The Dutch Authority for Consumers and Markets (ACM) announced a few days ago that it will launch a market study into how platforms deal with the rules laid down in the Platform-to-Business (P2B) Regulation. The P2B Regulation is a regulatory initiative that may not have received the attention it deserves. This could be explained by the fact that it started to apply in July 2020 when all eyes (of platform regulation aficionados) were turned on the Commission’s consultation on the Digital Services Act package. Yet, we believe that this is an instrument that both platforms and business users should take a close(r) look for at least three reasons:
- First, contrary to the proposal for a Digital Markets Act (DMA), the P2B Regulation is not restricted to regulating “gatekeeper” platforms. This means in practice that a large number and a wide range of companies must come up with a compliance plan soon (if they have not done so already).
- Second, failure to comply with the P2B Regulation may have far-reaching implications. The Dutch example illustrates this clearly. Based on the draft bill that was recently published, the ACM would be able to impose a fine amounting to 1% of the turnover of the infringer platform. That fine can be increased by 100% if the platform concerned has committed the same or a similar infringement in a five-year period.
- Third, while the Regulation seems “toothless” at first sight, the obligations it establishes may improve P2B relations and the way in which business users reach their customers. Those obligations relate to brand attribution (e.g., no removal of logos or other distinctive features) and the conditions under which platforms can modify their Terms & Conditions or “delist” products and services.
We expect that other authorities across the EU will follow the path paved by the ACM. The compliance process may have been delayed due to the pandemic, but the P2B Regulation establishes the Member States’ obligation to ensure adequate and effective enforcement of its provisions. Member States’ initiatives may range from the adoption of guidelines binding on the covered platforms (something that the ACM will likely do upon completion of its market study) to the adoption of rules that set out dissuasive measures applicable to infringements. In other words, it is only a matter of time before other Member States take steps similar to those of the Dutch government. While awaiting enforcement initiatives, we focus on the substantive features of the P2B Regulation that platforms and their business users must familiarise themselves with.
1.The P2B Regulation and the Digital Markets Act complement each other
Both the P2B Regulation and the DMA proposal are based on the premise that competition enforcement is not adequate to address “abuses of economic dependency” that arise from unfair platform practices. However, the means through which they pursue this objective are different. Broadly speaking, the P2B Regulation sets basic transparency safeguards that apply industry-wide. The DMA will establish stricter rules that prohibit certain practices altogether. The P2B Regulation establishes the platforms’ obligation to be transparent over whether they grant access to data; the obligation to disclose whether they grant differentiated treatment to their own (or specific business partners’) services; and the obligation to explain whether and why they have MFNs in place. The DMA proposal goes a step further. It includes the obligation to share data; a prohibition of self-preferencing in ranking; and a prohibition of MFNs. However, the DMA will only apply to “gatekeeper” platforms. The logic of this “graduated” approach to regulation (which is far from novel in EU law) is simple: in the case of gatekeepers, additional safeguards are needed to address imbalances in bargaining power.
The DMA proposal is trying to fill a gap the P2B Regulation left open. The P2B Regulation leaves outside its scope “online advertising tools and online advertising exchanges”. It is not clear why this choice was made; digital advertising markets are opaque and information asymmetries have enabled large platforms to exploit their business users through various means. The DMA proposal attempts to address this lacuna by establishing that gatekeepers must “provide advertisers and publishers […] with information concerning the price paid by the advertiser and publisher”. It also lays down that gatekeepers must provide access to the information advertisers and publishers need in order to carry out their own verification of the ad inventory. Though the DMA proposal patches the P2B Regulation, it is not clear why the obligations that are meant to promote transparency in online ad markets should only apply to gatekeeper platforms.
2. The P2B Regulation distinguishes between search engines and other platforms (aka “online intermediation service providers”)
The P2B Regulation does not refer to online platforms; it rather refers (and applies) to online intermediation services (OIS). For an OIS to fall under the scope of the Regulation, it must meet the following three conditions:
- An OIS must constitute an “information society service” within the meaning of EU regulation, that is, “any service normally provided for remuneration, at a distance, by electronic means and at the individual request of a recipient of services”;
- The OIS must be provided on the basis of a contractual relationship between the OIS provider and business users offering goods or services to consumers. An exchange of a service for money between the (business or end) user and the OIS provider is not required (i.e., a monetary transaction is not needed for the business user to benefit from the Regulation);
- The OIS provider must facilitate “the initiating of direct transactions between those business users and consumers”.
The above conditions essentially mean that app stores, e-commerce marketplaces and social networks are covered by the Regulation. Whether voice assistants are covered (a hot topic these days) is not so straightforward (but we will address this issue in a dedicated blog post).
