COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on promoting fairness and transparency for business users of online intermediation services
Date: 2018-04-26
Institutions: Directorate-General for Communications Networks, Content and Technology, European Commission
Subjects: Internet, commercial contract, consumer protection, digital single market, electronic commerce, goods and services, provision of services, trade intermediary, unfair terms of contract

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   EUROPEAN COMMISSION  Brussels, 26.4.2018  SWD(2018) 139 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document Proposal for a Regulation of the European Parliament and of the Council on promoting fairness and transparency for business users of online intermediation services  {COM(2018) 238 final} - {SEC(2018) 209 final} - {SWD(2018) 138 final}  
 
 
Impact assessment on a Proposal for a Regulation on Promoting Fairness in Online Intermediated Trade. 

Executive Summary Sheet 

Why? What is the problem being addressed?  

A. Need for action 

EU  merchants  trading  online  face  a  series  of  potentially  harmful  trading  practices  where  their  trade  is 
intermediated by online platforms. Evidence shows that these practices – such as delisting without statement of 
reasons or sudden changes of Terms and Conditions – can have a significant negative impact on businesses.  

When  such  problems  occur,  businesses  have  no  effective  redress  mechanisms  available  in the  EU  to  resolve 
problems. This  means  that European businesses  underexploit the potential of the online platform economy, to 
the  detriment  of  platforms  and  ultimately  consumers  especially  in  terms  of  cross-border  trade.  Businesses' 
turnover is in addition directly impacted by the visibility they get on online platforms and on online general search 
engines.  Ranking  practices  directly  influence  websites'  visibility  and  internet  traffic  received.  Opaque  ranking 
practices could have highly negative impact on businesses. 

At  the  same  time  online  platforms  face  difficulties  operating  across  the  single  market  due  to  an  emerging 
fragmentation of the single market. This limits sales, in particular cross-border sales, for EU businesses through 
platforms. 

These  problems  are  driven  by  the  increasing  importance  of  online  platforms  in  intermediating  transactions 
between  consumers  and  businesses.  Businesses  are  increasingly  dependent  on  online  platforms,  and  strong, 
data-driven  network  effects,  together  with  a  significant  fear  factor,  result  in  an  imbalance  in  bargaining  power 
between merchants and platforms.  

What is this initiative expected to achieve?  

The  specific  policy  objectives  are  three-fold.  Firstly,  the  proposal  intends  to  ensure  a  fair,  transparent  and 
predictable  treatment  of  business  users  by  online  platforms.  Secondly,  the  proposal  aims  to  provide  business 
users with more effective options for redress when they face problems. Thirdly, the initiative aims at creating a 
predictable and innovation-friendly regulatory environment for online platforms within the EU.  

What is the value added of action at the EU level?  

Online  platforms  such  as  Booking.com,  Facebook,  eBay  or  Amazon  (and  many  others)  connect  millions  of 
consumers  and  merchants  across  borders  in  the  EU,  regardless  of  their  place  of  legal  establishments.  The 
problems  underlying  the  Impact  Assessment  have  a  deeply  transnational  aspect.  Even  in  cases  where  online 
platforms  start  in one  national  market, those  platforms  rapidly  and  easily expand  beyond  their original market, 
and indeed many online platforms operate cross-border.  

Member  States  action  alone  cannot  capture  the  intrinsic  transnational  characteristics  of  the  problem.  The  EU 
added value derives from the fact that uniform rules framing the relation between merchants and platforms are 
needed for the smooth functioning of the Digital Single Market. 

The  present  initiative  aims  to  prevent  direct  harm  to  businesses  in  the  immediate  term,  and  to  safeguard  the 
Single Market-potential of online platforms in the medium to long term, by improving business user trust and by 
enabling well-informed policy responses at the appropriate level. It therefore serves to protect the interests of all 
participants in the online platform ecosystem. 

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B. Solutions 

What  legislative  and  non-legislative  policy  options  have  been  considered?  Is  there  a  preferred 
choice or not? Why?  

The  Impact  Assessment  has  considered  a  range  of  policy  options,  ranging  from  pure  non-legislative,  self-
regulatory approaches to fully binding mandatory rules aimed at achieving the policy objectives.  

