Thursday, 26 April 2018

Beyond B2C: proposed regulation on fairness and transparency in platform-to-business relations

Earlier today the Commission took further steps to advance its hotly debated initiative on platform-to-business relationships and proposed a regulation on promoting fairness and transparency for business users of online intermediation services. The declared aim of the new rules is to "create a fair, transparent and predictable business environment for smaller businesses and traders when using online platforms". This includes, in particular, businesses such as hotel owners, sellers of goods or developers of mobile applications who rely on online intermediation services to reach consumers. By proposing rules targeting this specific type of B2B relationships, the Commission - already second  time this month (cf. the proposed directive on unfair trading practices in the food chain) - departs from the usual, consumer-oriented approach to the regulation of fairness in commercial transactions and steps upon a legal minefield. 

Two approaches

Aside from the business-to-business dimension addressed, the rules proposed for the platform economy and for the food sector do not seem to have much in common. For a start, the rules tabled today would not be contained in a directive requiring implementation, but in a directly applicable regulation with elements of a co-regulatory approach. The substantive provisions of both initiatives are also fundamentally different. Rather than providing for a black or grey list of unfair trading practices, the proposed regulation on platform-to-business (un)fairness lays down obligations for providers of online intermediation services and, in certain respects, online search engines to provide business users and corporate website users, respectively, with appropriate transparency and to offer them certain redress possibilities. 

Content of the proposal

Particular attention in the instrument presented today is devoted to standard terms and conditions used by providers of online intermediation services. In this respect the proposal does not provide for a general fairness test, such as the one found in the Directive 93/13/EEC on unfair terms in consumer contracts, but rather focuses on the way T&Cs are drafted (in clear and unambiguous language - Article 3(1)(a)) and made available (easily and at all stages of the commercial relationship, including the pre-contractual stage - Article 3(1)(b)). Further provisions referring the specific terms and conditions to be determined by providers of online intermediation services are also found throughout the instrument. Only one of them, however, is mentioned as a direct follow-up to the rules on transparency and availability - one related to the suspension or termination of online intermediation services.

Indeed, pursuant to Article 3(1)(c) providers of online intermediation services shall ensure that their terms and conditions set out the "objective grounds" for decisions to suspend or terminate, in whole or in part, the provision of their online intermediation services to business users. The placement within the proposal is not insignificant considering that, pursuant to Article 3(2), "terms and conditions, or specific provisions thereof, which do not comply with the requirements of paragraph 1 shall not be binding on the business user concerned where such non-compliance is established by a competent court". Additionally, Article 4 of the proposal provides that the business users affected by suspension or termination should be provided with a "statement of reasons".

Consequences of non-compliance with other provisions related to the specifics of T&Cs such as the parameters of ranking (Article 5 - applicable also to search engines; for a consumer protection perspective see our ealier post: New Deal for Consumers: proposals on online transparency; note the differences between the addressees of the rules), conditions of differentiated treatment (Article 6) and of access to personal and other data (Article 7) as well as restrictions to offer different conditions through other means (Article 8) are not directly apparent. In this respect business users could either rely on the abovementioned rules on transparency and availability or try to address their concerns by means of internal complaint-handling systems (Article 9) or mediation (Articles 10-11). Both solutions do not seem unviable.

Furthemore, the proposal establishes a notification requirement of providers of online intermediation services regarding modification of their T&C. On the face of it, the requirement seems to be similar to the one known from regulated network markets. The proposed regulation, however, does not aim to allow business users to terminate the contract upon notice of changes in contractual conditions (cf. Article 20(4) of Directive 2002/22/EC and Article 98(3) of the proposed European Electronic Communications Code). Rather the failure to comply with requirements of proposed Article 3(3) would render the relevant modifications null and void

Last but not least, the proposal also opens avenues for injunctive relief (Article 12), which deserve an analysis of their own, particularly in the light of new initiatives devoted to consumer law enforcement.

Concluding thought

The basic premise regarding the role on online platforms - with regard both to professional users and the non-professional ones - seems to hold. Admittedly, one may argue that this is only true for some of the major players. Whether the extent of the issue calls for a response of the kind proposed today, and not, for example, within competition law, is only a part of controversy, however. The proposal on platform-to-business (un)fairness touches upon other highly divisive issues such as the distinction between B2B and B2C and the broader questions of Intenet governance. Even though, as for now, the future of the proposal remains uncertain, advancing the discussion on (some of) these matters would already bring value of its own. 

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