The European Commission published a report containing a preliminary assessment of the implementation of Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services.
The Regulation came into force in the EU and the UK on 12 July 2020 and provides a framework to oversee the way in which online intermediation services (such as social media platforms, marketplaces, app stores, price comparison tools, and booking platforms) interact with smaller businesses and traders in their supply chain.
In particular, the Regulation aims to “create a fair, transparent and predictable business environment” and ensure that “business users, in particular SMEs that can have limited bargaining power relative to the online platforms, should be able to conduct their business in a predictable manner … and are not exposed to unnecessary costs when facing issues with the online platform”.
The Regulation imposes a number of obligations on providers of online intermediation services, some of which must be complied with in the background while others must be enshrined in the platform’s terms and conditions. For example, there are specific – and quite prescriptive – rules around suspension and termination rights and making changes to terms and conditions, as well as how complaints are handled. But many of the rules are about transparency, requiring operators to give detailed information about their ranking and self-preferencing practices to explain what data they are collecting about their business users and what they are doing with it, and to provide grounds for any restrictions on businesses providing their goods and services outside the platform.
The report found some initial positive effects of the Regulation. Indeed, it notes that since the Regulation’s adoption, providers of online intermediation services have become more transparent, with clearer terms and conditions, new internal complaint handling processes and more clarity about the reasons for suspending or terminating accounts.
However, it also identified some key failings. On one hand, it found a low level of compliance from platforms, noting, for example, that the “rules on transparency and dispute settlement remain as relevant as ever, but are not given full effect in practice”. It said that although the terms and conditions of some platforms may appear compliant, according to business users, those terms were not being complied with in practice. In other cases, platforms were not including adequate information about their ranking practices. The problem is perhaps exacerbated by what the report describes as insufficient enforcement of the Regulation by national authorities.
In order to address the current lack of compliance by providers of online intermediation services, the EC has proposed the following actions:
Awareness: It will work with Member States to educate all players on the requirements of the P2B Regulation across different sectors and via different channels (including informational campaigns, business networks and other tools).
Alignment: It will consult with SME platforms (as well as Member States and their authorities) in order to discuss the awareness and use of mediation as a means of complaint resolution (noting that “the relative level of alignment on mediation is generally higher for larger online intermediation services”).
Codes of Conduct: It will (together with online intermediation services and Member State authorities) explore establishing codes of conduct in the hotel bookings and online marketplace sectors.
It is easy to see why platforms are dragging their feet on this issue. The Regulation requires platforms to disclose a lot of information which most would prefer to keep to themselves. On the other hand, there is little incentive to become compliant, or more compliant, when national authorities seem so reluctant to enforce the Regulations and businesses don’t know what they are missing. It is still (relatively) early days for the Regulation and it remains to be seen what impact the EC’s proposed action plan will have. Although it does seem to be pointing in the right direction, with a focus on increasing awareness among all stakeholders, it feels like greater levels of compliance will only come once we start to see greater levels of enforcement.
The Regulation aims to “create a fair, transparent and predictable business environment” and ensure that “business users, in particular SMEs that can have limited bargaining power relative to the online platforms, should be able to conduct their business in a predictable manner … and are not exposed to unnecessary costs when facing issues with the online platform”.