14.02.2020

Increasing Transparency in Platform and Search Engine Services - Brand new Platform-to-Business (P2B) Regulation coming up

By July 12, 2020 the Platform-to-Business (P2B) Regulation (EU) is coming into effect. Subject to the regulation are business relations between online intermediation services operators or online search engines on one and commercial users (business clients) on the other hand. We expect to find some severe change in the industry as transparency obligations are assigned and some key mechanisms become publically accessible for anyone.

Background

Search engines and online platforms have gained significant economic weight, in particular at SME level (small and medium enterprises). The P2B-Regulation aims to contribute to the proper functioning of the internal market and pursues to raise security and safety standards for business users and enhance transparency and fairness. It also introduces alternative means of dispute resolution to the field. Requirements are implemented by compulsory amendments to the GT&Cs (General Terms and Conditions) provided by the platform operator to its business clients and – where such are uncommon – requirements to provide at least equivalent information publically. The Regulation applies according to the business seat, not of the operator, but its client (within the EU) who targets EU-based-customers, regardless of otherwise applicable law. Hence comes along some severe change for big players in the search engine field even though business located in the USA.

Requirements assigned to Intermediation Services

The Regulation addresses “intermediation services“- better known as platforms. Those shall be services which – in short – allow business users to offer goods or services to consumers, perspectively facilitating direct transactions. This applies to the renowned global players, but also to much smaller, more specialised service providers, like travel sites. The provisions of the Regulation must be observed regardless whether offerings lead to successful transactions or not.

Once identified as intermediation services provider, their B2B general terms must adopt additional requirements. Non-compliance will resolve in voidness. Compulsory amendments include grounds for termination or suspension of the B2B contract, additional sales channels and partner programs and implications on intellectual property. Changes to the GT&Cs are subject to restrictions, too. Extrajudicial dispute resolution has been introduced as a new feature. Operators must provide an internal management system free of charge and name suitable mediators.

For sake of transparency intermediation service providers will have to disclose any ranking applied to its clients and differentiations between group companies’ and foreign client’s offerings. Obviously, transparency is key, when the Commission seeks to protect market minors. However, it also enables clients to engage more consciously in the choice of their sales tools. However, where there’s a choice, there’s a market (opportunity) and the forced-upon-transparency may well turn out as a sink or swim mechanism after all.

Requirements assigned to Search Engine Operators.

Search engine operators are likewise addressed by the Regulation. Rankings must be notified and where they are open to manipulation for payment, such structures must be disclosed, just like privileged output of proprietary results (of their group companies).

However, one major detail deserves attention: Unlike with intermediators, there is little or none direct contracting between search engines and the businesses that are put out on the results list. No contract – no GT&Cs that allow for implementation of safety and transparency measures. Therefore search engine operators will have to provide information on the regulated matters visibly, clearly and easily accessible to the general public. As restrictions to registered clients are not feasible, we can expect some true benefits to customers and business clients alike from this transparency obligation.

Due Date: July 12, 2020

We find the P2B-Regulation to announce some serious change to the platform and online business in general that is likely to not only pull things into the light, but to shape and change the business altogether. Disclosing ranking, paid-for-manipulation and proprietary privileges will certainly carve out new business opportunities and de-shame the way online marketing tools already work.

As the mechanisms become more transparent and illegitimate clauses will be plain void, chances are, that SME and even the smallest business clients will actually benefit from this regulatory protection when dealing with big players. Besides balancing David with Goliath, there is room for competitors to take watch on each other as non-compliance becomes publically accessible.

Regardless which side your business is on: given the amount of work to be invested in negotiations with your client or provider, we believe that early preparation before July 12 and thorough understanding of the changes ahead will serve your business well.

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