Purely  non-legislative  policy  options considered  focused  on calls  to  industry  to  develop  voluntary  measures  to 
address the most problematic trading practices, and to establish an industry commitment to improve access to 
redress  for  business  users  via  self-regulation.  An  independent  monitoring  strategy  would  similarly  rely  on 
industry commitments to report on the effectiveness and evolution of the problems. This option was discarded as 
unlikely to fully meet the policy objectives. 

Amongst  the  legislative  policy  options  considered,  co-regulatory  solutions  (combining  legislative  with  non-
legislative  elements)  as  well  as  fully  binding,  mandatory  rules  without  any  voluntary  components  were 
considered. A fully binding solution would lay down exhaustive mandatory rules prohibiting the trading practices 
in  question,  combined  with  mandatory  EU  wide  dispute  resolution  mechanism,  and  obligatory  reporting  by 
platforms to a fully-fledged regulatory agency (as has been proposed by a number of Member States). This has 
been discarded as disproportionate. 

The  preferred  option  is  a  co-regulatory  solution  addressing  issues  identified  on  online  platforms  and  in  online 
general search. Regarding online platforms, the regulatory part combines a set of legally binding transparency 
obligations on platforms, an obligation to set up internal redress mechanisms, as well as provisions to allow for 
collective redress for associations representing businesses. This would be combined with a non-binding call to 
industry  to  establish  an  independent  mediation  body  for  complaints.  Finally,  an  EU  observatory  for  emerging 
problems, organised around an EU expert group will also be set up to monitor emerging trends and the evolution 
of  problems.  Regarding  online  general  search  engines,  the  preferred  option  is  targeted  to  address  the 
dependency  induced  by  potentially  harmful  ranking  practices.  The  measures  foreseen  are  limited  to  scoped 
transparency  obligation  (limited  to  the  single  issue  of  ranking),  and  to  legal  standing  for  representative 
organisations to act on behalf of their business members. 

Who supports which option?  

Business users of online platforms generally support more far reaching, binding rules for the platform economy 
in order to increase their leverage over the relationships intermediated by online platforms. These include rules 
on  delisting  businesses,  and  transparency  on  discriminatory  practices  or  ranking  of  apps,  as  well  as  rules  on 
access to data in e-Commerce market places. 

Online  platforms  generally  support  self-regulatory  measures  and  oppose  binding  rules  as  too  burdensome  on 
their business models, and disproportionate to the problems at hand. Experts responsible for the Digital Single 
Market  as  well  as  e-Commerce  from  Member  States'  administrations  have  expressed  support  for  a  co-
regulatory, problem-driven approach, in principle. 

Regarding  transparency  around  rankings  and  data  use,  platforms  would  agree  with  high-level  disclosure,  but 
warn  of  "gaming"  and  manipulation  of  algorithms  in  case  of  too  much  transparency.  General  search  engines 
already  provide  comprehensive  guidance  on  how  to  optimize  the  ranking,  but  warn  of  the  ineffectiveness  of 
disclosing  algorithms,  not  least  in  light  of  many  and  frequent  changes  to  search  algorithms,  as  well  as  on  the 
risks to manipulation of search results.  

What are the benefits of the preferred option (if any, otherwise main ones)?  

C. Impacts of the preferred option 

The  preferred  option  is  expected  above  all  to  produce  direct  economic  benefits  for  EU  merchants  through 
additional  sales  in  the  digital  platform  economy,  which  would  also  benefit  online  platforms.  The  proposal  is 
estimated to be capable of reversing a dampening effect on the online platform economy resulting from a lack of 
trust of business users. The reversed dampening effect is expected to range between EUR 0.81 billion and EUR 

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4.05 billion. 

