EU set to change the rules of the e-commerce world
On the 14th of February, the European Commission made the following announcement via press release: “the European Parliament, the Council of the European Union and the European Commission reached a political deal on the first-ever rules aimed at creating a fair, transparent and predictable business environment for businesses and traders when using online platforms.”
So what are these rules?
According to the press release, the following are the expected changes:
Small businesses will particularly benefit immediately from:
- A ban on certain unfair practices
- No more sudden, unexplained account suspensions. With the new rules, digital platforms can no longer suspend or terminate a seller’s account without clear reasons, and possibilities to appeal. The platform will also have to reinstate sellers if a suspension was made in error.
- Plain and intelligible terms and advance notice for changes. Terms and conditions must be easily available and provided in plain and intelligible language. When changing these terms and conditions, at least 15 days prior notice needs to be given to allow companies to adapt their business to these changes. Longer notice periods apply if the changes require complex adaptions.
- Greater transparency in online platforms
- Transparent ranking. Marketplaces and search engines need to disclose the main parameters they use to rank goods and services on their site, to help sellers understand how to optimise their presence. The rules aim to help sellers without allowing gaming of the ranking system.
- Mandatory disclosure for a range of business practices. Some online platforms not only provide the marketplace, but are also sellers on the same marketplace at the same time. According to the new transparency rules platforms must exhaustively disclose any advantage they may give to their own products over others. They must also disclose what data they collect, and how they use it – and in particular how such data is shared with other business partners they have. Where personal data is concerned, the rules of the GDPR apply.
- New avenues for dispute resolution.
Today sellers are often left stranded with no ways to appeal or resolve complaints when problems arise. This will change with the new rules.
- All platforms must set up an internal complaint-handling system to assist business users. Only the smallest platforms in terms of head count or turnover will be exempt from this obligation.
- Platforms will have to provide businesses with more options to resolve a potential problem through mediators. This will help resolve more issues out of court, saving businesses time and money.
- Business associations will be able to take platforms to court to stop any non-compliance with the rules. This will help overcome fear of retaliation, and lower the cost of court cases for individual businesses, when the new rules are not followed. In addition, Member States can appoint public authorities with enforcement powers, if they wish, and businesses can turn to those authorities.
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What does this mean practically speaking?
With the ban on sudden, unexplained account suspensions, let’s hope this means much more detailed explanations from Seller Performance. I am skeptical of this in the short term however, because I am confident Amazon’s teams already believe they’re being clear with their notifications, and this will require multiple disputes being resolved before explanations become clearer or more complete from Amazon.
My biggest question is, how are they going to decide on error? We have multiple clients (not the norm) annually where I’m convinced that the account closure was in error, but there is no official appeal process, just a terrible approach that requires trying to get the attention of an executive at Amazon. The lack of transparency right now is pretty terrible; without some sort of official “SCOTUS” style setup to hear appeals, I’m convinced the same process would be replicated with a different team called an “Appeals” team.
Regarding the clarity of the search ranking results – this would be great to have defined – I think it would definitely reduce the number of companies that benefit off of the ignorance of sellers and overcharge them for questionable and potentially unauthorized ranking results.
The “sellers on the same marketplace at the same time” looks like a direct dig at Amazon. Completely fair point, since they’re private labelers and wholesalers on the same marketplace that everyone else competes on. Bring on the transparency!
Regarding the requirement to have an internal complaint handling system – Amazon already has this. Many hundreds of them. But hopefully the opening for mediation would be helpful. One of the challenges logistically with the existing system is that the people who are deciding the future of someone’s business are typically making $30-40k/annually in the US, and quite a bit less for out of the US, and have little to no actual business experience themselves. So they’re really not qualified in many cases to handle difficult cases, and yet, they’re expected to do so consistently, with impartiality, and accurately. It’s rather a tall order for individual lower level employees.
I hope that their appeals process requires multiple employees having an independent evaluation of the case, such as a requirement to have three employees from three different locations (different local culture/expectations/management) evaluate the case, and the majority rules, rather than having the life of a seller’s business in the hands of one individual only.
Finally on the last note in the press release, I love that industry associations can take platforms to court!! Individual sellers have limited recourse against Amazon, but an industry association would provide the necessary counterbalance to make the process fairer for all sellers.
A fair approach for sellers?
For too many of our clients, the process for dealing with Amazon and managing the stress of a warning or suspension makes them want to avoid any appearance of impropriety – or avoid Amazon altogether. Amazon’s success makes that nearly impossible, however, creating a situation that is similar to how Facebook was viewed in a recent decision in Germany – that the ubiquity of the platform gives it an unfair advantage in the terms and conditions and how data is used.
I will personally be watching how this plays out in Europe closely, and hope for a reasonable and fair regulation of online commerce platforms here in the US that makes it easier for small businesses to seek redress in unfair business practices, and transparency in how decision making happens regarding the growth and health of their business.