Sales to consumers through online platforms: new rules to protect businesses
1 I was reading over the weekend about a freelancer, who was making a living selling videos and other content through an online platform.
They were doing pretty well, and had amassed a considerable sum in the platform's bank account. However, before the money was transferred to their bank account, the platform suspended their account and — it seems — kept the freelancer's earnings.
Typically, business customers get fewer protections in law than consumer customers. They are expected to be more savvy, and to be better placed to take risk-based decisions.
And, while that makes sense in theory, not all businesses are the same, and the bargaining power, or even the ability to afford good legal advice to understand the contract they're being asked to sign, will vary massively. A business with a substantial in-house legal team is in a completely different position to the majority of freelancers.
Business users of some platforms may then take at least some solace from the European Union's "Platform To Business" — "P2B" — Regulation, which became binding on 12th July 2020.
The regulation applies to "online intermediation services" and "online search engines". In this blogpost, I'm going to focus only on "online intermediation services".
"Online intermediation services" — what are they?
In non-legal terms, an "online intermediation service" is a two-sided online platform where consumer buyers and business sellers come together, to find each other, and to buy and sell.
- app stores
- short-term accommodation rental websites where hosts include businesses (e.g. hotels)
- online auction sites with business sellers
- online marketplaces with business sellers
- some online social media services
It does not apply to business-to-business marketplaces.
The legal definition
If you want the legal definition, platforms are "online intermediation services" if they meet all of the following requirements:
- they constitute information society services within the meaning of point (b) of Article 1(1) of Directive (EU) 2015/1535;
- they allow business users to offer goods or services to consumers, with a view to facilitating the initiating of direct transactions between those business users and consumers, irrespective of where those transactions are ultimately concluded; and
- they are provided to business users on the basis of contractual relationships between the provider and business users which offer goods or services to consumers.
It doesn't apply to all online intermediation services though. It applies if the following two tests are both met:
- the online intermediation services are provided, or offered to be provided, to business users that have their place of establishment or residence in the Union; and
- through those online intermediation services, the business users in the Union offer goods or services to consumers located in the Union.
The place of establishment or residence of the provider does not matter.
Requirements relating to terms and conditions
What the terms must include, and how
Providers must ensure that their terms and conditions:
- are drafted in plain and intelligible language;
- are easily available to business users at all stages of their commercial relationship with the provider of online intermediation services, including in the pre-contractual stage;
- set out the grounds for decisions to suspend or terminate or impose any other kind of restriction upon, in whole or in part, the provision of their online intermediation services to business users;
- include information on any additional distribution channels and potential affiliate programmes through which providers of online intermediation services might market goods and services offered by business users; and
- include general information regarding the effects of the terms and conditions on the ownership and control of intellectual property rights of business users.
Terms which don't meet these requirements are void. (This means that they are not part of the contract, and so they cannot be enforced.)
In addition, providers must set out in their terms and conditions:
- the main parameters determining ranking, and the reasons for the relative importance of those main parameters as opposed to other parameters.
- In some situations, they need to provide further information about their rankings, but they are not required to disclose "algorithms or any information that, with reasonable certainty, would result in the enabling of deception of consumers or consumer harm through the manipulation of search results".
- a description of any differentiated treatment which they give, or might give, in relation to goods or services offered to consumers through those online intermediation services by either that provider itself or any business users which that provider controls, versus other business users.
- In other words, how others might get preferential ranking or treatment
- information on the conditions under which business users can terminate the contractual relationship with the provider of online intermediation services
- a description of the technical and contractual access, or absence thereof, to the information provided or generated by the business user, which they maintain after the expiry of the contract between the provider of online intermediation services and the business user
- a description of the technical and contractual access, or absence thereof, of business users to any personal data or other data, or both, which business users or consumers provide for the use of the online intermediation services concerned or which are generated through the provision of those services
- all relevant information relating to the access to and functioning of their internal complaint-handling system
- the identity of two or more mediators with which they are willing to engage to attempt to reach an agreement with business users on the settlement, out of court, of any disputes between the provider and the business user arising in relation to the provision of the online intermediation services concerned, including complaints that could not be resolved by means of the internal complaint-handling system
Notice of changes
Providers must notify business users of any proposed changes of their terms and conditions.
