The platform for company regulation has been directly applicable in Great Britain and all EU member states since July 12, 2020. However, given concerns about Brexit and the ongoing COVID-19 crisis that continues to affect business in the digital sector, the new rules are widespread. Now is the time to ensure compliance.
The regulation applies to online platforms (examples are e-commerce marketplaces, app stores, comparison sites and social media platforms) and search engines that provide their services to business and corporate users based in the EU / UK, regardless of where in the world the operator of the online platform or search engine is located.
The main aim of the regulation is to ensure that platform and search engine providers treat their business customers more fairly.
Notable rules of the regulation: Differentiated treatment and precedence
Differentiated treatment. In recent years there has been an increase in online platform and search engine operators promoting their own goods and services to those of their business users. This differentiated treatment is a focus of the regulation as it can harm the economic interests of users, especially those who rely heavily on e-commerce sales. According to Article 7 of the regulation, online platforms and search engines must now include in their contracts with business users a description of all the benefits of their products.
Leaderboards. The regulation also aims to deal with “rankings” (the relative importance of goods or services offered on an online platform, or the importance of search results provided by a search engine). We all know how important rankings are in improving a company’s online visibility. However, the regulation calls for more transparency for traders when it comes to how rankings are set. Article 5 aims to ensure that business users of platforms and search engines understand how a ranking mechanism works in order to optimize their digital presence.
What measures should operators of online platforms and search engines take?
Online service providers now have to change their terms and conditions to comply with the regulation:
- Include a description of all the benefits of their products (differentiated treatment, Article 7).
- Transparency in determining rank (Article 5)
Articles 5 and 7 apply to search engines. The burden is higher on platform vendors who are now prohibited from engaging in certain unfair practices, such as suspending or terminating a seller’s account for no good reason. In addition, platform providers must:
- Give a period of at least 15 days for changes to their terms and conditions and allow business users to terminate the contract if they object to the proposed changes
- Give at least 30 days notice to end the service and explain why
- Explain the IP and data ownership rights
- Use terms that are clear and understandable
- Set up a complaint handling system and offer a mediation option
Failure to comply with the above provisions (contained in Articles 4, 8 – 12) may result in the terms and conditions being annulled, business users taking legal action against online platforms for damages and regulatory authorities (such as the Competition Market Authority) enactment a procedure.
The regulation is part of the EU’s digital single market strategy, which we have commented on in relation to the geoblocking regulation and the public policy / competition law approach.
Contact Carlton Daniel and Lucy Hopman with any questions about the regulation, whether you are a customer or a provider of online platform or search engine services.