Locations
However, the limited number of online platform competitors and the necessity of access leads to a power imbalance, between online platforms and business users. This imbalance may put businesses in a dependable position, allowing online platforms to dictate conditions that indirectly, affects consumers.
Two of the elements that have an effect on the success of a business using an intermediary online platform are user fees, and the platform's ranking system.
Businesses obtain access to online platforms by paying a user fee, unilaterally established by the online platform. The user fees are often high and it is unclear how pricing levels are determined. Almost all intermediation services use a ranking system determining which businesses consumers easily find. More than that, the level of user fee can affect a business' ranking, instead of the quality of a particular business and its products or services.
These circumstances have a distorting impact on the market eventually unfairly influencing the availability of services to consumers.
This is changing. As part of its Digital Single Market strategy, the European Commission drafted the European regulation to promote fairness and transparency for business users of online intermediation services (Platform-to-Business Regulation). The regulation entered into force on 12 July 2020 and aims to minimalize the distortion of the market and to level the playing field between online platforms and business users, which eventually leads to the better protection of consumers.
The regulation has two main attributes: it imposes transparency requirements to online platforms and it includes provisions on dispute settlement. The regulation purpose is to increase the fairness and transparency for business users of online intermediation services. By imposing transparency requirements, the regulation aims to combat harmful and unfair commercial practices. The European Commission purposely choose not to prohibit specific practices, but to focus on visualizing the user practice of online platforms. Based on the information provided consumers are free to decide to make use of an online platform.
The regulation has a wide scope. All online platforms facilitating a transaction between a vendor and a consumer in the European Union (EU) are subject to the regulation. The regulation only targets parties that bring together companies and consumers. Other online services, such as payment services, are not subject to its obligations.
Note that the physical presence of the online platform in the EU is not a requirement.
The main aim of the regulation is to increase transparency. That is why Article 3 of the regulation requires online platforms to publish the main considerations of their terms and conditions. These terms and conditions should also mention the most important parameters for the ranking of services vis-à-vis each other. Additionally, the terms and conditions need to clarify the relative importance of these parameters.
In short, online platforms ensure that the reasons for ranking of products and services are easily found by consumers and are motivated objectively.
As part of the increased transparency that the regulation aims to achieve, online platforms must indicate if and how the online platform itself treats products and services differently than the products of a business user. In addition, when an online platform decides to restrict or suspend the provision of services with a business, it is obliged to share its decisions. The obligation to state reasons extends to specific subjects, such as the ranking of businesses on the online platform. Online platforms also need to provide reasons for imposing restrictions on business users for products and services offered by the online platform itself.
Online platforms also have to indicate if and to what extent the platform and the business user have access to the (personal) data of the consumer and other data. The obligation of the General Data Protection Regulation (GDPR) applies to the actions of online platforms and business users.
Finally, the regulation includes provisions on dispute settlement in the form of an internal complaint system. Any online platform with more than 50 employees and a yearly turnover of 10 million euros needs to establish an internal complaint system. The platform has to appoint two or more internal mediators who are independent and objective in their Terms and Conditions.
The aim of dispute settlement clauses is to solve conflicts between the online platform and businesses outside of court. Business users may bring a complaint to the internal complaint system. The dispute settlement provisions also provide access to the internal complaint system to organisations or associations that represent business leaders to go to court on behalf of the businesses. Business users of online platforms are thus able to join forces against any infringement of the regulation. The regulation has direct effect so business users are able to enforce the obligations against online platforms in court if necessary.
Concluding observations
The regulation increases transparency for business users of online platforms, which indirectly protects consumers against arbitrary (and higher) prices for goods and services. From a market perspective, the choice to focus on increased transparency instead of restrictions is a sound one. By doing so, the regulation will increase predictability without unduly limiting online platforms in conducting business operations.Still, a number of limitations could undermine the effectiveness of the regulation. Most notably, online platforms are not required to provide access to the detailed workings of their ranking mechanisms. The exact parameters upon which its algorithms function, are not made accessible to consumers. Moreover, the regulation shields business secrets from the transparency requirements. This may serve as a loophole for any business wanting to shield particular information from end-consumers. It also yet unclear which businesses fall within the scope of the regulation.
For example, a platform such as Uber may or may not fall within its scope as it is not clear if the service provider is subject to the rules of information societies. The same goes for services such as Foodora, Deliveroo or UberEats, because it is unclear whether these companies fall within the definition of a business-to-business transaction. Whether the services of these companies are offered to consumers, restaurants or the online platform determines whether the regulation is applicable or not.
Due to these limitations and exceptions, the exact information that online platforms need to share is not entirely clear.
It is expected that the European Commission will publish guidelines on what information needs to made transparent (and which not).
Pending such guidelines from the European Commission, online platforms it is advisable for online platforms to provide more transparency to the terms and conditions for business users of their platform. Terms and conditions need to be drafted in clear and clear language. The criteria for removing a business from the online platform should be explicitly stated. The terms and conditions also need to include the criteria for the ranking of businesses on the online platform.
The platform-to-business regulation is a step in the right direction, levelling the playing field between business users and online platforms.