According to official guidance, this applies only where the change alters the content or meaning of the terms and conditions, and doesn't apply to editorial or stylistic changes which don't alter the meaning.
A provider must give at least 15 days notice before the changes take effect, and longer if necessary to allow business users to make technical or commercial adaptations to comply with the change.
The notice period doesn't apply if:
- the online intermediation service is subject to a legal or regulatory obligation which requires it to change its terms and conditions in a manner which does not allow it to respect the rules around notice; or
- if it has exceptionally to change its terms and conditions to address an unforeseen and imminent danger related to defending the online intermediation services, consumers or business users from fraud, malware, spam, data breaches or other cybersecurity risks.
No retroactive changes
Changes cannot be retroactive, except when they are required to respect a legal or regulatory obligation or when the retroactive changes are beneficial for the business users.
Right to terminate
If business users do not agree with the changes, they have the right to terminate the contract. It appears that they must do this during the notice period.
Waiving the notice period
A business user can waive the notice period. This needs to be done by means either of a written statement or a clear affirmative action.
However, "clear affirmative action" seems a bit, well, unclear and non-affirmative to me, since the Regulation expressly says that, at least in some cases, a business user can waive the notice period by submitting new goods or services (e.g. uploading a new app), to the online intermediation service, during the notice period, thereby immediately agreeing to the changes.
Restrictions, suspensions, and termination
The Regulation imposes (some) safeguards for business users against arbitrary restriction, suspension, or termination.
Restrictions and suspensions
In terms of restriction (which appears to including demotion of a business user's listings) or suspension, if a provider decides to restrict or suspend the provision of its online intermediation services to a business user in relation to individual goods or services offered by that business user, the provider must give the business user, either before or at the time of the restriction or suspension taking effect, a statement of reasons for that decision.
(It is not wholly clear, but it seems that restriction or suspension of multiple individual listings still falls within this. Whether suspension of a business user's entire listings would fall within it is less clear but, conceptually, the rules should still apply, since suspension stops short of termination.)
In respect of termination, if a provider decides to terminate the provision of the whole of its online intermediation services to a business user, the provider must provide the business user, at least 30 days prior to the termination taking effect, with a statement of reasons for that decision on a durable medium.
There are some exceptions to the obligation to provide a statement of reasons, including where the action is required by law, or results from the business user's repeated breach of of the provider's terms.
The statement of reasons must contain a reference to the specific facts or circumstances, including contents of third party notifications, that led to the decision of the provider of online intermediation services, as well as a reference to the applicable grounds for that decision.
In addition, the provider must give the business user the opportunity to clarify the facts and circumstances in the framework of its internal complaint-handling process.
If the restriction, suspension or termination is revoked by the provider of online intermediation services, the provider must reinstate the business user without undue delay, including providing the business user with any access to personal or other data, or both, that resulted from its use of the online intermediation services prior to the restriction, suspension or termination having taken effect.
Dealing with complaints
Internal complaint-handling system
Providers of all but the smallest online intermediation services must provide an internal system for handling the complaints of business users.
This system must be easily accessible and free of charge for business users and must ensure handling within a reasonable time frame.
It must be based on the principles of transparency and equal treatment applied to equivalent situations, and treating complaints in a manner which is proportionate to their importance and complexity.
Providers which are obliged to provide an internal complaint-handling system are also required to offer mediation, and set the details of this out in their terms and conditions.
Mediation is an out of court dispute resolution procedure, and the Regulation requires explicitly that the mediators must be impartial, independent, and affordable.
Normally, mediation is voluntary, but the Regulation requires both sides to engage in good faith throughout any mediation attempts.
In terms of the bill for mediation, providers of online intermediation services are required to bear "a reasonable proportion of the total costs of mediation" in each individual case.
The European Commission has published a pretty extensive set of FAQs.