By Martine de Koning[*]
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 civil law EU legislation that provides B2B rules for relations of internet platforms with business and corporate website users. The aim is to protect small and medium enterprises (SME’s), but the scope of the regulation is not limited to SME. The regulation will have direct effect in all members states of the EU upon the date of entry into force. First, the draft will have to be adopted by the EU Parliament.
This regulation is particularly interesting because in many parts of the world, regulators are watching very carefully how the digital landscape is evolving and whether any enforcement action is necessary.
Why is the EU adamant to regulate internet platforms and social media providers?
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, social media or search engines. But due to the dependence of business or corporate website users on these online intermediation services, providers often have bargaining power which enables them to affect the legitimate interests of their users and leaves the latter with ample possibilities to seek redress.
What is the content of the new rules?
The new rules introduce the following requirements, for example:
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 mere ‘transparency’. Therefore, one may question if the proposal will actually change anything in practice. On the other hand, if buyers are better and more fairly informed, this may indeed change purchasing behaviour and thus ultimately platform choices.
What will change in 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.
What will be the impact of the regulation?
This draft regulation is welcomed by parties doing business with internet platforms. It may help companies and organizations that use platforms for sales to consumers in their dealings with these platforms. Platforms can be powerful business partners that tend to work with template agreements, and some are vertically integrated. They 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 behaviour 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 recent investigation of the European Commission into Amazon. For abuse of dominance in the economic sense to be present, evidence can be difficult to obtain. An interesting question is therefore whether this draft regulation falls within the trend of more rules for B2B contracts in the EU. The density of rules in the EU has also been criticized because it may become an impairment to free flow of business.
When will next steps take place?
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.
[*] Martine de Koning is partner and head of the Commercial & International Trade department at Kennedy Van der Laan. Martine is also a partner in the EU and Competition law department. She can be contacted at firstname.lastname@example.org.