The above definition does not cover search engines; broadly speaking, there is no contractual relationship between a search engine and the businesses that are displayed in the list of organic search results following a user’s query. The Regulation refers to search engines as a distinct category of platforms, which is only required to comply with the obligations established in Articles 5 (duty to disclose the main parameters determining ranking) and 6 (duty to disclose whether they grant differentiated treatment to their own or specific partners’ services). For example, Article 11, which requires platforms to establish an internal complaint-handling mechanism that businesses may have recourse to in order to resolve disputes, does not apply to search engines. It is not clear why the EU legislator opted for subjecting search engines and OIS providers to different regulatory treatment. The Regulation states that “[e]ven in the absence of a contractual relationship with corporate website users, providers of online search engines can […] behave unilaterally in a way that can be unfair and that can be harmful to the legitimate interests of [businesses and consumers alike]”. Moreover, referring to the scope of the Regulation, the Regulation lays down that the services it covers must be defined “in a precise and technologically-neutral manner”. Excluding search engines from the majority of the provisions that would apply to platforms may not be technology neutral or reflective of market reality.
3. Algorithms may be protected by trade secret regulation, but the P2B Regulation sets limits to how opaque ranking practices can be
Article 5, which applies to OIS providers and search engines alike, establishes the platforms’ obligation to provide a description of the main parameters determining ranking and (the reasons for) the relative importance of those main parameters as opposed to other parameters. In the case of search engines, that description must be “easily and publicly available”. Given that Article 5 is drafted in broad (and somewhat vague) terms, Article 5 also establishes that the Commission must facilitate compliance with the above obligation through Guidelines, which were published in December 2020.
Many thorny questions arise from the wording of Article 5. Some are addressed in the Commission’s Guidelines while others are not. For example, the Regulation does not explain what an “easily and publicly available description” of the main parameters determining ranking is. It merely states that the relevant description should be available “in an obvious location” and that “[a]reas of websites that require users to log in or register should not be understood as easily and publicly available”. But, how many “clicks” away from the homepage should the description be? Should the description be in a prominent position in the T&Cs? The Guidelines explain that:
“it is for the […] search engine to assess and decide where it provides the required description on ranking. In making that decision, the provider could consider how users of its service behave […]. For example, if users use the service as it provides a result in one click, the same principle could be applied to the description. This could mean that if a description is accessed via a link, the link should lead directly to the description and not require further navigation to find it.”
However, the Guidelines provide little or no guidance on other matters. For example, though the Regulation imposes on platforms the duty to disclose the relative importance of the main parameters, there is little on this critical obligation. Two issues arise from lack of guidance on such issues. First, it is far from clear how business users will be able to assess whether there is something to complain about. Businesses may need to hire programmers to develop code to compare their rankings with the main parameters disclosed by the platform. This implies a cost that not all business users are in the position to incur. Second, even if business users decide to submit a complaint, the system established by the Regulation envisages that such complaints would be addressed in the context of an internal mechanism that platforms should set up. Whether this will be an effective dispute resolution mechanism remains to be seen.
4. OIS providers cannot modify their T&Cs or delist the products of others without notice
Unilateral and unannounced T&Cs modifications have been very disruptive since business users have often had to adapt their modus operandi to changes platforms implement overnight. The P2B Regulation is expected to put an end to that by imposing on platforms the duty to notify to their business users any proposed changes of their T&Cs. Such changes must not be implemented before the expiry of a 15-day notice period. In cases where business users must make “technical or commercial adaptations”, OIS providers must grant longer notice periods. The downside is that the Regulation does not specify what is meant by “longer”, leaving it up to platforms to find a sensible solution.
The P2B Regulation further lays down that platforms must ensure that their T&Cs set out the grounds for decisions to restrict or terminate the provision of their services to business users. It provides that, where a platform makes such decisions, it should provide the business users concerned with a statement of reasons. That statement must contain “a reference to the specific facts or circumstances […] as well as a reference to the applicable grounds for that decision”. It is still not clear how detailed the explanation provided by platforms should be in order to prevent abuses (e.g., in cases where platforms remove competing products or services). Unfortunately, the Regulation provides no guidance on the above matters. Perhaps the ACM (and other authorities) may be able to propose a sensible approach to those issues.
5. The P2B Regulation offers brand protection
Article 3(5) of the P2B Regulation establishes that OIS providers must ensure that the identity of the business user that provides goods or services through the platform concerned is “clearly visible”.
This is perhaps the most overlooked provision of the Regulation. Yet, it is important for at least two reasons: First, appropriate brand attribution has a clear commercial rationale. It enables businesses offering their goods and services through an intermediary to establish a relationship with their customers. Increased brand awareness may increase sales and internet traffic. Second, removal of logos and distinctive features may have implications that go beyond the ability to do business. For example, in the case of media content, end users must be able to assess whether they consume content provided by a trustworthy source. As a result, brand attribution may also contribute to the fight against the spread of misinformation.
Overall, though the P2B Regulation has not received a great deal of attention so far, this does not mean that it is meritless. Despite the fact that the obligations it establishes can prevent harmful platform practices, the Regulation has yet to reach its potential. This will happen soon once the authorities of other Member States engage in an exercise similar to that launched by the ACM and business users get acquainted with the obligations the Regulation establishes. In other words, stay tuned because this play will definitely be continued.