Supporting European businesses without hampering innovation – the Platform-to-Business Regulation

Supporting European businesses without hampering innovation – the Platform-to-Business Regulation

European SMEs largely rely on internet platforms to conduct their online business. Nonetheless, SMEs are concerned by the practices of some of the platforms. Properly crafted, the proposed European regulation on promoting fairness and transparency for business users of online intermediation services (P2B regulation) can play a positive role in addressing these concerns without hampering innovation, writes Kim Gagné.

Kim Gagné is the executive director of the European Cloud Alliance.

The EU Commission’s proposed P2B regulation has the potential to play a positive role in addressing some of the challenges SMEs face as they conduct their business online.  The Commission’s proposal should be the basis of agreement in the trilogue process.

Online platforms create opportunities for European businesses, serving as major channels of communication and commerce. SMEs increasingly depend on platforms to access markets.  It is therefore critical that the relationship between the platforms and their users be based on mutual trust.

As a prelude to proposing its P2B regulation, the Commission conducted an impact assessment (PDF) that identified a number of potentially harmful trading practices of platforms. These included the imposition of unilateral changes in terms and conditions, the delisting of products or services without prior notice, the lack of access for businesses to customer data, and a lack of transparency, notably concerning search ranking and advertising placement.

While such potential abuses merit close watch, lawmakers should be careful not to overregulate. Platforms operate in a fiercely competitive environment, and market forces address most areas of concern.  Moreover, just as SMEs constantly evolve their businesses, the platforms reinvent themselves to adjust to market imperatives.

The European Commission has rightly chosen to propose a light-touch approach to address some of these potential challenges.  For example, it would impose transparency requirements on online platforms regarding their terms and conditions, including a reasonable minimum notice period for implementing changes. It would also stipulate possible reasons for delisting, and state general policies on what data generated through a platform’s services can be accessed. To complement these measures, platforms would be required to set up effective compliance systems, and a new collective redress action for business users will be established.

The Commission has also proposed establishing an EU Observatory to monitor the implementation of the regulation and assess whether new measures might be needed. This proposal suits the rapidly evolving internet economy and is in line with the Commission’s better regulation agenda.

The Commission’s co-legislators have reacted quickly to the proposals. Member States and the European Parliament have now agreed their positions. Member States generally favor the Commission’s light-touch approach, while a majority in Parliament is pushing for a more ambitious regulation. The co-legislators are considering prohibiting certain business practices as always unfair and extending the scope of the proposal to cover certain mobile operating systems. 

European cloud business supports the Commission’s approach as it will improve transparency requirements for platforms and will provide enhanced mechanisms for redress of complaints. More restrictive approaches may have their appeal, but they also risk hampering innovation in the fast-changing internet economy and are not necessarily aligned with the findings of the initial impact assessment.

Swift agreement in trilogue is preferable to continuing controversies about scope and unintended consequences. It would be best to take the steps proposed by the Commission now, and be ready to assess the need for further measures as internet business evolves.  

The Commission’s proposed P2B regulation is forward looking and generally strikes a good balance. It is crucial to see how it works for European citizens, SMEs and platforms alike before taking more ambitious steps.