European

Union's ("EU") proposal for regulation on online intermediation services and

search engines ("Regulation") is expected to be published shortly on the

Official Journal of the European Union and become effective twelve months

following its date of publication.

The

purpose of the Regulation is set out as contributing to the proper functioning

of the internal market by laying down rules to ensure that business users of

online intermediation services and corporate website users in relation to

online search engines are granted appropriate transparency, fairness and

effective redress possibilities.

A. Definitions

The

Regulation defines online intermediation services as information society services which 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 which are provided to business

users on the basis of contractual relationships between the provider of those

services and business users which offer goods or services to consumers

(Article 2/2 of the Regulation).

Online

search engine is defined as a digital

service that allows users to input queries in order to perform searches of, in

principle, all websites, or all websites in a particular language, on the basis

of a query on any subject in the form of a keyword, voice request, phrase or

other input, and returns results in any format in which information related to

the requested content can be found (Article 2/5 of the Regulation).

B. Scope and Jurisdiction of the Regulation

Pursuant

to Article 1/1 of the Regulation, the Regulation applies to online

intermediation services and online search engines provided, or offered to be

provided, to business users and corporate website users (i) that have their

place of establishment or residence in the EU and (ii) that, through those

online intermediation services or online search engines, offer goods or

services to consumers located in the EU, irrespective of the place of

establishment or residence of the providers of those services and irrespective

of the law otherwise applicable.

In

order words, the Regulation would apply to providers of online intermediation

and online search engine services regardless of whether they are established in

a Member State or outside the EU, provided that these two cumulative conditions

are met: (i) the business users or corporate website users should be

established in the EU and (ii) the business users or corporate website users

should, through the provision of those services, offer their goods or services

to consumers located in the EU at least for part of the transaction. As per the

Recital, in order to determine whether business users or corporate website

users are offering goods or services to consumers located in the EU, it would

be necessary to confirm whether it is apparent that the business users or

corporate website users direct their activities to consumers located in EU.

The

Regulation shall not apply to online payment services or to online advertising

tools or online advertising exchanges, which are not provided with the aim of

the facilitating the initiation of direct transactions and which do not involve

a contractual relationship with consumers (Article 1/2 of the Regulation).

The

Regulation also does not apply to peer-to-peer online intermediation services

without the presence of business users, pure business-to-business online

intermediation services which are not offered to consumers (Paragraph 11 of the

Recital).

The

preamble of the Regulation indicates that it is without prejudice to EU law, in

particular EU law applicable in the areas of judicial cooperation in civil

matters, competition, data protection, trade secrets protection, consumer

protection, electronic commerce and financial service.

C. Obligations Set Out by the Regulation

The

Regulation imposes a number of obligations for online intermediation services

and online search engines. Below are the obligations set out by the Regulation

under two separate headings for (i) online intermediation services and (ii)

online search engines.

1.

Online Intermediation Services

Terms and Conditions

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To ensure that the general terms and conditions enable business users to

determine the commercial conditions for the use, termination and suspension of

online intermediation services, and to achieve predictability regarding their

business relationship, providers of online intermediation services

("Intermediaries") should draft terms and conditions in plain and intelligible

language. Terms and conditions should not be considered to have been drafted in

plain and intelligible language where they are vague, unspecific or lack detail

on important commercial issues and thus fail to give business users a

reasonable degree of predictability on the most important aspects of the

contractual relationship (Article 3 of the Regulation).

-

Intermediaries should ensure, towards their business users, the transparency of

any additional distribution channels and potential affiliate programs that they

might use to market those goods or services (Article 3/1(d) of the Regulation).

-

Intermediaries should within their terms and conditions include general, or

more detailed, information if they so wish, regarding the overall effects, if

any, of those terms and conditions on the ownership and control of intellectual

property rights of the business user. Such information could, inter alia,

include information such as the general usage of logos, trademarks or brand

names (Article 3/1(e) of the Regulation).

-

Intermediaries should also ensure that the terms and conditions are easily

available at all stages of the commercial relationship, including to

prospective business users at the pre-contractual phase, and that any changes

to those terms are notified on a durable medium to business users concerned.

