EU – A primer on the P2B Regulation
At the start of July, the so-called Platform-to-Business (P2B) Regulation will apply across the EU. It is aimed at online marketplaces and search engines and should encourage them to deal with businesses in a fair and transparent manner.
We provide a brief overview of the main obligations under that Regulation.
Who is subject to the Regulation?
The P2B Regulation (Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services) was adopted in July 2019 and will become applicable from 12 July 2020. It applies to:
- Online intermediation services – This is broadly defined to include online e-commerce marketplaces, including collaborative ones on which business users are active (e.g. Amazon Marketplace, eBay, Fnac Marketplace), online software applications services (e.g. Apple App Store, Google Play, Microsoft Store) and online social media services (e.g. Facebook or Instagram pages used by businesses).
- Online search engines – These are services that facilitate web searches based on a subject query and provide results, e.g. Bing, Google Search, Yahoo!.
In both cases, these entities are only caught if they provide their services to businesses established in the EU and offer goods or services to consumers located in the EU. However, the P2B Regulation contains a number of carve-outs, including:
- Consumer P2P & Business B2B – Online intermediation services that only connect consumers to consumers, or businesses to other businesses, are not caught.
- Adtech – Online advertising tools, online advertising exchanges, advertising blockers and search engine optimisation software services are also generally out of scope.
- Interfaces – Similarly, technology and interfaces that merely connect hardware and applications are outside the scope of the Regulation.
- Online retailers – Grocery stores and retailers are not subject to the Regulation where they directly sell their own products to consumers without relying on third-party sellers.
What does this mean for online marketplaces?
The P2B Regulation requires providers of online intermediation services (“OIS providers”) to create a fair and transparent framework that meets the following requirements.
1. Transparent terms and conditions - Standard terms and conditions must be in plain and intelligible language, transparent and easily available. They must include sufficient information on:
- when the OIS provider can suspend, restrict or terminate a business user’s use of the service;
- when the business user can terminate their relationship with the OIS provider; and
- the additional distribution channels and potential affiliate programmes through which a business user’s goods and services will be marketed by the OIS provider.
Modification of the terms and conditions will need to be announced in advance and will typically need 15 days’ notice. Those changes cannot be made retrospectively. OIS providers must also ensure that the identities of the business users providing the goods or services on the online intermediation services are clearly visible.
2. Controls on suspension and termination - There are controls on an OIS providers ability to terminate or suspend a business user. Before doing so it must:
- give the business user a statement of reasons for that decision on a durable medium;
- give at least 30 days’ prior warning in most cases of termination (subject to certain exceptions); and
- preserve the data associated with the business users' account, so this can be reinstated if the business users' account was closed in error.
3. Ranking – The prominence given to a business user’s goods and services in any consumer search will have a huge effect on their likely sales. Accordingly, OIS providers must inform businesses how they rank goods or services offered through their services, either in the terms and conditions or in a publicly available document.
4. Ancillary goods and services – Where ancillary goods and services, including financial products, are offered to consumers through online intermediation services, either by the OIS provider or by third parties, the provider of online intermediation services shall set out in its terms and conditions:
- a description of the type of ancillary goods and services offered; and
- a description of whether and under which conditions the business user is also allowed to offer its own ancillary goods and services through the online intermediation services.
5. Differentiated treatment – OIS providers must set out in their terms and conditions a description of any differentiated treatment which they give to their own products and services or to other business users. This must include the main economic, commercial or legal considerations for such differentiated treatment.
6. Access to data – OIS providers must set out in their terms and conditions how business users can access personal data or other data generated through the provision of those service to the business user. Those terms must also describe any access the OIS provider has to that data after the expiry of the contract with the business user.
7. Restrictions on selling through other channels – Where an OIS provider restricts business users from offering the same goods and services to consumers through other channels, it must include those restrictions in its terms and conditions and set out the main economic, commercial or legal considerations for those restrictions.
8. Dispute resolution – Finally, OIS providers must offer a variety of means to resolve disputes by:
- setting up an internal complaint-handling system (though there is an exception for smaller platforms);
- publicising details of how well the system is operating, e.g. number of complaints, their subject matter, time taken to process complaints and the decisions taken; and
- providing business users with the option of mediation.
What does this mean for search engines?
The obligations on online search engines are much more limited.
1. Ranking - The principal controls are in relation to the ranking of search results. The search engine provider must provide details of the main parameters used to rank results, including the treatment of “paid for” search results.
Where a website is demoted or delisted as a result of a third-party notification (e.g. alleging infringement of intellectual property results) the owner of the website should be able to see that notification.
This will provide a very high-level overview of the operation of the search engine. However, given the complexity and variety of factors used by search engines and the tailoring of the search results, it is unlikely to explain why a search engine has given a particular site a particular ranking for a particular user. In addition, there is no obligation on the search engine provider to disclose their actual algorithm or other information that could be used to game the system.
2. Differentiation - The P2B Regulation also requires search engine providers to describe any differentiation they apply to their own goods or services in search engine results.
Does the Regulation protect consumers?
The P2B Regulation is relatively unusual in that it protects businesses dealing with online intermediation services or whose websites are listed by online search engines. It does not directly protect consumers. However, these measures should indirectly benefit consumers by helping to provide a fairer and more transparent marketplace.
However, additional consumer protection will be provided through the Enforcement and Modernisation Directive (2019/2161) which was adopted last year. This provides a range of new protections for consumers including by amending the following Directives:
- Directive on unfair commercial practices (2005/29/EC) – The amendments, amongst other things, require additional transparency for consumers about search functions on online marketplaces and the steps taken to ensure consumer reviews are genuine.
- Directive on consumer rights (2011/83/EU) – A number of amendments are made to this Directive including a requirement on traders to disclose if personalised pricing is used and an obligation on providers of online marketplaces to disclose additional information, such as whether the consumer is dealing with a trader or another consumer. There are also controls on the use of non-personal data provided by the consumer.
- Directive on consumer price indications (93/13/EEC) – This Directive is amended to require additional transparency for price reduction claims.
Member States must implement these changes by May 2022 and they will be accompanied by a steep increase in sanctions with breaches punishable by fines of up to 4% of annual turnover.
Will it work and what happens if the rules are broken?
This marks a first tentative step towards regulating the rough and tumble of online marketplaces and search results. These are not easy markets to regulate. Bad actors constantly try to exploit online marketplaces to sell illegal or counterfeit material, or to cheat or defraud consumers. Similarly, search engines have to filter out fraudulent or illegal websites and counter legitimate businesses who will, for understandable reasons, go to great lengths to improve their website’s search rankings.
Member States must ensure adequate and effective enforcement of this Regulation, but in doing so must tread the difficult line between allowing providers of online intermediation services and search engines to take swift action against bad actors, whilst providing a fair and transparent environment for legitimate businesses. Providers of online intermediation services must also contend with the fact that non-compliant terms and conditions are automatically void and be alert to the risk of representative actions for breach of the Regulation.
This is not the end of the story. At the start of June, the EU Commission launched a public consultation on the Digital Services Act which will introduce new measures to ensure a “level playing field” in European digital markets. This may include non-personal data access obligations, specific requirements regarding personal data portability or interoperability requirements (see The EU’s Digital Services Act: Difficult choices ahead).
By Ceyhun Pehlivan