Online platforms to undergo a revolution in 2018?
According to a Eurobarometer survey, 42% of EU-based SMEs – sellers, game companies or for instance online travel agents – use online platforms to sell their products and services. As many as 82% of these firms use search engines on these platforms to promote their products and services.
Online platforms are a huge force driving the e-economy, through which SMEs have unlimited access to millions of prospective customers. They are becoming increasingly important as vital go-betweens in online transacting of business. The operators of these online platforms are well aware of this and frequently exploit this reliance in platform-to-business relationships with firms offering their products and services to end customers.
The Commission (has identified a number of key harmful trading practices in platform-to-business relationships, which include:
- platform terms and conditions which cannot be negotiated and are frequently subject to unilateral and unannounced changes,
- a lack of transparency in platform practice policies, especially with regard to search engines, positioning, and advertising placement,
- delisting of products and services, and even blocking access to accounts without notice and without providing a means of contesting that decision,
- favouring the platform's own products and services or discriminating against sellers,
- inability to contact a customer via means other than the platform, preventing direct marketing activities and restricting access to and impeding use of a customer database,
- a lack of mechanisms or ineffective mechanisms for rapid redress in cases of infringement of rights. While there are channels for legal redress against an online platform operator domiciled in the EU, in practice firms rarely seek enforcement of their rights, primarily because of elements of a non-EU jurisdiction (typically US law).
The Commission has observed that measures of this kind on the part of operators can cause firms to stop using platforms, which in turn is harmful to the end customer, as they are deprived of access to the products and services provided by those firms. Moreover, these practices impede the creation of a Digital Single Market. There is a danger that the market will become increasing fragmented as a result of the adoption by individual member states of various schemes to counter unfair practices on the part of internet platform operators. Therefore, it has been decided that measures will be taken to combat this problem at the EU level. A legislative proposal concerning transparency in P2B relationships is due to be drafted by May 2018 as part of a legislative package on the formation of a Single Digital Market.
Among the primary objectives are optimisation of the growth and innovation potential of platforms by ensuring certainty of legal frameworks for firms, reducing the costs connected with making platforms suitable for operation in various legal systems, and preventing abuse of dependencies in P2B relationships.
The primary objectives described above are further detailed in a number of initiatives, for example at stakeholder workshops. Various models for P2B dispute resolution are being considered. The major issues include costs, speed, and the language of the proceedings, ensuring that SMEs are able to make effective use of the new mechanisms, distinguishing between technical problems and problems of a factual nature, guaranteeing anonymity and legal recourse in a class action, and striking a balance between transparency (judgments made public) and confidentiality, in order to safeguard trade secrets.
While enacting the new P2B regulations could give rise to new obligations for operators of online platforms, at the same time these measures are intended to stabilise the market and the position of SMEs. A lot will depend however on the eventual form taken by this legislation, and this is something which will take time.
Monika Górska, Monika Dynowska
