New EU regulation strengthens the rights of commercial users of online intermediary services

On 12 July 2020, the new Platform-To-Business (P2B) Regulation will come into force. The new regulations contained therein are intended to ensure that the rights of those companies that use online brokerage services or search engines (hereinafter referred to as "platform") are improved. This includes online marketplaces such as Amazon, search engines such as Google Shopping, comparison portals such as Check24 or distribution platforms for software applications such as Apple's App Store.

There is a need for regulation because such platforms have become indispensable in online trade within the EU.  European consumers benefit from these services by gaining access to a wide range of products and services. At the same time, entrepreneurs gain access to new markets and consumers, which is crucial for their business success. Due to the growing dependence on these platforms, their operators have an ever-growing bargaining power, which also allows them to behave unilaterally and anti-competitively. For example, they can arbitrarily exclude commercial users from their platform or demand exorbitant fees for a sufficiently noticeable placement of the offer - for example by means of a so-called ranking.

The EU has exploited this imbalance of power to the detriment of commercial users and now, with the P2B Regulation, is delivering a package of measures designed to create more fairness and transparency. In particular, new requirements for the general terms and conditions (hereinafter also “GTC”) of platform operators are envisaged.

I. Subject matter and scope

The Regulation provides rules exclusively for the relationship between the operators of the platforms and their commercial users. It is irrelevant for the applicability of the Regulation whether the platform operator is based in the EU. Rather, the decisive factor is whether the commercial user of the services is established or resident in the EU and sells goods or services to consumers within the European Union via the platform. The decisive factor is therefore also the procuration of the conclusion of a contract with a consumer in the EU. For example, business-to-business (B2B) platforms are therefore not covered. The new rules apply directly in the Member States. This means that they do not have to be converted into German law first.

II. New requirements for the drafting of general terms and conditions

The Regulation requests platform operators to meet new requirements for the design of general terms and conditions vis-à-vis their commercial users. In particular, new information obligations are provided for:

• For example, the GTCs must specify any reasons which may lead to the suspension, termination or other restrictions on the use of the platform.
• In addition, they must contain information on additional distribution channels or partner programs through which the platform operator can additionally market the goods and services offered. This means, for example, highlighting products on the start page of the platform or concrete advertising in newsletters.
• General information on the effects of the GTC on the intellectual property of the users - such as, for example, with regard to copyright issues when using product images - must also be included.

The further requirements of the GTC in detail:

1. Amendments and right of termination

If the platform operator intends to change the GTC, it must inform its commercial users of this in advance. The intended changes may then be implemented after the expiry of a reasonable and proportionate period of time. In case of changes, the user has the right to terminate the contract with the platform operator at any time before the end of the period.

In Germany, however, unilateral reservations of changes to GTCs are only possible in any case if they are transparent, objectively justified and the other party to the contract is given time to object within a reasonable period. However, the contractual partner does not receive an immediate special right of termination in the case of amendments, but only if this would cause him serious disadvantages.

2. Invalidity in case of breach of information duties

All those provisions of the general terms and conditions which do not contain the aforementioned obligatory information are null and void. This means that they would be treated as if they had never existed. This applies at least to those provisions which do not meet the specific requirements. All other provisions that make separate regulations would continue to be effective and enforceable.

3. Ranking of the offers

The term "ranking" refers to the highlighting of offers and the influencing of relevant search results on the platforms. In order to determine the rankings, the operators define certain evaluation mechanisms or algorithms. The resulting rankings have a considerable influence on consumer choice and thus also on the business success of commercial users.

In order to provide clarity on how the rankings are created, platform operators will in future have to disclose the relevant key parameters in the general terms and conditions in a clear and comprehensible manner. To this end, the reasons for the weighting of these main parameters compared to other parameters must also be explained. This is the only way to ensure that commercial users can understand how the ranking mechanisms work. This is necessary, for example, so that they can adapt their offers to promote sales or so that they can compare the ranking methods of different providers in order to find the ideal platform for themselves.

In addition to the main parameters, information must also be provided on whether and to what extent the ranking can be actively influenced in return for payment.

4. Complaint management and mediation

In particular, if access to a platform is restricted, suspended or terminated, the suffering user should be given an effective opportunity to seek redress.
Specifically, the platform operators should provide an internal complaint management system for this purpose, which should handle and settle complaints in a transparent, fair and timely manner. For this purpose, all information necessary for access and operation of the system must be included in the general terms and conditions. However, the ordinance allows platform operators an appropriate degree of flexibility in the handling of the systems and in dealing with individual complaints. This is intended to keep the administrative burden as low as possible.

In the event that a problem cannot be solved by means of internal complaint management, the platform operators are also required to appoint at least two neutral mediators. Mediation is intended to provide a last resort for platform operators and commercial users to resolve disputes without the need for lengthy and costly legal proceedings.

5. Differentiated treatment of offers and restrictions on other distribution channels

If an operator not only manages his platform but also offers goods on it, this may result in different treatment between this offer and that of commercial users. In this case, the GTC must contain information on the basis of which considerations this unequal treatment has come about.
It is also conceivable that a platform operator may deny its users the opportunity to offer the same goods or services through another distribution channel, for example on a competing platform. In this case, too, the general terms and conditions must in future contain a justification for this treatment. This also applies to so-called best-price clauses, in which users are prohibited, for example, from offering better conditions in their own webshop than on the platform.

III.     Conclusion

It appears that the new Regulation attempts to ensure greater transparency and fairness for the benefit of commercial users of platforms. For this purpose, the information obligations with regard to possible restrictions of the platforms as well as the legal consequence of invalidity or the direct right of termination in case of infringements appear to be useful. In any case, however, it is to be criticized that a differentiated treatment of the service providers' own offers as well as a denial of other distribution channels only has to be made public and is not immediately subject to a ban or certain requirements. Furthermore, it remains open to what extent complaint management or mediation can be used effectively.

Finally, it remains to be seen whether the new Regulation actually improves the power gap between users and operators of the platforms. Specifically, the platform operators are now required to adapt their general terms and conditions and to set up the new mechanisms.