Businesses' turnover is in addition directly impacted by the visibility they get on online general search engines. A 
transparency obligation on ranking in general search would thus allow more predictability for business users.  
At  the  same  time  such  obligation  would  help  businesses  to  develop  better  informed  search  optimisation 
strategies,  greater  insight  in  which  could  lead  businesses  to  access  new  markets  and  embrace  innovation 
opportunities offered online, thus also enhancing their competitiveness. This would be particularly beneficial for 
SMEs  and  enterprises  with  no  or  emerging  online  presence.  Better  insight  in  ranking  policies  could  also  help 
business users grasp innovation opportunities offered online. 
The  preferred  option  can  also  be  expected  to  have  a  pro-competitive  effect  between  search  engines  and 
comparison  sites  through  enhanced  transparency,  as  public  ranking  policies  can  provide  a  greater  scope  for 
differentiation  by  start-ups,  new  entrants  as  well  as  existing  players.  Competition  on  quality  of  products  and 
services  among  business  users  dependent  on  search  engines  for  their  marketing  strategies  could  potentially 
also increase due to greater insight in ranking policies – to the extent such business users' website design are 
currently sub-optimal for achieving visibility. It is not excluded that the preferred option equally contributes to a 
more impartial outcome for consumers in the form of higher relevance results being more easily identifiable. A 
transparency  obligation  set  in  EU  law  would  strengthen  businesses'  ability  to  use  such  a  provision  in  court 
proceedings. Finally, it would also be a helpful complement to enforcement tools under competition law since it 
would allow greater insight in possible discriminatory behaviours. The additional trust for search engines which 
would result from the initiative could be expected to counterbalance the limited costs. 

Direct  social  benefits  are  conceivable  in  particular  for  self-employed  entrepreneurs  or  microenterprises  doing 
business  via  digital  platforms,  resulting  from  a  greater  predictability  and  transparency  online.  This  includes 
professional  users  of  collaborative  economy  platforms  (although  the  boundaries  between  professional  and 
personal  use  is  set  at  national  level  in  the  EU),  but  the  precise  nature  and  scope  of  these  benefits  cannot  be 
quantified. 

The preferred option can be expected to either increase employment opportunities or maintain existent ones.  

No direct environmental benefits are expected from the measure. 

What are the costs of the preferred option (if any, otherwise main ones)?  

The main costs of the preferred option relate to the requirement for online platforms to set-up an internal redress 
mechanism  for  business  users,  as  well  as  one-off  legal  compliance  costs  to  implement  the  transparency 
requirements  which  in  practice  means  adapting  the  platforms  terms  and  conditions.  These  costs  vary 
considerably with size, complexity and number of transactions intermediated, but can amount to 1 FTE in staff 
for  smaller  platform,  and  reach  values  of  ~0.03%  of  turnover  for  large  platforms,  based  on  industry  data.  No 
additional costs are expected for  EU merchants  trading on platforms. The compliance costs for  online general 
search  engines  are  expected  to  be  rather  limited  both  for  bigger  search  engines  (which  have  provided  SEO 
guidelines that could be usefully re-purposed for business users, or serve in some cases as inspiration for ways 
to  provide  meaningful  transparency),  and  for  smaller  ones  (since  they  would  be  able  to  equally  draw  from 
existing best practices). 

The preferred option has no direct negative impacts in the social or environmental area. 

How will businesses, SMEs and micro-enterprises be affected?  

Businesses of all sizes using online platforms to trade will be the main beneficiaries of the preferred option. The 
particular relative benefits will be strongest for weaker parties such as microenterprises, whose bargaining power 
in the online platform economy is particularly limited.  

Concerning platform businesses, the preferred option would exempt small enterprises (<50 employees) from the 
obligation to set-up an internal redress mechanism, so as to prevent burdens during the scale-up phase of EU 
platform businesses. As to the possibility to set an additional threshold exempting enterprises from the entire 
regulation, the analysis of pros and cons does not allow concluding on the need to add a horizontal exemption to 
the internal mechanism-specific one. 

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Will there be significant impacts on national budgets and administrations?  
No. 

Will there be other significant impacts?  

Most  notable  are  potentially  significant  indirect  benefits  for  consumers,  as  a  result  of  greater  choice  and 
improved trust, as more smaller merchants enter the platform economy, as well as from increased transparency, 
e.g. in areas such as disclosure of the general criteria which determine ranking mechanisms. Additional indirect 
benefits can be expected in the area of innovation, as a result of increased turn-over and greater predictability, 
but also through transparency on modalities of data access policies. Other potentially significant impacts in areas 
such  as  fundamental  rights  and  impacts  on  non-EU  platforms  have  been  assessed  and  not  found  to  be 
significant.  

When will the policy be reviewed?  

D. Follow up 

The proposed policy is designed to be reviewed after three years in force, and accompanied by a dedicated EU 
Observatory which will capture and analyse emerging trends in the digital economy, and inform the review of the 
policy.  This  is  a  key  component  of  the  policy,  to  ensure  an  adaptive,  responsive,  and  future-proof  approach, 
tailored specifically to the dynamic nature of the area. 

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