Regulation 2019/1150 of the European Parliament and of the Council has radically changed the rules relating to online business by regulating the operation of certain online service platforms, such as e-commerce marketplaces, application stores and search engines. We highlight here the most important things you need to know about the regulation, commonly known as the Platform Regulation or the P2B Regulation.
Why was the Platform Regulation necessary?
The reason is very simple: with 1 million businesses in the European Union’s internal market already selling goods and services through online platforms, the EU wants to bring large online platforms under increased regulatory control. These online platforms offer access to cross-border markets with unparalleled efficiency, which is why they are key to millions of businesses operating online.
At the same time, while the bridging role which online platforms play allows millions of their users to be directed to a particular business, it also carries the risk of unfair commercial practices, against which injured businesses have no effective remedy.
It is important to be aware that online intermediaries often negotiate from a dominant position that enables them to act almost unilaterally. This could easily create unfair conditions and harm the legitimate interests of their business users and, indirectly, EU consumers.
With the P2B Regulation, the European Commission has therefore taken steps to eliminate unfair commercial practices and to combat such contractual clauses in the course of business between individual online platforms. The regulation has been mandatory in all EU Member States since 12 July 2020.
Who does the regulation cover?
The P2B Regulation covers almost the entire spectrum of the online economy and covers almost 7,000 online intermediary services in the EU, including:
- online advertising and auction sites
- e-commerce markets
- software application stores
- social media
- search engines.
Typically, this includes commercial platform providers such as Amazon or Alibaba, as well as various app stores like Google Play or the App Store.
The regulation also applies to services that make it easier to initiate direct transactions between business users and consumers, regardless of whether the transactions are ultimately online or whether consumers pay for them. Examples are online price comparison sites such as Árukereső or the Skyscanner flight search service.
Simply put, this regulation does not govern the rules between businesses and consumers, but the relationship between online intermediaries and the businesses that use the services they offer. Consumers are therefore only indirectly affected.
To understand the indirect involvement of consumers, it is important to know that the regulation applies to online intermediaries and online search engine providers (“providers”). This refers to service providers who offer services to business users established in the EU who also provide goods / services to consumers in the EU, for at least part of the transaction, regardless of where the service providers are established.
For example, if a Hungarian company sells mobile phone cases to consumers in Hungary via Árukereső or to consumers in another EU Member State through Amazon, it will fall within the scope of the regulation. However, if the same Hungarian company sells mobile phone cases in India via Amazon, the provisions of the regulation no longer need to be taken into account in the contractual relationship between the Hungarian trader and Amazon.
What does the P2B Regulation contain?
The main purpose of the P2B Regulation is to ensure the transparency of commercial relations between platforms and business users. In other words, the terms and conditions of the platform services are clear and easily accessible to business users, and the terms and conditions of the agreement and any amendments thereto are communicated to business users within a proportionate and reasonable time.
The regulation seeks to cover the entire scope of online services (such as contractual terms, contract nullity, data protection, protection of intellectual property rights and redress), but in such a way that it does not completely constrain innovative and creative practices arising from the nature of those services.
As such, the new rules prohibit certain past unfair practices, such as changing online contractual terms without good reason. The regulation also requires online intermediaries to operate transparently, and to operate and maintain internal complaint handling mechanisms. The regulation also imposes a very severe legal consequence to these insofar as any condition or provision thereof which infringes the obligations contained in the regulation is void.
New rules to look out for
- Restriction, Suspension and Termination of Services – GTCs shall specify the reasons for the decision to suspend or terminate the services provided to business users in whole or in part. If a service provider wishes to limit, suspend or terminate its services, it must comply with certain information requirements, including a justification for the business user.
- Search Results and Rankings – GTCs should now include the main parameters used to determine rankings and explain the relative importance of each parameter.
- Differentiated treatment of products – GTCs must contain a description of the different treatment of the service provider’s own products compared to the products of other business users. This description should refer to “the main economic, commercial or legal aspects” that explain the difference in treatment.
- Amendments to General Terms and Conditions – any proposed amendments to GTCs must be made available to the business user in writing, electronically or in another durable form and may not be implemented before the 15-day notice period has expired (longer notice periods must be provided if required, but a shorter notice period may be applied in certain circumstances).
- Termination Rights – business users may terminate the agreement before the notice period expires. Information on the method of termination of which business users may avail themselves must be included in GTCs.
- Prohibition of retroactive changes – service providers may not impose any retroactive changes to GTCs on companies, unless they are required to comply with a legal or regulatory obligation or the changes are more favourable to business users.
As mentioned previously, any condition that does not meet these criteria is considered null and void.
How can these obligations be enforced?
The P2B Regulation leaves it to the Member States to define enforcement mechanisms. All that is expected is that they be suitable for the proper and effective implementation of the P2B Regulation. In addition, the Regulation requires organisations representing the legitimate interests of business users or website users to be able to bring proceedings before the competent national courts. Thus, such organisations may even claim compensation on behalf of business users (depending on the law of the Member States).
These representative organisations are therefore entitled to bring proceedings before the competent national courts in the European Union in order to eliminate or prohibit online intermediaries or online search engine providers from infringing the requirements of the Regulation.
Service providers are not left without options either
Businesses providing intermediary services will continue to have the right to suspend the services of their clients if they have a legitimate interest in so doing. For example, if a trader starts selling products on an e-commerce platform that are contrary to the values or community guidelines of the intermediary service company, or even violate the law, they may suspend the transmission and display of the customer’s products. However, the decision must be sent with detailed justification to the customer concerned on a “durable medium” 30 days before the suspension takes effect. The latter, in the knowledge thereof, may lodge a complaint or, ultimately, go to court.