EC proposals to redress the balance between online marketplaces and their customers

EC publishes draft Regulation to promote fairness and transparency for business users of online intermediation services.

What's the issue?

The EC's Digital Single Market (DSM) proposals aim to create a digital level playing field across the EU. With a raft of legislation aimed mostly at protecting consumers and small businesses, the EC has turned its attention to the relationship between online search engine (OSEs) and online intermediation service (OIS) providers, and their business users. The EC has concluded that the balance of power in the relationship is too much in favour of the former and that it can be hard for businesses to understand the nature of their contractual relationships with them.

What's the development?

The EC has published a draft Regulation to promote fairness and transparency for business users of online intermediation services (Regulation) as part of the Digital Single Market proposals. The aim of the draft Regulation is to redress perceived asymmetry between the market power of OSEs and OIS providers (online platforms which facilitate transactions between business and consumers by allowing businesses to offer goods or services through them).

The intention is to require enhanced transparency around search results rankings and in platform terms and conditions, and to ensure effective redress for users.

What does this mean for you?

The Regulation is clearly aimed at the tech giants and will catch third party e-commerce marketplaces like Amazon marketplace and eBay, App stores like GooglePlay and Apple App Store, social media for business, for example, Facebook pages and Instagram, and price comparison websites and tools.

Businesses which rely on third party marketplaces and search ratings are likely to welcome the enhanced transparency requirements and redress mechanisms.

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What is an OIS provider?

OISs are defined as services which meet all of the following:

• they are "information society services" i.e. a service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services;
• they allow business users to offer goods or services to consumers with a view to facilitating the initiating of direct transactions between those business users and consumers, irrespective of where those transactions are concluded; and
• there are contracts in place between the business user and the service provider and between the business user and the consumer. A contract is deemed to exist where the parties express their intention to be bound in an unequivocal and verifiable manner. An express written agreement is not required.

Online advertising service tools, online advertising exchanges and online payment services are excluded.

What is an OSE?

An OSE is defined as a digital service which allows users to perform searches of, in principle, all websites or websites in a particular language on the basis of a query on any subject in the form of a keyword, phrase or other input, and returns links in which information related to the requested content can be found. OSE providers are within scope.

What is the scope of the Regulation?

The Regulation will apply to OIS and OSE providers which provide their services to businesses established in the EU and that offer goods or services to consumers located in the EU. The location of the OIS or OSE provider is not relevant.

The proposal excludes online advertising and payment services that do not intermediate direct transactions between businesses and consumers, as well as intermediaries that operate between businesses only.

Main obligations on OIS providers

OIS providers will have to ensure their terms and conditions:

• Are drafted in clear and unambiguous language.
• Are easily available to businesses at all stages of their commercial relationship with the OIS provider, including pre-contract.
• Set out the objective grounds for decisions to suspend and or terminate a business user's use of the OIS, whether in whole or in part.

Any terms held not to fulfil these criteria by a court will not be binding on the business.

Reasonable advance notice (of at least 15 days) must be given to users of changes to the terms and conditions unless the notification requirement is waived by the user or the change is required by law. Failure to comply will render any changes invalid.

There are information requirements around unexpected termination or suspension of an OIS.

OIS providers have to give information about their rankings in such a way as to enable the users to understand them (without having to disclose Trade Secrets). This will include describing the main parameters determining ranking and their relative importance in light of prescribed criteria.

OIS providers also have to give information about any more favourable treatment they give to their own products or services.

OIS providers have to give information about technical and contractual access they allow to business users in respect of their own, or consumers' personal or other data as generated by the OIS provider.

Grounds for any use of 'most favoured nation' provisions must be supplied.

OIS providers will be required to have an internal complaints handling system and identify a mediator they are willing to use.

What are the main obligations on OSEs?

OSEs will have to provide information about their rankings in such a way as to enable the users to understand them (without having to disclose Trade Secrets). This will include describing the main parameters determining ranking and their relative importance in light of prescribed criteria.

Other issues?

Provision is also made for representative organisations or associations and public bodies to take action before national courts to enforce the Regulation and the Commission is also encouraging OIS and OSE providers to draw up codes of conduct.