Notification shall be made within a set notice period which is reasonable and proportionate

in light of the specific circumstances and which is at least 15 days (Article

3/2 of the Regulation).

That

notice period should not apply where, and to the extent that, it is waived in

an unambiguous manner by the business user concerned or where, and to the

extent that, the need to implement the change without respecting the notice

period stems from a legal or regulatory obligation incumbent on the service

provider under EU or national law. However, proposed editorial changes should

not be covered by the term ‘change' in as far as they do not alter the content

or meaning of terms and conditions.

Identity of the Business Users

-

Intermediaries shall ensure that the identity of the business user providing

the goods or services on the online intermediation services is clearly visible

(Article 3/5 of the Regulation).

However,

this provision should not be understood as a right for business users to

unilaterally determine the presentation of their offering or presence on the

relevant online intermediation services (Paragraph 21 of the Recital).

Restriction, Suspension, Termination

-

Intermediaries should provide, prior to or at the time of the restriction or

suspension taking effect, with a statement of reasons for that decision on a

durable medium. Intermediaries should also allow an opportunity for business

users to clarify the facts that led to that decision in the framework of the

internal complaint-handling process, which will help the business user, where

this is possible, to re-establish compliance.

In

addition, where the Intermediary revokes the decision to restrict, suspend or

terminate, for example because the decision was made in error or the

infringement of terms and conditions that led to this decision was not

committed in bad faith and has been remedied in a satisfactory manner, the Intermediary

should reinstate the business user concerned without undue delay, including

providing the business user with any access to personal or other data, or both,

available prior to the decision (Article 4 of the Regulation).

-

The termination of the whole of the online intermediation services and the

related deletion of data provided for the use of, or generated through, the

provision of online intermediation services represent a loss of essential

information which could have a significant impact on business users and could

also impair their ability to properly exercise other rights granted to them by

this Regulation. Therefore, the Intermediary should provide the business user

concerned with a statement of reasons on a durable medium, at least 30 days

before the termination of the provision of the whole of its online

intermediation services enters into effect (Article 4/2 of the Regulation).

In

order to ensure proportionality, Intermediaries should, where reasonable and

technically feasible, delist only individual goods or services of a business

user. Termination of the whole of the online intermediation services

constitutes the most severe measure (Paragraph 23 of the Recital).

-

Business users should be offered clarity as to the conditions under which their

contractual relationship with Intermediaries can be terminated. Intermediaries

should ensure that the conditions for termination are always proportionate and

can be exercised without undue difficulty.

Business

users should be fully informed of any access that Intermediaries maintain,

after the expiry of the contract, to the information that business users

provide or generate in the context of their use of online intermediation

services (Paragraph 32 of the Recital).

Rankings

-

Intermediaries should outline the main parameters determining ranking, in order

to improve predictability for business users, to allow them to better

understand the functioning of the ranking mechanism and to enable them to

compare the ranking practices of various providers (Article 5/1 of the

Regulation).

-

The description of the main parameters determining ranking should include an

explanation of any possibility for business users to actively influence ranking

against remuneration, as well as an explanation of the relative effects

thereof. Remuneration could refer to payments made with the main or sole aim to

improve ranking, as well as indirect remuneration in the form of the acceptance

by a business user of additional obligations of any kind which may have this as

its practical effect, such as the use of services that are ancillary or of any

premium features (Article 5/2 of the Regulation).

-

Intermediaries should not be required to disclose the detailed functioning of

their ranking mechanisms, including algorithms (Article 5/6 of the Regulation).

Consideration of the commercial interests of Intermediaries should never lead

to a refusal to disclose the main parameters determining ranking (Paragraph 27

of the Recital).

Ancillary Goods and Services

-

Intermediaries offering goods or services to consumers that are ancillary to a

good or service sold by a business user, using their online intermediation

services, should set out in their terms and conditions a description of the

type of ancillary goods and services being offered (Article 6 of the

Regulation).

This

description should in all circumstances include whether and under what

conditions a business user is allowed to offer its own ancillary good or

service in addition to the primary good or service that it is offering through

the online intermediation services (Paragraph 29 of the Recital).

