Since July 12, 2020, online platforms must comply with the EU Platform-2-Business Regulation (the P2B Regulation). In this blog, we discuss penalties: what should online platforms fear if they fail to comply? Bringing claims by representative organizations of business users seems like it could be an effective tool.
See our Whitepaper for a detailed discussion of the new rules in the P2B Regulation.
The P2B Regulation has two main pillars, one of which is transparency. This includes obligations to provide certain information in the platform's terms and conditions. These information obligations consist largely of open rules.
For example, the P2B Regulation requires online platforms to inform business users of the reasons for terminating or restricting use. But to what detail must the online platform inform its users? Simply saying that "a violation of the terms and conditions" may result in termination or suspension is probably not enough. However, it is almost impossible to predict in advance all situations that may warrant termination or suspension.
See, for example, the Amazon terms and conditions. These give Amazon the right "to terminate for convenience." That means no reason is needed to terminate. We can also assume that the terms do not meet the "clear and understandable language" requirement. The P2B Regulation emphasizes that many business users are micro or small businesses with limited legal knowledge. There is also no information about ranking or differential treatment anywhere in the terms and conditions.
Uber Eats' terms also fail to meet the requirement of clear and understandable language. In fact, as a specialized lawyer, I have trouble understanding just the definitions. And Uber Eats also fully and unconditionally reserves the right to discontinue its services.
The terms and rates of Thuisbezorgd.nl have been the subject of much controversy in recent years. And even now the conditions are still not satisfactory. For example, Thuisbezorgd.nl does not inform about the sharing of customer data. It is also unclear about the additional services it can offer in addition to its business user offerings. The information about its ranking parameters (Toprank) also seems inadequate.
So what do the platforms have to fear because of the likely violation of the P2B Regulation?
The regulation itself contains one penalty for non-compliance. Terms of the online platform that do not meet the requirements of Article 3(1) are considered null and void. They are deemed to have never existed. The same applies to any changes to the terms and conditions that have not been announced in accordance with the requirements of Article 3 paragraph 2.
Can an Amazon seller argue that its terms and conditions do not apply because they are insufficiently clear and understandable? Are Thuisbezorgd.nl's terms and conditions void because they do not inform about customer data sharing?
I don't think a Dutch judge would go that far. But then how to proceed?
Article 15 requires EU member states to ensure adequate and effective enforcement, and to adopt measures against violations. What measures should be taken is left to the member states. However, the measures must be effective, proportionate and dissuasive.
So far, only the United Kingdom and Spain have introduced new legislation providing for specific measures. The two countries have chosen completely different enforcement mechanisms.
The United Kingdom has chosen to leave enforcement to the courts and not introduce government oversight. Does a business user believe that an online platform is violating the P2B Regulation? Then it is up to him to take the online platform to court. The UK Online Intermediation Services for Business Users (Enforcement) Regulations 2020 provide that business users can bring a claim for non-compliance, including for damages.
We note that the P2B Regulation will continue to apply after the Brexit transition period. However, the territorial scope will be limited to situations where platforms offer their service to users based in the United Kingdom.
Spain, on the other hand, has opted for government supervision and fines. The Spanish bill is still pending in the Senate. However, it appears that supervision will be carried out by the Ministry of Economy and Digital Transformation. In Spain, online platforms that violate the P2B Regulation then risk fines up to a maximum of €150,000.
As yet, the Dutch government has said nothing about how the P2B Regulation is to be enforced. Just like most other EU member states. However, a specific enforcement regime is currently being considered. The P2B Regulation may be brought under the supervisory jurisdiction of the Consumer and Market Authority. It is still uncertain whether that will actually happen.
For now, the legislature is leaving it up to affected business users to invoke the P2B Regulation in court. This is possible since European regulations (unlike directives) are directly applicable in member states.
So if a business user finds that a platform has terminated his account without adequate substantiation, he can invoke the P2B Regulation to have his account reinstated.
But what if the online platform has not provided sufficient information in its terms and conditions about ranking or differential treatment? It will be difficult to get a court order compelling the online platform to change its terms and conditions. Under Dutch law, the business user would have to demonstrate a clear interest, which seems like a difficult task.
Individual business users may also be hesitant to address the online platform. This is because of limited financial resources, fear of retaliation and choice of law and forum clauses in the terms and conditions.
However, the EU legislature anticipated this.
Article 14 Regulation gives organizations representing business users the right to bring actions in court. Those actions must be aimed at ending or prohibiting infringements and preventing harm.
The requirements seem less stringent than those of the general collective action law, laid down in Article 3:305a of the Civil Code. The main difference is that the organization need not demonstrate a concrete similar interest with the constituency. However, the question is whether courts will not apply this requirement anyway under the P2B Regulation.
Another interesting point is that Article 14 and Recital 44 seem to provide that the action may be based on the law of the Member State where the claim is brought. This seems to override any choice of law clauses in the terms and conditions of the online platform.
Organizations seeking to establish collective action do need to meet certain criteria. In particular, they must be properly constituted, non-profit, and pursue their objectives in a sustainable manner. These requirements should prevent the creation of ad hoc organizations for the purpose of specific actions or making a profit.
There is a list of organizations and associations that Member States believe meet the requirements of the Regulation. The list can be consulted here. So far, only Austria seems to have submitted its list of organizations. It is our understanding that the Netherlands will not include any organizations on the list.
All in all, collective actions seem to be the most powerful tool to force online platforms to comply with the P2B Regulation.
