EU Regulation on online platforms approved

On 14 June 2019, the Council of the European Union approved the new Regulation on promoting fairness and transparency of online platforms. The new Regulation will enter into effect in summer 2021, without the need for any further implementation by EU Member States.

The new Regulation is based on two findings. First, several online platforms have superior bargaining power, enabling them to behave unfairly towards the many business users that need those platforms for selling their products and services. Second, many online businesses rely on their website ranking by search engines, which justifies transparency requirements for those search engines. The new Regulation aims to ensure a fair, predictable and trusted online business environment for the benefit of all consumers in the EU.

The main instrument in achieving these goals is the terms and conditions, which must clearly set out the rules for operating the platform. The platform operator can only amend its terms and conditions with 15 days’ prior notice and must give the platform’s business users a further 15 days to terminate the contract if they do not accept the proposed amendments. If the platform operator wants to terminate, it must provide a statement of reasons on a durable medium and give at least 30 days’ prior notice. The new Regulation also requires that the identity of business users is visible on the platform, to allow them to gain the confidence of the consumers.

For search engines, the new Regulation requires that they are transparent about how they determine rankings. If it is possible for rankings to be influenced by any direct or indirect payment, this must be disclosed. If the ranking order is altered or if a website is delisted following a third party notification, the content of the party notification must be available for inspection. Obviously, there is no requirement to disclose algorithms that are protected as trade secrets.

Platform operators must include in their terms and conditions a description of the technical and contractual access, or lack of, to any personal data or other data generated when consumers use the platform. They must also be transparent about the transfer of personal data to other parties, if any.

To ensure that all these principles are complied with, the new Regulation contains a full range of remedies. Platform operators must provide for an internal complaint-handling system that is easily accessible and free of charge. Complaints that are not resolved may be submitted to impartial and independent mediators. The online platform operators must identify in their terms and conditions one or more mediators for settling disputes out of court. As a last resort, judicial proceedings may be required and the new Regulation provides that such proceedings may also be initiated by representative organisations or public bodies.

Tom Heremans, Partner, tom.heremans@cms-db.com