Better protection for vendors on online marketplaces and platforms

We already reported a few months ago about the new legislation that the European Union prepared to provide better protection for traders selling products online through marketplaces, hotels using booking platforms and app developers.

The European Commission, the European Parliament and the European Council have now reached a final agreement on these new rules in the form of a new European Regulation on 14 February. This new regulation ensures that the online trading environment becomes more predictable and transparent and offers new possibilities for resolving disputes and complaints.

Protection online sellers

The power of marketplaces, platforms and search engines

According to the European Commission, some 7,000 online platforms and marketplaces are active in the EU. Some of them have become so big in recent years that they have acquired an important part of the e-commerce market. Just think of eBay, Fnac, Amazon or Bol.com, but also the app stores of Apple, Google and Microsoft, social selling via Facebook, Instagram and others or booking sites like Booking.com. Search engines that sell or rank vendors are also covered by the new regulation.

The EU has been investigating for a long time the dominant position that some of these platforms have built up with regard to the vendors operating on these platforms. For many online traders, presence on the large market places has become an economic obligation, putting them in a weak negotiating position with respect to those platforms.

According to European statistics, no less than 42% of European online traders are active on marketplaces and platform websites and more than half of them experience problems in their contractual relationship with the marketplaces in question, with a direct loss of sales of 2 billion euro according to the EU.  Complaints often concern, for example, the sudden change of sellers’ rankings for no apparent reason, the unilateral adaptation of Terms  of Use and even the unilateral suspension or closing of accounts.

What protection do vendors get in the future?

These are, in summary, the measures that the European Parliament, the Council of the European Union and the European Commission have reached an agreement on:

  • Accounts can no longer be blocked suddenly and without explanation. The general terms and conditions must clearly state the reasons for which platforms can suspend or terminate the agreement.
  • The terms and conditions of the platforms must be drawn up in clear and unambiguous language and must be easily accessible at any time (even during the “negotiations” if there are any). The sanction is the nullity of (the part of) the conditions (which was not clear or was not known in advance).
  • The general terms and conditions must state how the ranking (the order in which products and services are shown) is determined. More and more complex algorithms and visitor profiles are used for this and for (even professional) vendors on online platforms the operation thereof is very vague and not transparent. Companies must therefore also be informed about how they can influence their position in the ranking on online platforms, for example through the payment of extra commissions.
  • Online search engines also need to inform consumers when the ranking of the search result is influenced by agreements with the users of the website.
  • If an online platform also offers products and/or services through its online platform, such as Bol.com, the general terms and conditions must include a description of every way in which the platform’s own products are treated differently (eg. in search results) than the products of the vendors on the platform.
  • Marketplaces and platforms must set up an internal and external complaints system with regard to complaints from the professional sellers. This does not cover complaints from consumers, for which the ADR and ODR rules have existed for several years. The complaints system must be easily accessible in order to file complaints directly with the platform provider. The system must be aimed at solving problems between parties and out of court. An exception applies to small platforms. Marketplaces or platforms with fewer than 50 employees and less than 10 million euros annual turnover do not need to set up additional dispute resolution systems.
  • When using an online platform, both professional sellers and consumers share (personal) data with the platform. This concerns pure personal data of consumers, but also eg. product photos or product information that belongs to the seller. This data is very valuable for both the platform and the professional seller.  In the future, therefore, the general terms and conditions must determine whether and how the platform, as a professional seller, has access to which data and what the conditions are for this.

Who is not subject to the new regulation?

The regulation does not apply to online advertising, payment services, SEO services, purely technical connection platforms and platforms that only operate B2B. Also online retailers, such as supermarkets and retailers of brands (eg Nike.com), are not covered by the Regulation to the extent that they only sell their own products directly to the consumer, without calling on other sellers and are not involved in facilitating direct transactions between other sellers and consumers.

What is the further timing?

The new rules will enter into force 12 months after their adoption and publication (this will be de facto in early 2020).

More balanced market situation …

This should lead to a more balanced market situation, giving online vendors more control over how marketplaces, platforms and search engines treat them, giving them immediate control over their own competitive position and their own sales channels.

In other words, online vendors will better understand how the large marketplaces work and will be able to determine more quickly when they are being treated incorrectly. They will also be able to take action more easily against the market place in question in such cases.

The EU has also immediately decided to revise the regulation for the first time within 18 months to ensure that it keeps pace with the rapidly evolving e-commerce market. The EU has also set up a dedicated observatory for online platforms and marketplaces that oversees the development of the online market.

Questions about marketplaces or about e-commerce in general in the EU or in the rest of the world?

Please feel free to contact Bart Van den Brande on +32 486 901 931 or on bart@siriuslegal.be