The Online Platform Regulation 2019/1150 (the P2B Regulation) came into effect on 12 July 2020 and applies in a business-to-business context of online platforms and search engines. However, despite its B2B application, this is considered a consumer protection measure. This is because its objective is to benefit consumers that access and buy from traders on these platforms, as well as using consumer protection concepts found in unfair contract term laws to protect business users of the platforms.
The broad definition given to platforms, or ‘online intermediation services’, means that many e-commerce market places, auction websites, app stores, and social media sites are within the scope of the P2B Regulation.
Obligations to inform
The P2B Regulation imposes a set of obligations on online platforms in dealing with business users of the platform. They must be transparent about:
• How they rank goods and services on the platform
• How the ranking parameters work on the site, and
• Whether traders can improve their ranking through direct or indirect payments
There is a ban on certain unfair practices, such as making changes to terms and conditions without good reason or notice. Where a platform decides to suspend or terminate an account, it must provide the business user with a statement of reasons within the timeframe specified. Any changes or updates to the platform’s terms and conditions must be in clear language and communicated to business users in a durable medium such as email or any other means that enables business users to keep such notifications for future reference. The platform is also required to publish information on its internal complaint handling process and to display details of at least two independent mediators. The platform must also be willing to engage in mediation in the event of a dispute with a business user.
The P2B Regulation will apply to those entities that have their place of establishment or residence within the EU and, through their platform, offer goods or services to customers that are located within the EU. It does not apply where sellers are not established in the EU or where the platform is used to offer goods exclusively to customers located outside of the EU, or to persons who are not consumers.
In Ireland, the Competition and Consumer Protection Commission is the designated authority for the purposes of the Regulation and its offences as set out in the Irish instrument, S.I. No. 256/2020. These Regulations also set out fines of up to €5,000 and / or a prison term not exceeding 12 months.
New guidance on transparency in ranking
The Commission has recently (December 2020) published guidance on ranking transparency. Ranking has a significant impact on consumer choice and consequently, the commercial success of a product. The technical details of how the ranking system works may be protected by the Trade Secrets Directive (2016/943). Business users are unlikely to know what factors are deciding their performance.
The Commission says providers should give meaningful explanations of their ranking mechanism, in particular, the main parameters used. For intermediation services, the information has to form part of their terms and conditions. The explanation of the parameters should be drafted in plain and intelligible language. The Commission highlights the ‘best practice’ of explaining the thought process behind their chosen parameters and the relative importance of each. Where paid ranking is possible, providers must set out a description of that service and the effects of remuneration on ranking. It is worth noting that indirect remuneration is possible, for example where a business user takes on extra obligations which improves their ranking.
The Guidelines highlight that there may be cases where several separate explanations may be required. For example, several explanations may be required where parameters vary when services are offered through different devices, when the service is operated across different territories and domains, or when there is a syndication or sub-syndication of search results.
Providers should consider what impact filtering options may have for business users, as a customer who filters their search results may alter how important certain parameters are for that specific ranking.
Providers should also be careful to note that business users may think that certain factors are relevant for ranking, when in fact they are not considered. The descriptions of parameters should be sufficiently clear so that users can understand that other factors are not taken into account. Providers should bear in mind that they are not required to disclose the detailed functioning of their ranking mechanisms.
Online intermediation services should ensure their terms and conditions are compliant in terms of transparency and substance, and conduct regular reviews thereafter. Annual reports of how the platform’s internal complaints mechanism is working must be published.
Intermediation services and online search engines should give careful consideration to the transparency requirements in the P2B Regulation. The Commission’s recent guidance further highlights the importance of transparency in this regulation.
Further changes for platform providers, small and large, are imminent as part of the proposed Digital Services Act which is addressed in further detail elsewhere in this issue of the Annual Review.
For more information contact a member of our Product Regulation & Consumer Law team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.