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'World-first' rules for online platforms closer in the EU

Out-Law News | 15 Feb 2019 | 4:52 pm | 2 min. read

Online marketplaces will have to disclose how they rank goods and services on their platforms, and explain any preferential treatment of their own products on those platforms where they also act as a seller, under planned new EU laws that have moved closer to being finalised.

The new transparency obligations are provided for in the draft EU Regulation on fairness and transparency in online platform trading. EU law makers reached provisional agreement on the wording of the new rules on Wednesday. The European Parliament and the Council of Ministers must both formally approve the legislation before it can enter into EU law.

A summary of the transparency obligations agreed upon was set out by the European Commission on Thursday.

"Marketplaces and search engines need to disclose the main parameters they use to rank goods and services on their site, to help sellers understand how to optimise their presence," the Commission said. "The rules aim to help sellers without allowing gaming of the ranking system."

"Some online platforms not only provide the marketplace, but are also sellers on the same marketplace at the same time. According to the new transparency rules platforms must exhaustively disclose any advantage they may give to their own products over others. They must also disclose what data they collect, and how they use it – and in particular how such data is shared with other business partners they have," it said.

The new regulation, described as "the first rules of this kind anywhere in the world" by the EU's commissioner for the digital economy Mariya Gabriel, also outlines a ban on certain business practices which online platforms must observe.

"With the new rules, digital platforms can no longer suspend or terminate a seller's account without clear reasons, and possibilities to appeal," the Commission said. The platform will also have to reinstate sellers if a suspension was made in error."

"Terms and conditions must be easily available and provided in plain and intelligible language. When changing these terms and conditions, at least 15 days prior notice needs to be given to allow companies to adapt their business to these changes. Longer notice periods apply if the changes require complex adaptions," it said.

Under the new rules, online platforms will also be required to establish an internal system to handle complaints from business users, and the legislation further encourages the resolution of disputes through mediation.

It is open to individual EU countries whether to appoint public authorities to enforce the new rules. However, business associations have a right to pursue non-compliance with the new rules through the courts under the regulation, regardless of whether or not a new regulator is established.

The regulation will not apply until a year after it has been finalised, adopted and published in the Official Journal of the EU.

E-Commerce marketplaces like Amazon and eBay, app stores like the one run by Apple, and social media for business, including Facebook pages and price comparison tools, are among the intermediaries that will be subject to the new regime.

The European Commission said: "It is essential that businesses have a more predictable relationship with online platforms and access to effective and straight-forward means to address potential problems. This will encourage them to use online platforms as a means to grow their business. At the same time, clearer rules at EU level should provide platforms with a predictable regulatory environment and enable them to scale up in a less fragmented digital single market."