EU Online Platform Regulation – deal reached

To date, much of the scrutiny on online platforms has focused on how they treat consumers. However, now for the first time specific EU legislation is set to regulate how businesses such as marketplaces, app stores and price comparison tools treat the businesses that depend on their services to access consumers in the EU. With nearly half all SMEs in the EU using online marketplaces to sell their services and with nearly 7,000 platforms falling in scope of the new Regulation, the new rules are set to have a big impact on the platform economy both in the EU and beyond.

What is the status of the new legislation?

On 13 February, the European Parliament, Council of the European Union and the European Commission reached agreement on the rules that will apply to how online platforms deal with businesses. Next, EU member states will vote on whether to make the new rules law. If adopted by EU member states, the rules will apply twelve months later.

Who will the EU Online Platform Regulation apply to?

The new Regulation will apply to online platform intermediaries and general online search engines that provide services to businesses established in the EU and that offer goods or services to consumers located in the EU. This means that platforms outside the EU may need to comply with the Regulation. Examples include e-commerce marketplaces, app stores, social media used by businesses and price comparison tools. Search engines which facilitate searches based on a query will also be covered by the new Regulation. Platforms which do not intermediate between businesses and consumers will not be subject to the Regulation. This means that online advertising exchanges and brands selling their own products direct to consumers without third party sellers will not be in scope.

What do the new rules say?

One of the key aims of the new Regulation is to increase transparency in the way that online platforms operate. It also addresses practices that have been the subject of recent European Commission and member state enforcement action and investigations. Key provisions are:

1. Banning specific unfair practices: seller accounts cannot be terminated without clear reasons and the possibility of appeal. Subject to a few exceptions, 15 days’ notice of changes to terms and conditions must be given so that businesses can adapt to the changes being imposed. Additionally, subject to a few exceptions, intermediation services providers must give businesses at least 30 days’ notice if they wish to terminate their relationship.
2. Transparent ranking: marketplaces and search engines will need to disclose how they rank goods and services, including the role of any payment made by business users to influence their ranking. Lack of transparency in search results has been the subject of recent enforcement action by the UK’s Competition and Markets Authority under consumer legislation.
3. Those platforms which provide a marketplace and sell on that marketplace will have to disclose what advantage is given to their own products and services. In particular, they will have to disclose what data they collect and how it is shared with other business partners. The ongoing investigations by the European Commission and by competition authorities in a number of member states as to how an e-commerce marketplace treats sellers shows how relevant this issue is for online sellers using marketplaces.
4. Dispute resolution: Platforms will need to set up internal complaint-handling systems so that businesses can file a complaint directly and provide more options for mediation by naming mediators in their terms and conditions. There are exemptions for those platforms with less than 50 staff which generate less than €10m in turnover.
5. Enforcement: Organisations and associations representing businesses will be able to enforce non-compliance with the Regulation before national courts.

What is the effect of Brexit on the new rules?

If adopted by EU member states, the rules will apply twelve months later. This raises the possibility that the Regulation will come into force after Brexit has occurred. However, given the extra-territorial scope of the rules, any business that provides services to businesses established in the EU and that offers goods or services to consumers located in the EU will remain affected by the Regulation. In the event of a no-deal Brexit, British businesses who use platforms in scope of the Regulation will not be able to benefit post-Brexit from the protection it offers.