New requirements for online intermediation service providers and online search engines as of July 2020
For many companies, platforms that enable them to offer their goods and services to consumers or that make it easier to find business websites are a significant factor in opening up new markets and expanding distribution channels. The advantages of using these platforms, however, regularly lead to a certain dependence of users on the respective platform providers. The European legislator recognized a need to compensate for the frequently existing power gap between platform providers and business users by means of appropriate regulatory requirements. The aim is not only to strengthen the position of business users, but also to avoid disadvantages for consumers. As a result, the Regulation on the Promotion of Fairness and Transparency for Commercial Users of Online Mediation Services (Regulation EU 2019/1150 of the European Parliament and of the Council of 20 June 2019) came into force in July of this year. Starting July 12, 2020, new transparency and information obligations will apply to providers who make online intermediation services and/or online search engines available to EU-based business users.
Who is affected?
The Regulation applies to any provider of an online intermediation service or an online search engine. Both platform types are legally defined in the regulation.
Characteristics of an online mediation service are as follows:
- The platform constitutes information society services, i.e. any service normally provided for remuneration at a distance, by electronic means and at the individual request of a recipient.
- The platform allows the initiation of direct transactions between business users and consumers, irrespective of where these transactions are ultimately concluded.
- A contract regarding the platform’s use exists between the provider of the platform and the business user.
Examples of online intermediation services, according to this definition, include trading platforms or hotel or flight booking websites.
The definition of an online search engine reflects the general understanding and describes a "digital service that allows users to input queries in order to perform searches of, in principle, all websites, or all websites in a particular language, on the basis of a query on any subject in the form of a keyword, voice request, phrase or other input, and returns results in any format in which information related to the requested content can be found.”
A provider is any person who offers one of the services described above, irrespective of its registered office or other applicable law (cf. Art. 1 para. 2 of the Regulation). This means that, in principle, providers that have their place of business outside of the EU may also be subject to the obligations.
In order for the Regulation to apply, the following criteria must also be fulfilled cumulatively:
- The online mediation service or the online search engine is provided or offered for provision to business users or users with a company website.
- The users have their place of establishment or residence in the EU.
- The users offer goods or services to consumers located in the European Union through the platform.
Conversely, platforms which only allow private use or whose users are not located in the EU or which do not offer goods/services to consumers in the EU are not covered by the Regulation. However, it should be noted that the scope of application does not presuppose that the respective platform is provided exclusively to business users.
What do providers of such platforms have to consider starting July 2020?
The Regulation’s provisions concern the general terms and conditions of providers of online intermediation services in particular, which in many cases will require considerable adaptation. In addition, there will be further obligations for providers of online intermediation services. The extent to which these requirement shall also apply to providers of online search engines remains uncertain.
Providers of online brokerage services
Requirements for the General Terms and Conditions of Business
In addition to the general requirements, the general terms and conditions of providers of online intermediation services must, in accordance with the Regulation
- be drafted in plain and intelligible language;
- be easily accessible at all times;
- set out the grounds for decisions to suspend or terminate or impose any other kind of restriction upon, in whole or in part, the provision of their online intermediation services to business users;
- include information on any additional distribution channels and potential affiliate programmes through which providers of online intermediation services might market goods and services offered by business users;
- include general information regarding the effects of the terms and conditions on the ownership and control of intellectual property rights of business users;
- in the case of rankings, set out the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters;
- where applicable, contain 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;
- contain a description of any differentiated treatment which they give, or might give, in relation to goods or services offered to consumers through those online intermediation services by, on the one hand, either that provider itself or any business users which that provider controls and, on the other hand, other business users;
- contain information about the conditions under which business users can terminate the contractual relationship with the provider of online intermediation services;
- contain information on the provider's access to personal or other data or information provided or generated by the user;
where applicable, information on the grounds for restriction of the ability of business users to offer the same goods and services to consumers under different conditions through other means than through those services;
- contain information on access to and functioning of the internal complaints management system;
contain information on two or more mediators with whom the provider is willing to cooperate in order to reach an out-of-court settlement of any disputes with business users.
The Regulation also lays down specific provisions for amendments to the general terms and conditions:
- The general terms and conditions may not be changed retroactively, unless it is to the users’ advantage.
