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Proposed EU Law to Regulate Online Retailer Platforms with a View to Benefiting Small Businesses in Particular

On 26 April 2018, the European Commission announced that it has proposed new rules for online platforms, with a view to providing businesses, including small and medium sized enterprises (SMEs), with a “safety net” in the digital economy. It is now widely recognised that online platforms offer access to cross-border consumer markets and have become a valuable and efficient tool for millions of businesses, big and small, including for online retailing.

The proposed law may prove to be beneficial for Hong Kong sellers having links with EU-based businesses, as it will make more transparent how platforms and search engines such as Amazon and Google, list retailers when consumers conduct searches for consumer goods.

The new rules are intended to improve the functioning of the EU’s Digital Single Market. The future Regulation, containing these rules, is aimed at addressing the issues of unfair contractual clauses and trading practices identified in platform-to-business relationships, by exploring dispute resolution, fair practice criteria and transparency. Businesses (especially SMEs) that rely on search engines for attracting internet consumer traffic to their websites are amongst those who will benefit from the new rules.

Almost half (42%) of the SMEs who responded to a recent Eurobarometer survey claimed that they use online marketplaces to sell their products and services. However, another study informed the Commission that nearly 50% of European businesses operating on platforms experience problems. The study also showed that 38% of problems regarding contractual relations remain unsolved, and 26% are solved but with difficulties. The new rules will, it is expected, tackle such concerns.

The future Regulation will cover online platform intermediaries and general online search engines that provide their services to businesses established in the EU and that offer goods or services to consumers located in the EU. A consumer may, for example, directly subscribe to an online service on a platform (e.g. by downloading an app). Such online platform intermediaries include third-party e-commerce market places (e.g. the Amazon Marketplace, eBay or the FNAC Marketplace), app stores (e.g. Google Play, the Apple App Store or the Microsoft Store), social media for business (e.g. Facebook or Instagram) and price comparison tools (e.g. Skyscanner or Google Shopping).

As for online search engines, those that facilitate web searches (e.g. Google Search, Yahoo! and Bing) based on a consumer’s query and which provide links corresponding with the search request will fall within the scope of the future Regulation.

All such providers of online intermediation services will have to ensure that their terms and conditions for professional users are easily understandable and easily available. This includes setting out in advance the possible reasons why a professional user may be de-listed or suspended from a platform.

In addition, the providers of these services must formulate and publish general policies on (i) what data generated through their services can be accessed, by whom and under what conditions; (ii) how they treat their own goods or services compared to those offered by their professional users; and (iii) how they use contract clauses to demand the most favourable range or price of products and services offered by their professional users.

Importantly, both online intermediation services as well as online search engines must set out the general criteria that determine how goods and services are ranked in search results.

In addition, providers of online intermediation services are required to set up an internal complaint-handling system. To facilitate out-of-court dispute resolution, all providers of online intermediation services will have to list in their terms and conditions the independent and qualified mediators they are willing to work with in good faith to resolve disputes. The industry will also be encouraged to voluntarily set up specific independent mediators capable of dealing with disputes arising in the context of online intermediation services.

An EU Observatory will be set up to monitor the impact of the new rules. Particular attention will be paid to developments in policy and regulatory approaches all over Europe.

According to the Commission, although the proposed Regulation concerns consumers only indirectly, they are likely to benefit from the overall positive effects of the new rules. By improving trust, predictability and legal certainty in the online business environment, the use of online intermediation platforms is expected to lead to an increase in the number of businesses active on them. This is likely to expand consumer choice, increasing online business competition and leading to better quality and lower prices for the European consumer.

For more information, Hong Kong sellers can examine the Commission’s communication on the proposed new law.

Content provided by Picture: HKTDC Research
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