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Does a marketplace platform need to be regulated?

EU rules introduced 12 July 2020 regulate the relationship between online platforms and their business users. The rules are set out in Regulation EU/2019/1150 (Online Intermediation Services or Platform to Business Regulation) and require marketplaces to promote fairness and transparency in their online intermediation services.

The Platform Regulation applies to all online intermediation platforms – approximately 7,000 services operating in and into the EU. These include:

  • E-commerce marketplaces
  • Online advertisement and auction websites
  • Software application stores
  • Social media
  • Search engines

The focus of the regulation is the relationship between business users and online intermediation services (marketplaces) and search engines. It seeks to promote fairness and transparency in the access marketplaces grant to consumers.

The rules ban certain unfair practices, such as changing online terms and conditions without cause, and mandate transparency over the ranking of search results.

Who must comply with the EU marketplace rules?

The rules apply to online intermediation services and search engines that allow businesses to offer goods or services to consumers. Examples of online intermediation services given in the regulation include:

  • E-commerce marketplaces, including collaborative ones
  • Online software applications services, such as application stores
  • Social media services
  • Intermediation services provided by means of voice assistant technology

It is not relevant whether those transactions between business users and consumers involve any monetary payment or whether they are concluded partly offline. However, the rules do not apply to peer-to-peer online intermediation services.

The rules underpin contractual relationships between business users who offer B2C goods or services and providers of online marketplaces.

Do the rules apply in the UK?

Yes. The Online Intermediation Services or Platform to Business Regulation has applied in the UK since 12 July 2020.

Do the rules apply after Brexit?

Yes. Brexit and the end of the UK-EU transition period have not changed the rules on how online platforms must operate. From 1 January 2021, the retained EU law version of Online Intermediation Services or Platform to Business Regulation applies in the UK.

What is an online intermediation service?

Online intermediation service means services that 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. They are provided to business users on the basis of contractual relationships between the provider of the services and business users which offer goods or services to consumers.

The word ‘consumer’ in the context of the regulation means any natural person who is acting for purposes which are outside this person’s trade, business, craft or profession.

What are the rules on marketplace platforms?

The Online Intermediation Services or Platform to Business Regulation sets rules on:

  • Access to data
  • Ancillary goods and services
  • Complaints
  • Differentiated treatment
  • Ranking
  • Terms and conditions
  • Termination and restrictions

Access to Data

Under the rules, platforms are required to include in their terms and conditions a description of the technical and contractual access of, or absence of, business users to any personal data or other data. This includes data in an aggregated form, provided by or generated through the provision of online services. A marketplace’s terms and conditions should also state whether any data is provided to third parties. 

Ancillary goods and services

Where ancillary goods and services are offered to consumers through online marketplaces, the website should provide in its terms and conditions a description of the type of goods and services offered and under what conditions business are allowed to offer these goods or services.

Complaints

The Regulation requires online platforms to establish an internal complaint-handling system. The complaint-handling system should be easily accessible and free of charge for business users. The system should also ensure the handling of complaints within a reasonable time frame.

Platforms must ensure that business users can complain about the following issues:

  • Alleged non-compliance by the platform with the regulations
  • Technological issues
  • Behaviour by the platform relating to the provision of the service

Providers of online marketplaces should establish and make available, at least annually, data on the handling of complaints.

Differentiated Treatment

Online marketplaces and search engines must include a description of any differentiated treatment they give, or might give, in relation to the services or goods. That description must refer to the main economic, commercial and legal considerations for the differentiated treatment.

Ranking

Platforms must set out the main ranking parameters and the relative importance of those parameters to rankings.

Online search engines are required to set out the parameters that are individually or collectively significant in determining ranking. These should be provided in plain and intelligible language. The description should explain if businesses are able to actively influence their ranking and explain the impact of this.

Terms and conditions

Online platforms must ensure that their terms and conditions are:

  • Drafted in plain and intelligible language
  • Easily available
  • Set the grounds for decisions to suspend or terminate
  • Include information on any additional distribution channels or affiliate programmes
  • Include information on the ownership and control of intellectual property rights

For more information on what to include in your terms and conditions, see our article: What should your terms of business agreement cover?

Termination and restrictions

Where a provider of online intermediation services decides to restrict or suspend a business, it shall provide to the business, prior to the suspension, a statement of the reasons for the decision in a durable medium.

Where a platform decides to terminate the provision of a service to a given business, it must provide at least 30 days’ notice with a statement of its reason for the decision.

 What other rules apply to marketplaces?

Other rules that apply to marketplaces include the Unfair Commercial Practices Directive (2005/29/EC)(‘the UCPD’), the E-Commerce Directive and the Geo-Blocking Regulation (EU/2018/302).

The UCPD

The UCPD prohibits traders from engaging in commercial practices towards consumers which are misleading, aggressive or contrary to the requirements of professional diligence. Recent UCPD guidance clarifies that online platforms will be considered ‘a trader’ where it:

  • Charges a commission on transactions between suppliers and users
  • Provides additional paid services
  • Draws revenues from targeted advertising

The E-Commerce Directive

The E-Commerce Directive requires information society services (ISS) to:

  • Acknowledge receipt of an order without undue delay
  • Ensure commercial communications are clearly identifiable
  • Provide information about themselves and about how contracts concluded electronically will be made

An ISS is broadly any service “provided for remuneration, at a distance, by electronic means”.

The Geo-blocking Regulation

The Geo-blocking Regulation seeks to ensure that customers who are resident in one member state can buy from a trader on the terms offered by that trader in any EU member state. Its purpose is to prevent traders from blocking EU customers based on their geographic location.

The Geo-blocking Regulation was revoked in the UK following the end of the UK-EU transition period. A UK trader is no longer prevented from discriminating between its UK and EU customers in the ways prohibited by the Geo-blocking Regulation. However, the rules will continue to apply where a trader supplies goods or services into the EU single market. This means that UK traders cannot discriminated between a customer based in France versus a customer based in Spain. 


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