EU Platform-to-Business Regulation Enters Into Force

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Latham & Watkins LLPThe regulation is part of the EU Digital Single Market strategy to harmonise digital rights.

From 12 July 2020, the EU’s Platform-to-Business Regulation 2019/1150 (P2B Regulation) promoting fairness and transparency for business users of online intermediation services applies. The P2B Regulation, which entered into force in June 2019, came about in response to complaints from SMEs regarding unfair practices and lack of transparency by online platforms, and the European Commission’s review of the same.

Who has to comply?

The P2B Regulation applies to providers of online search engines and online intermediation services (Online Services and Providers). While the concept of online search engines is familiar, online intermediation services is a new, and potentially far-reaching, concept in the context of EU legislation. However, where commentators have complained of a lack of clarity in other Digital Single Market legislation (e.g., the Copyright Directive), the P2B Regulation provides a detailed definition of the enterprises to whom it applies. The Commission has also published a Q&A document to further clarify whom the P2B Regulation applies to, the steps to be taken to achieve compliance, and information on the rights of business users.

The P2B Regulation defines online intermediation services as any service that:

  • Is normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of service, i.e., any information society service provider (as defined in Directive 98/34/EC and clarified in Directive (EU) 2015/1535)
  • Allows business users to offer goods or services to consumers, that facilitate the initiation of direct transactions between those business users and consumers, irrespective of how those transactions are ultimately concluded (whether online or offline )
  • Is provided to business users on the basis of contractual relationships between the provider of the service and business users that offer goods or services to consumers

The P2B Regulation expressly:

  • Confirms that e-commerce marketplaces, price comparison tools, app stores, and social media are within its scope
  • Does not apply to peer-to-peer online intermediation services (where no business users are present), pure business-to-business online intermediation services that are not offered to consumers, online payment services, online advertising tools, or online advertising exchanges

Notably, whether the transactions between business users and consumers (i) involve any monetary payment, or (ii) are partially concluded offline is not relevant to the application of the P2B Regulation.

What are Providers’ obligations?

Providers will need to ensure compliance with the P2B Regulation in several areas, including:

  • Terms and conditions (Article 3). These must now, amongst other obligations:
  • Be drafted in plain and intelligible language
  1. Be easily available to business users at all stages of the commercial relationship
  2. Include a minimum 15-day notification period when changes are made
  3. Clarify which additional channels and affiliate programmes Providers may use to distribute business users’ goods/services, and what, if any, ancillary goods and services Providers may offer
  4. Include general information on the effects of the terms and conditions on ownership and control of the intellectual property rights of businesses

Any terms and conditions that do not satisfy the above criteria will be deemed null and void.

  • Delisting. The grounds for restriction, suspension, and termination must be set out in the terms and conditions, and Providers must provide a statement of reason if they restrict, suspend, or terminate the provision of a service (save when the Provider acts in compliance with a legal obligation).
  • Ranking. Providers must set out in the terms and conditions the general criteria used in determining how goods and services are ranked and the reasons for the criteria’s relative importance. The Commission will issue guidelines for Providers on these requirements in the coming weeks.
  • Differentiated treatment. Providers must be clear on how they treat their own goods and services compared with those of business users.
  • Redress. Providers must implement an easily accessible internal complaint handling system, and must identify in the terms and conditions external mediators with whom they are willing to engage.
  • Data access. Providers must formulate and publish general polices on the type of data generated through their services that can be accessed as well as who can access that data and under what conditions.
  • Most-favoured nation. When Providers limit business users’ ability to offer better conditions to other parties, they must explain their economic, commercial, or legal reasons for imposing such restrictions.

Non-compliance and enforcement

The P2B Regulation gives Member States the freedom to determine the manner of enforcing these obligations. The UK Online Intermediation Services for Business Users (Enforcement) Regulations 2020 do not refer to specific penalties, but provide the right for business users to bring an action for damages against Providers in breach of the P2B Regulation. It also enshrines the right (outlined in Article 14 of the P2B Regulation) for organisations, associations and public bodies that have a legitimate interest in representing business users to bring proceedings against Providers for remedies including injunctions. The P2B Regulation requires that Member States should communicate the identity of such entities to the Commission and the Commission will publish a list of such entities in the Official Journal of the European Union. If an organisation, association, or public body is not included on such a list, they may still bring an action before the national courts subject to the courts’ examination of such entities’ legal capacity. Whether this opens up an opportunity for bringing class actions remains unclear.

Effect of Brexit

As the P2B Regulation has been implemented during the transition period, it will continue to apply in the UK after Brexit.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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