Platform to Business Regulations: what rights do consumer brands have when selling through online platforms?
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Senior Counsel
Germany
As Counsel in our Commercial and Intellectual Property Practice Groups, and our Media, Entertainment & Sport and Technology & Communications Sector Groups in Düsseldorf, I advise domestic and international clients in contentious and non-contentious IT, media and commercial matters, with detailed practical knowledge and experience in copyright topics.
Partner
UK
As a Partner in our Commercial Group, I advise clients on complex, cross-border commercial transactions, with particular expertise advising sports and consumer brand clients.
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The Platform to Business Regulation ("P2B Regulation", officially Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services) comes into force on 12 July 2020. The primary purpose of the P2B Regulation is to regulate how operators of online platforms and search engines interact with businesses that want to use those platforms and search engines to reach consumers. The success of online platforms and search engines has led to many being considered as 'gatekeepers' to consumers, and the European Union has, through the implementation of the P2B Regulation, sought to level the playing field between operators of online platforms/search engines and businesses seeking to sell to consumers.
Much has already been written about the requirements that operators of online platforms and search engines must satisfy from 12 July 2020. This brief article is written from the perspective of consumer brands that use online platforms to reach consumers in the European Union. What are their new rights?
When does the P2B Regulation apply?
The P2B Regulation comes into force on 12 July and applies to online platforms that provide their services to business users, where those business users are:
- established in the EU; and
- offer products or services to consumers located in the EU.
What does the P2B Regulation cover?
The P2B Regulation places a number of obligations on online platforms in their dealings with business users:
Terms and Conditions
- Accessibility. The terms and conditions imposed by platform operators should be clearly and plainly drafted. They should also be made easily available through all stages of the relationship with business users, including at the pre-contract stage.
- Amendments. In most circumstances, online platforms are required to provide business users with at least 15 days' notice of changes to their terms and conditions. Where the changes might require a business user to make certain technical or commercial adaptations, a longer notice period should be given. Importantly, if a business user does not agree to the changes, they have a right to terminate the contract.
- Suspension and termination: The online platform's terms and conditions should set out objective reasons to suspend, terminate or restrict access to the service.
- Rankings. The online platform's terms and conditions should set out the parameters that are used for rankings. If rankings can be influenced by providing the online platform with remuneration, the terms and conditions will need to provide a description of how such remuneration affects rankings.
- Differentiation. If the online platform provides its own products and/or services and those products and/or services are treated differently to those of its business users, it must provide information about this in its terms and conditions.
- Mediation. Unless the online platform is a small enterprise (an enterprise with fewer than 50 employees and an annual balance sheet total/annual turnover of less than EUR 10 million), its terms and conditions must provide details of at least two mediators it is willing to engage with for the purpose of dispute resolution. Providers shall engage in good faith in any mediation attempt and bear at least half of the total cost of mediation.
Other important points
- Suspension and Termination. If an online platform decides to restrict, suspend or terminate a business user's access to its services, it will, in most circumstances, be required to provide a statement of reasons to the business user before the restriction, suspension or termination takes place. In the case of termination, at least 30 days' notice must be given to the business user, unless the termination is: (i) required by law; or (ii) the result of persistent breach by the business user.
- Complaints. Unless it classifies as a small enterprise, the online platform will be required to provide a free complaint-handling process to business users.
What happens if online platforms do not comply with the P2B Regulation?
- Provisions null and void. If an online platform fails to: (i) satisfy the accessibility requirements set out above; (ii) comply with the notice requirements when amending its terms and conditions, and/or (iii) set out objective grounds for a suspension, termination and/or restriction of access, the relevant provisions will not be enforceable against a business user.
- Complaints. The online platform's internal complaints process should allow business users to raise complaints if the online platform fails to comply with its obligations under the P2B Regulation. If a complaint about non-compliance cannot be resolved, business users should be able to refer the complaint to mediation (see above).
- Collective proceedings. Under the P2B Regulation, non-profit organisations/associations that represent business users, as well as public bodies, are able to pursue legal action against online platforms who fail to comply with their obligations under the P2B Regulation.
- Legal action. Business users may also choose to pursue legal action against a non-compliant online platform directly.
Brexit
From 12 July 2020, the P2B Regulation will form part of UK law and it will continue to apply after the transition period. However, it could subsequently be amended by other UK legislation or revoked altogether, as is the case with all EU law that is retained in UK law prior to Brexit. It is important to note that the P2B Regulation has extra territorial application, so it will continue to apply to a UK operator of an online platform where services are being provided to business users and consumers who are based in the EU.
Conclusion
Consumer protection legislation has developed over the last 10 years or so as a response to the unequal bargaining power between business and consumers. It is now widely understood that consumers have certain key protections when interacting with businesses – such as implied terms, obligations on businesses to act fairly and transparently and (for distance contracts) a 14-day cancellation right. The P2B Regulation has extended that focus to the supply side of online marketplaces and seeks to regulate the powerful 'gatekeeper' role that some of the most successful online platforms now undertake. Consumer brands should be mindful of these new rights when contracting with online platform operators and in the event that difficulties arise.
We are experienced in providing legal advice to businesses who sell to consumers online. If you want to find out more about how the P2B Regulation might affect your organisation, our International Consumer Law Group is well positioned to provide you with advice and guidance. Please contact Robert Turner at robert.turner@twobirds.com or Alice Esuola at alice.esuola@twobirds.com for more information.
