Business is increasingly moving online. UK data shows a sustained trend favouring online transactions as a percentage of retail sales, with current levels at about 20 per cent. More and more, businesses and consumers find each other using the internet, with consumers turning to platforms like Amazon, eBay and Booking.com to find the goods and services they need. Providers of services like these influence which businesses succeed and fail.
New EU rules intended to make these interactions more transparent and fair will apply from July. These P2B rules will affect providers of “online intermediation services”, wherever they are based, if they work with EU-based businesses offering goods and services to consumers in the EU. There are also new obligations for search engines. The aim is to help businesses like hotels, small traders offering goods online and app developers. It is unclear how the new rules might affect the UK market post-Brexit, but they will remain relevant to any services with an EU element.
What does this mean for business users of platforms?
For businesses that rely on platforms and search engines to bring their products and services to consumers, the rules offer an opportunity to have unbalanced terms reset, and to challenge lack of transparency or unfairness in new ways.
What does this mean for online platforms?
Providers of online platforms will have to take much more care when contracting with and working with businesses looking to promote their offering. They may have to take a new approach to their contractual T&Cs, and offer comprehensive complaints procedures and routes to dispute resolution.
What services are covered?
Most of the rules apply to online intermediation services, or OISs. An OIS is a service to facilitate direct transactions between businesses and consumers through an “information society service”, and involving a contractual relationship between the service provider and the business using the service. Examples include online market places, app stores, social media for businesses (such as Facebook or Instagram feeds) and price comparison tools. Online advertising or payment services, or online retailers serving their customers directly, are excluded.
The definitions are broadly drafted. The intention is to bring in innovative services as they are developed, without needing to reopen the legislation. Voice-activated services like those involving the use of virtual assistants are in scope.
The concept of an “information society service” is used widely in EU legislation. This is intended to be future proof and technology-blind, and includes any services that are provided at a distance, by electronic means and at the recipient’s individual request. So, for example, it does not cover situations where the customer is present like the use of electronic catalogues or online resources while the customer is in a shop. Neither does it include services which have a physical element (such as cash machines or software on discs) or those involving voice telephony. It does not extend to services transmitted to unlimited groups of users, such as broadcast television and radio.
Broadly speaking, an OIS is an online or digital platform where business users to make their products and services available to consumers.
Impact on agreements between platforms and their business users
Terms and conditions that are intended to apply between OIS providers and business users and have been unilaterally determined by the OIS provider will have to cover the following areas:
- grounds for decisions to suspend or terminate business users’ access to the service, or impose any other kind of restriction
- information on any additional distribution channels through which providers might market goods and services offered by business users
- the main parameters determining ranking of business users and the reasons for the relative importance of these and other ranking parameters
- description of any ancillary goods and services offered by the service
- description of any differentiated treatment of goods or services offered by business users
- information relating to the access to and functioning of the service’s internal complaint-handling system
- details of at least two mediators that service provider will work with to resolve disputes with business users
OIS providers will have to provide specified information to their business users in a “durable medium”. This includes, for example, any planned changes to the terms and conditions, with a notice period of at least 15 days before they can take effect.
The specific provision(s) of terms and conditions which do not comply with these new rules will be deemed null and void.
Complaints and disputes
Complaints handling and dispute resolution receive close attention.
Where a business user has a complaint against a service provider, it must be able to access a readily accessible and free complaints handling process. Any complaints must be dealt with promptly and transparently. Small enterprises employing fewer than 50 people and whose annual turnover and/or annual balance sheet total does not exceed €10m are exempt from these requirements.
Where disputes cannot be dealt with through the complaints procedure a range of options for dispute resolution are laid out. These include:
- Mediation – as mentioned above, service providers will have to identify in their terms and conditions at least two mediators that they are prepared to work with.
- Collective action – representative organisations and associations, as well as officially designated public bodies, will be able to take enforcement action against service providers in national courts.
- Individual action – business users will remain free to bring enforcement action themselves.
- Enforcement action – EU member states are required to ensure that there are effective, proportionate and dissuasive enforcement measures.
Rules for search engines – ranking transparency
Most of the rules apply to platform services only. However, the rules include new transparency requirements for ranking methodologies used by search engines. There may not be a contractual relationship between a search engine provider and a business through which ranking can be regulated. However, a search engine provider will have to publish the main parameters determining ranking of search results, in straightforward language. Where ranking is influenced by payments this must be disclosed, and specific alterations to rankings based on third party interventions must be shared with the business concerned. Further guidance on how ranking transparency will work is in development.
Two difficult areas
Is your service in scope?
Although for many businesses like providers of major international search engines it will be pretty clear that the rules apply, for smaller locally-focused or unusual services it may be difficult to work out if the rules apply. The details of the definitions will have to be worked through carefully to check if your offering is in scope.
What happens after Brexit?
For UK based organisations, the future after Brexit remains a big question mark. Although EU rules that come into full effect during the transition period automatically extend to the UK, what happens after that is more complex. The current position is that the transition period will end on 31 December 2020. This date could be extended, but the UK Government is currently resisting an extension very strongly.
While there is automatic continuation of most existing EU legislation even after the transition period, much of this requires tweaking to make it work in a standalone UK. This legislation includes applicability requirements involving an EU-based business and EU-located consumers, which make no sense for the UK market as they are. We have yet to see any proposals to make it work in a post-Brexit UK.
What if you are in doubt over whether you have to comply?
A cautious approach would be to aim to comply with the rules if you think you may be covered. However, the obligations are extensive and could have a substantial impact on your business model. It may therefore be worth looking in detail at your service and considering whether any changes might be appropriate.
As for Brexit, monitoring developments over the coming months is likely to shed light on whether the UK market will remain subject to the new regime. But if your offering does include an EU element you are likely to have to comply for that part of the service in any event.
This article has also been published in IT Law Today
Our content explained
Every piece of content we create is correct on the date it’s published but please don’t rely on it as legal advice. If you’d like to speak to us about your own legal requirements, please contact one of our expert lawyers.