms.
European Commission research has shown that online platforms have increasing power and influence. Providers of online platforms give individual product and service providers access to a large market in a relatively simple way. In addition, the platforms often have a great deal of information about consumer behavior. In fact, as a result, many platform providers operate as "gatekeepers" to markets and consumers.
There are more and more questions about the new legislation and how to prepare for it. In this blog, Douwe Linders outlines the main issues. The European Commission fears that without clear regulation, platform providers will abuse their position, such as with unreasonable general terms and conditions. The new rules should ensure a fair, transparent and predictable business environment for companies using online platforms (business users).
The rules aim to protect professional companies from unfair actions by platform providers (platform-to-business, p2b). This is unusual. Usually, legislators take this kind of measure to protect consumers (business-to-consumer, b2c).
The new rules are now set out in a proposal for a new Regulation: the Regulation on promoting fairness and transparency for business users of online intermediation services. When adopted, the Regulation will apply immediately in all EU member states.
The new rules will apply to providers of online platforms, defined in the European Commission's proposal as "online brokering services. These are services with the following three characteristics:
1) The platform provider provides the service electronically, remotely and at the individual request of the business user and usually for a fee. This is easily met. Almost any online economic activity is covered.
2) The platform allows business users to offer products or services to consumers (b2c) and facilitates contracting between those two parties.
3) The platform provider enters into a contract (such as general terms and conditions) with both the business user and the consumer.
Parties that may be included are (among others) online marketplaces, search engines, platforms for software solutions such as appstores, auction websites, price comparison websites, social media and accommodation websites.
Providers of online platforms must now actively inform business users of intended changes to their terms and conditions. Changes may only be implemented after a reasonable period of at least 15 days. Changes that do not comply with this are automatically non-binding.
General terms and conditions should be drafted in clear and unambiguous language and always easily accessible, including prior to contract conclusion.
Furthermore, the terms and conditions must now clearly state the reasons why the provider may suspend or terminate its service. If the platform provider decides to terminate its services, it must give proper reasons for that decision. In doing so, he must report the facts and circumstances that led to that decision.
Under the new Regulation, platform providers will have to provide information on the main parameters by which they determine "ranking": the order in which users' products or services are displayed. This is usually done based on algorithms and data on visitors to the platform.
If the platform provider offers the ability to influence ranking for a fee, this should be clearly stated.
Search engine providers will also have to disclose key ranking parameters from now on, including those related to website content and design. Thus, Google will have to start providing more insight into the factors that matter in search engine optimization.
Online platforms must begin to disclose how their ranking algorithms work and how they use visitor data.
If the platform provider himself offers products or services through his platform, he should also be transparent about their ranking. The general terms and conditions must include a description of so-called "differential treatment" he gives to his own products or services.
Platform providers will also have to become transparent about access to data from business users and consumers. The general terms and conditions must include a description of the technical or legal (im)possibilities for accessing that data. Platform providers will not have to give their business users access to data from consumers, for example, but they will probably have to start disclosing what kind of data they have.
Platform providers may impose restrictions on business users to offer products or services through other channels, such as other online platforms. They must then clearly communicate and set out the economic, commercial or legal grounds for doing so in their terms and conditions.
Larger online platforms (more than 50 employees) must establish an effective and easily accessible complaints procedure. Business users should be able to complain about non-compliance with the Regulation, about technical issues related to the online platform, and about actions taken by the platform provider, such as termination of the service.
The platform provider is only required to handle complaints that have (non-negligible) adverse effects on the complainant. Decisions on complaints must be communicated clearly and in an "individualized manner" to the complainant.
Platform providers must publish information each year about their complaint process: the number of complaints filed, the subject of the complaints, the length of time they were handled and the decisions made.
Platform providers will be required to appoint an independent mediator to whom they are willing to submit a dispute and must reasonably cooperate in mediation. They must then bear a reasonable share of the costs, with a minimum of 50%. Both platform provider and business user incidentally retain the option of going to ordinary court.
The proposal will now be considered by the European Parliament and the European Council. They will make changes to the text. The European Parliament will do its best to complete its review before the elections in May. A number of member states support the plan to more heavily regulate online platforms. They will thus push for quick adoption of the Regulation. It is therefore expected that the Regulation will enter into force in mid-2019.
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