THE PLATFORM TO BUSINESS REGULATION
The so-called Platform to Business Regulation (in short “P2B-Regulation”) establishes rules for the first time to achieve a certain balance in view of the steadily increasing power of platform operators on the Internet (“Platform Operators”). For some situations and problems that have proved to be particularly critical for companies in the past, the regulation attempts to encourage Platform Operators to be fairer. The future will show how effective this Regulation will actually be.
I. The “P2B-Regulation”
The Regulation (EU) 2019/1150 of the European Parliament and of the Council of 20 June 2019 on promoting fairness and transparency for business users of online intermediation services has been directly applicable in all EU Member States since 12 July 2020 and, for the first time, sets out rules for online platforms. In the P2B-Regulation such platforms are called online intermediation services. It only refers to the relationship between the Platform Operator on the one hand and the trader who sells his product or service via the platform (“Business User”) on the other hand. The P2B-Regulation does not focus on consumer protection.
The aim of the P2B-Regulation is to counteract the increasing market power of some Platform Operators, who can sometimes influence the access of companies to markets like a “gatekeeper”. It is particularly important for small and medium-sized entrepreneurs to establish a balance of power and thus create a fairer market. The background to the Regulation is that the market is not self-regulating due to the low level of competition between different intermediaries and platforms. The selected tool is first and foremost the creation of greater transparency.
While it makes sense for Business Users to know their rights vis-à-vis the Platform Operators, there is a corresponding need for implementation for Platform Operators. This article focuses primarily on the first aspect and at the same time provides an initial overview for Platform Operators, especially since most regulations also cover platforms of smaller companies such as start-ups.
II. Scope of the P2B-Regulation
Most of the provisions of the P2B-Regulation apply only to online intermediation services, while individual standards also apply to online search engines (especially regarding ranking and differentiated treatment). Online intermediation services within the meaning of the P2B-Regulation are digital and enable Business Users to offer goods or services to consumers by facilitating the direct conclusion of contracts between the aforementioned market participants (“Platform”). The mediation activity is based on a contract between the Business User and the Platform Operator on the one hand and concerns Platform Operators and consumers on the other hand. Typically, these include online e-commerce market places, booking portals (especially in the travel industry), price comparison websites, app stores and appointment reservation services (e.g. for restaurants, doctors or hairdressers). Product displays that are directly integrated into social media and which guide users to the company’s online store via a link also fall under the P2B-Regulation. On the other hand, it excludes pure payment services, online ad exchanges or B2B intermediation services (such as Amazon Business or Alibaba).
The headquarters of the Platform Operator or the search engine is irrelevant for the validity of the P2B-Regulation. On the contrary, the decisive factor is whether the Platform or search engine is made available to Business Users who, on the one hand, have their place of business or residence within the EU and, on the other hand, offer goods or services via the Platform or search engine to consumers that are located in the EU.
III. Essential provisions of the P2B-Regulation
A selection of essential regulatory aspects of the P2B-Regulation is presented below.
a) Fundamental requirements for the General Terms and Conditions
The P2B-Regulation initially imposes certain fundamental requirements on the content and amendment of the Platform Operator’s General Terms and Conditions (GTC) (Art. 3 of the P2B-Regulation). Failure to comply with these requirements will result in the nullity of the regulations concerned. The GTC must be clear and comprehensible and must specify cases in which the Platform Operator may suspend or terminate all or part of its services to Business Users. In addition, Business Users must be informed if the Platform Operator has other distribution channels or partner programs and could market the goods or services there as well. The GTC must also provide information on the handling of the intellectual property of the Business User. The P2B-Regulation also contains requirements with regard to form and timeframe, which the Platform Operator has to comply with if he amends the GTC.
b) Restriction and termination of services
The “ranking” of the goods and services offered by the Platform Operator, which is so important for the marketing success via online intermediation services, is regulated in Art. 5 of the P2B-Regulation. According to this, the Platform Operator’s GTC must describe which essential factors determine the ranking and for what reasons. The exact algorithm does not have to be disclosed. Search engine providers have to publicly provide information about the weighting of the parameters. If the ranking is increased by a payment from the respective company or website operator, this must be disclosed.
d) Dual role of Platform Operators
Since some Platform Operators have started to offer goods or services themselves, Art. 7 of the P2B-Regulation requires them to indicate in their GTC to Business Users the extent to which they give preferential treatment to their own products on the Platform – for example by means of ranking or by the Platform Operator making the data and information generated from the operation of the Platform available to their own trading company. Similar rules also apply to search engine providers. If the Platform Operator also offers the consumer additional services, such as insurances, the Platform Operator shall also inform the Business User of this in its GTC and also whether the Business User could also market such additional services via the Platform.
e) Access to data
Data of various kinds represents an enormous, essential value of platform operations, and their business model allows Platform Operators to collect and use large amounts of data. Therefore, Art. 9 of the P2B-Regulation contains a provision according to which the Platform Operators must inform the Business Users in their GTC whether and to what extent the Business User can gain access to the generated data and whether collected data is passed on to third parties.
f) Best price clauses
Finally, Art. 10 of the P2B-Regulation contains a provision according to which it must be explained and justified in the GTC as well as publicly if the GTC of Platform Operators contain contractual provisions according to which the Business Users may not offer the product or service elsewhere on different terms, as it is the case, for example, with so-called “best price clauses”.
In contrast, the P2B-Regulation provides for quite mild means to enforce the aforementioned regulations. On the one hand, Platform Operators must provide for an internal complaint-handling system, the functioning of which is described in Article 11 of the P2B-Regulation. On the other hand, the GTC must specify two or more mediators with whom the Platform Operator is willing to cooperate in order to settle disputes. Exceptions to these requirements apply to smaller Platform Operators and thus especially to start-ups. In addition, Art. 14 of the P2B-Regulation establishes the possibility to take collective action, which certain organizations can file in order to stop or prohibit any non-compliance by providers of online intermediation services or providers of search engines with the provisions of the Regulation.
Beyond the means of nullity of GTC regulations in case of non-compliance with the requirements for GTC under Art. 3 of the Regulation and the implementation of the Regulation by collective action, the P2B-Regulation does not provide for an own effective enforcement mechanism. This is rather left to the respective national legislation, Art. 15 P2B-Regulation.
For German law, this raises numerous follow-up questions that will only be legally clarified in the future. Enforcement of compliance with the regulations could e.g. be achieved by means of sections 3, 3a German Act against Unfair Competition (UWG). In addition, it is questionable whether individual contractual provisions that violate the requirements of the Regulation are null and void due to violation of a legal prohibition according to section 134 German Civil Code (BGB). However, many regulations only require transparency without prohibiting a specific action. A possible violation of the P2B-Regulation by the Platform Operator, which leads to a causal damage to the Business User, could possibly give rise to claims for damages by the Business User.
V. Outlook and consequences
In the future, the new Regulation will primarily offer entrepreneurs who use a platform for their sales activities the opportunity to at least inform themselves about the exact conditions on which the Platform Operators base their business model. However, with the introduction of numerous transparency provisions, relatively mild means of enforcing the purpose of the P2B-Regulation has been chosen, so the future will show whether transparency will lead to efficient control of the market power of Platform Operators. The Regulation itself provides for a timely review of its enforcement rules, which is why it will be reviewed again in the future. For the entire platform industry, the Regulation implies that some measures must be taken to implement the Regulation and that small and medium-sized Platform Operators should also seek legal advice on this matter.
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