Differentiated Treatment

-

Where Intermediaries themselves offer certain goods or services to consumers

through their own online intermediation services, or do so through a business

user which they control, they should act in a transparent manner and provide an

appropriate description of, and set out the considerations for any

differentiated treatment, whether through legal, commercial or technical means,

such as functionalities involving operating systems that they might give in

respect of goods or services they offer themselves compared to those offered by

business users (Article 7 of the Regulation).

To

ensure proportionality, this obligation should apply at the level of the

overall online intermediation services, rather than at the level of individual

goods or services offered through those services (Paragraph 31 of the Recital).

Data Obligations

-

Intermediaries should provide business users with a clear description of the

scope, nature and conditions of their access to and use of certain categories

of data. The description should be proportionate and might refer to general

access conditions, rather than an exhaustive identification of actual data, or

categories of data. However, identification of and specific access conditions

to certain types of actual data that might be highly relevant to the business

users could also be included in the description. Altogether, the description

should enable business users to understand whether they can use the data to

enhance value creation, including by possibly retaining third-party data

services (Paragraph 33 of the Recital, Article 9 of the Regulation).

-

Business users should in particular be made aware of any sharing of data with

third parties that occurs for purposes which are not necessary for the proper

functioning of the online intermediation services; for example where

Intermediary monetizes data under commercial considerations. To allow business

users to fully exercise available rights to influence such data sharing,

Intermediaries should also be explicit about possibilities to opt out from the

data sharing where they exist under their contractual relationship with the

business user (Paragraph 34 of the Recital, Article 9 of the Regulation).

Competition and Unfair Commercial Practices

Without

prejudice to national and EU laws in the areas of competition and unfair

commercial practices, and the application of such laws, Intermediaries should

set out the grounds for restricting the ability of business users to offer

goods or services to consumers under more favorable conditions through other

means than through those online intermediation services, in particular with

reference to the main economic, commercial or legal considerations for the

restrictions (Article 10 of the Regulation).

Internal Complaint-Handling System

-

Intermediaries should provide an internal complaint-handling system which is

easily accessible and free of charge for business users. Internal

complaint-handling system should be based on principles of transparency and

equal treatment applied to equivalent situations (Article 11/1 of the

Regulation).

The

internal complaint-handling system should aim to ensure that a significant

proportion of complaints can be solved bilaterally by the Intermediary and the

relevant business user in a reasonable period of time. Any attempt to reach an

agreement through the internal complaint handling-process shall not affect the

rights of providers of online intermediation services or business users to

initiate judicial proceedings at any time during or after the internal

complaint-handling process (Paragraph 37 of the Recital).

-

Intermediaries should publish and, at least annually, verify information on the

functioning and effectiveness of their internal complaint-handling system to

help business users to understand the main types of issues that can arise in

the context of the provision of different online intermediation services and

the possibility of reaching a quick and effective bilateral resolution

and  where significant changes are needed, they shall update that information

(Article 11/4 of the Regulation).

Mediation

-

As per Article 12 of the Regulation, Intermediaries shall identify in their

terms and conditions two (2) 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 in relation to the provision of the online

intermediation services. Intermediaries shall bear a reasonable proportion of

the total costs of mediation in each individual case.

2.

Online Search Engines

Rankings

-

As per Article 5 of the Regulation, search engines should provide description

regarding the main parameters which individually or collectively determine the

ranking of all indexed websites, the relative importance of those main

parameters, and keep such description in plain language.

These

descriptions should take into account (i) characteristics of the goods and

services provided, (ii) relevance of those characteristics for the consumers

and (iii) design characteristics of the website used by corporate website

users. However, search engines are not obliged to disclose algorithms or any

information manipulating search results within this scope.

Differentiated Treatment

-

Search engines should set out a description of any differentiated treatment in

relation to goods or services offered to consumers through the relevant search

engines, or a corporate website user which they control. This description

should contain information regarding any differentiated treatment applied

whether through legal, commercial or technical means in respect of goods or

services offered (Article 7 of the Regulation).

In

conclusion, the Regulation imposes significant new obligations on

Intermediaries and search engine operators, particularly for their B2B

transactions.

(First published

by Mondaq on June 26, 2019)