knowledge | 11 September 2020 |
New EU Regulation for Online Platforms – the P2B Regulation
The EU P2B Regulation (here) introduces new rules to the relationship between online platforms and business users with the purpose of promoting fairness and transparency for business users and tackling unfair contractual clauses and trading practices. It entered into force on 12 July 2020 and Ireland has designated the Competition and Consumer Protection Commission (the “CCPC”) for the purposes of the Regulation and offences for breaches have been prescribed under Irish law (here). These new rules apply to providers of online services who facilitate direct transactions between businesses/traders and EU consumers, ie e-commerce websites, price comparison websites, app stores and online search engines. All online intermediary service providers (“OIPs”) and online search engines should review their T&Cs and internal procedures in light of the new requirements of the P2B Regulation.
Who does the Regulation apply to?
The P2B Regulation applies to OIPs and online search engines with business users located or established in the EU that conduct business with consumers in the EU. Examples of OIPs are described in the P2B Regulation and include, online e-commerce market places, price comparison websites, online software application services and certain social media services. The Court of Justice of the European Union (the “CJEU”) has also recently held that Airbnb falls within this definition and is not merely an “accommodation service” (Case C‑390/18). The Commission may have also envisaged apps like Uber operating under the Regulation’s umbrella as evidenced by its 2019 press release. However, in Uber France (Case C-320/16) the CJEU categorised Uber as “a service in the field of transport” and not an “online intermediary service”.
In order for the P2B Regulation to apply, it is essential that the business users and consumers operate within the EU, however the P2B Regulation applies to online platforms irrespective of their establishment or residence. This extra territorial effect and the wide range of online platforms captured, means the P2B Regulation will have a significant effect on the online regulatory landscape.
The P2B Regulation does not apply to online payment services or to online advertising tools or online advertising exchanges which do not facilitate the initiation of direct transactions and which do not involve a contractual relationship with consumers. For example, the ordinary services of online payment platforms would not fall under this definition. The P2B Regulation is also not designed to cover search engine optimisation software services or advertising-blocking software services.
Terms and Conditions (T&Cs)
The P2B Regulation requires OIPS to ensure that their T&Cs with business users are drafted using plain and intelligible language and are easily available to business users at all stages of their commercial relationship. It also requires a number of new matters to be addressed in their T&Cs, including:
- Restriction, Suspension and Termination of Services - T&Cs must 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 the services to business users. Where an OIP wishes to restrict, suspend or terminate the services, it must comply with certain information requirements, including the provision of a statement of reasons to the business user.
- Search Results and Rankings - T&Cs must now contain the main parameters used to determine rankings and an explanation of the reasons for the relative importance of those particular parameters.
- Differentiated Treatment for Products - T&Cs must include a description of any differentiated treatment given to the OIP's own products over those of other business users and the description should refer to “the main economic, commercial or legal considerations” which may explain the different treatment.
- Changes to the T&Cs - Any proposed changes to the T&Cs must be provided to the business user in written, electronic or other durable form, and cannot be implemented before the expiry of a 15 day notice period (longer notice periods should be granted where necessary and a shorter notice period can apply in certain limited circumstances).
- Termination Rights - Business users can terminate before the expiry of the notice period and information on how the business user can terminate must be contained in the T&Cs.
Any terms and conditions that fail to comply with these criteria will be held null and void.
New Rules on Search Results and Ranking
The P2B Regulation includes provisions that affect the search results and rankings of both OIPs and online search engines. These include:
- Effects of Remuneration - If a ranking is affected by remuneration from business users or corporate website users, OIPs must provide a sufficient description of the options available and the effects of remuneration on ranking.
- Online Search Engine Rankings - Online search engines must also set out the main parameters used to rank goods and services on their site and the importance of those parameters. This must be kept up to date.
- Alteration or Delisting Websites - If an online search engine alters or delists a website on the basis of a third party notification, the corporate website user must be offered the chance to inspect that third party notification.
- Commercially Sensitive Information - OIPs and search engines do not have to disclose commercially sensitive algorithms or information.
We note that the European Commission intends to publish guidelines for OIPs and search engines on how to navigate these transparency requirements.
Internal Handling of Complaints from Business Users
With the exception of smaller businesses (those with less than 50 employees and turnover of €10m or less), both OIPs and search engines must provide an effective internal complaint handling system for business users which is accessible, free of charge for business users, and handles complaints within a reasonable time frame.
OIPs must identify in their T&Cs two or more mediators with which they are willing to engage to attempt to resolve a dispute with a business user arising from the provision of the services. This includes complaints that could not be resolved through an internal complaint handling process. The mediator must be based in the EU, except in certain limited circumstances.
Resolution of a dispute through mediation does not affect the rights of either the OIP or the business user to initiate legal proceedings before during or after the mediation process.
Enforcement in National Courts
Organisations and associations that have a legitimate interest in representing business users are permitted to bring proceedings in national courts to ensure compliance with the P2B Regulation. For example, an association of advertisers.
Provision is also made in the P2B Regulation for public bodies to bring actions on foot of any breach, and in Ireland, the CCPC has been identified as the public body who can bring and prosecute offences. The CCPC will also be maintaining a register of “unlawful acts” by OIPs and search engines that have been the subject of a prohibition order before the Circuit Court or the High Court. Under Irish law, the CCPC has a broad discretion to take actions in order to improve consumer welfare. Before commencing an action on this basis, it will take into account the level of economic and/or physical harm caused by the apprehended offence, the likely impact of the CCPC’s action, the strategic significance and the risks, resources and costs involved.
If an OIP or search engine is found guilty of breaching the P2B Regulation they are liable on summary conviction in Ireland to a fine not exceeding €5,000 and/or to a term of imprisonment not exceeding 12 months.
It is worth noting that corporate officers of an OIP or search engine can be made liable for the offences of a corporate body under the P2B Regulation, if it is found that the offence was committed with the corporate officer’s consent, connivance or approval, or was attributable to any neglect on their part. However, mistake, reliance on information supplied by a third party or reasonable due diligence is a defence if shown. Convicted persons are also liable for the costs and expenses of the proceedings and investigation.
What do intermediary service providers and search engines do next?
OIPs and online search engines should seek guidance and advice from their legal advisors on how to best update their T&Cs and internal procedures in light of the new requirements in the P2B Regulation. Careful consideration should also be given by affected businesses to the transparency requirements for ranking and search results to ensure compliance and to protect commercially sensitive information. The guidelines on transparency expected from the EU Commission will inform this analysis.
The extra territorial effect of the P2B Regulation’s provisions means that it applies even if the parties have chosen a non EU governing law for their contractual arrangements. Its applicability is also largely outside of the OIP’s and search engine’s control, as it depends on the business user and whether it provides services to EU consumers. It will be interesting to see how these issues play out in practice, how they will affect contractual negotiations and the ultimate enforcement of the P2B Regulation.
Also contributed to by Sean Kehoe
This document has been prepared by McCann FitzGerald LLP for general guidance only and should not be regarded as a substitute for professional advice. Such advice should always be taken before acting on any of the matters discussed.