19 Feb 2019
Online Platforms to Become More Regulated Under Newly Agreed P2B Rules
On 13 February 2019, the European Parliament, the Council of the European Union and the European Commission reached a political deal to finalize the legal text of the platform-to-business (P2B) Regulation. This will be the first EU law to address P2B relations, aiming to increase transparency in contractual interactions and provide effective redress for online businesses. According to the rules agreed by EU negotiators, tech firms operating as online intermediation services and subject to the provisions of the new P2B Regulation will be required to disclose information on their data collection and ranking algorithms. It will also be more difficult to suspend or terminate online sellers’ accounts. The platforms concerned will also have to facilitate the understanding of their terms and conditions and will have to offer alternative dispute resolution mechanisms for their business users.
Hong Kong businesses with links to EU establishments should recall that, on 26 April 2018, the European Commission published its proposal for a Regulation on promoting fairness and transparency for business users of online intermediation services (the “P2B Regulation” - for more details on the proposal, please see Parliamentary Committee to Vote Next Month on EU Regulatory Proposal Targeting Platforms and Online Search Engines). The need to enact such a law to provide a more predictable and transparent business environment was clarified in the Commission’s Impact Assessment. In this assessment, it was demonstrated that nearly 50% of European businesses operating on platforms experience problems. According to the report, 38% of these problems are related to unsolved contractual relations, whereas 26% are solved but with difficulties, causing a €1.27-2.35 billion direct loss in sales as a result.
Hong Kong businesses may be aware of the fact that a Eurobarometer Survey published in June 2016 noted that 42% of European companies use online marketplaces to sell their products and services.
Indeed, through trilogue negotiations, the European Parliament, the Council and the European Commission have reportedly reached a political deal on the final text of the rules, on 13 February 2019. Leaving behind the previous discussions on the issue of enforceability and stringent application of a future P2B Regulation, through this deal, the EU institutions have set a common objective of providing a more predictable and transparent business environment for smaller businesses and traders when using online platforms. The positive outcome of the recent negotiations will pave the way for the Regulation to be adopted in early 2019.
Hong Kong’s online community with operations in the EU will note that as part of the Digital Single Market Strategy, the proposed rules concern over 7000 online companies operating in the EU as search engines, application stores, social media and price comparison tools. These include Google Search, Google Shopping, Google Play, Apple, App Store, Amazon Marketplace, eBay, Facebook, Instagram, Skyscanner, Yahoo and Bing. The rules include a blacklist of unfair trading practices, a 30-day termination clause and an effective complaints-handling system, which will allow businesses to group together to sue online platforms.
Therefore, Hong Kong traders should note that, following the mid-February political deal, traders selling online via marketplaces, hotels using booking platforms, or app developers are amongst those that will benefit from the new rules. These can, broadly speaking, be listed as follows:
- Prohibition of suspension or termination of sellers’ accounts by digital platforms without clear reasons, and with possibilities to appeal.
- Reinstatement of the seller by digital platforms in case of a suspension or termination by error.
- Easily accessible, clear and intelligible terms and conditions with a prior notice period (of 15 days or more) when changing these terms and conditions to allow companies to adapt their business to these changes. Longer notice periods apply if the changes require complex adaptions.
- Mandatory disclosure of the main parameters the marketplaces and search engines use to rank goods and services, to help sellers understand how to optimise their presence.
- Mandatory disclosure of any advantage the platforms may give to their own products over others, including with respect to the collection, use and sharing of data.
- Mandatory set-up of an internal complaints-handling system.
- Resort to mediation as an alternative option for business owners to skip court procedures to solve their legal disputes.
Vice-President for the Digital Single Market, Andrus Ansip, defined the deal as “an important milestone of the Digital Single Market that will benefit millions of European companies relying on digital platforms to reach their customers”.
European Commissioner for the Digital Economy and Society, Mariya Gabriel, highlighted the importance of the initiative and its stabilizing effect, asserting that: “These are the first rules of this kind anywhere in the world, and they strike the right balance between stimulating innovation while protecting our European values.”
Once the text that was agreed upon on 13 February 2019 is formally approved (rubberstamped) by the Council and the European Parliament, it will be published in the EU’s Official Journal. The new law will apply 12 months after its publication, EU-wide.