- The provider must inform business users of any changes to the general terms and conditions in advance.
- The notification must be made at least 15 days before the change is implemented (exceptions may apply).
- The business user can terminate the contract with the provider at any time during the period.
In this respect, it may be reasonable to revise the internal processes for changing the general terms and conditions.
The disregard of these specifications for the general terms and conditions can lead to the invalidity of the respective clauses or in individual cases to the invalidity of the entire general terms and conditions, in as far as they can be severed from the noncompliant provisions.
Restriction, suspension and termination of use of the service
The restriction or suspension of the online intermediation service to the given user requires a statement of reasons. This statement must be conveyed to the user before or at the same time as the measures take effect. In the event of a complete termination of the service provided, the business user concerned has to be provided with said justification 30 days prior to the termination taking effect. In all cases the user may clarify the facts and circumstances in the framework of the internal complaint-handling process.
Internal complaint-handling system
Providers of an online intermediation service must set up an internal system for handling the complaints of business users, allowing complaints to be dealt with within a reasonable timeframe. The use of the complaint-handling system must be easily accessible and free of charge for the user. The provider has to evaluate the effectiveness of the complaint-handling system and make the results publicly available, the total number of complaints lodged, the main types of complaints, the average time period needed to process the complaints and aggregated information regarding the outcome of the complaints.
Mediation
In addition to setting up a complaint-handling system, providers of an online intermediation service are obliged to engage in all mediation attempts by users in good faith. For this purpose, each provider must name at least two mediators with whom it would be willing to work out an out-of-court settlement in the event of a dispute. In principle, the designated mediators must provide their services within the EU. The regulation contains specific requirements for the mediators’ qualification.
Further obligations
For the following obligations the regulation names providers of online intermediation services as well as providers of online search engines as obligated parties. However, the provisions are not identical in this respect, so that the scope of the obligations for online search engines – in particular when taking into account the provisions that apply exclusively to providers of online brokerage services – remains unclear.
Rankings
The providers of such platforms shall set out the main determining ranking parameters. According to the Regulation, ranking means the relative prominence given to the goods or services offered through online intermediation services, or the relevance given to search results by online search engines, as presented, organized or communicated by the providers of online intermediation services or by providers of online search engines, respectively. Therefore, the Regulation includes rankings that result from the use of algorithmic sequencing, rating or review mechanisms, visual highlights, or other saliency tools, or combinations thereof (c.f. recital 24).
In this respect, the Regulation contains explicit specifications on the content and design of these descriptions. In particular, providers must state whether and, if so, how users can influence the ranking by paying direct or indirect remuneration. However, the provision of algorithms used or other information whose disclosure would, with reasonable certainty, result in the enabling of manipulation, is excluded. In this respect, the Commission will adopt guidelines for the implementation of the transparency requirements laid down.
Differentiated treatment
Providers must provide information explaining the modalities of differential treatment between their own offers (or those of undertakings controlled by them) and those of users.
How are violations of the Regulation sanctioned?
According to the recitals, the Regulation is designed to protect business users from online intermediation services and online search engines, in particular, from possible unfair behavior by the providers. The intended "competitive, fair and transparent online ecosystem" serves the consumers’ welfare. It remains to be seen whether, in addition to the users, consumers themselves will be able to derive direct - and legally enforceable - claims from the Regulation.
The Regulation itself does not stipulate any sanctions for the event of a provision’s violation. It is rather up to the Member States to determine proportionate and dissuasive measures to be applied in such cases. In this respect, both fines and damage claims seem possible.
The regulation does however stipulate a right of action for organizations and associations, which have a legitimate interest in representing business users or users with business websites.
What measures should providers of such platforms take?
Providers of online intermediation services and online search engines must provide the parameters of rankings on their platforms in a form that is easily understandable and accessible to the user. This should be taken as an opportunity to review the parameters in order to avoid unfair design. If own offers are treated differently from those of users, the criteria of this differentiated treatment must be explained as well.
Providers of online intermediation services should further consider the following measures:
- Assessment and corresponding adjustment of the general terms and conditions;
- Adaptation of processes for changing the general terms and conditions;
- Development and implementation of a process for restricting, suspending and terminating the service to individual users;
- Development and implementation of a complaint-handling system;
- Selection and appointment of mediators.
