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Europe: New Rules for the Platform Economy

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By Patrick Van Eecke, Partner, DLA Piper Brussels and Anne-Gabrielle Haie, Lead Lawyer, DLA Piper Brussels  

From July 12, 2020 onwards, new European rules will oblige online platforms to take several additional measures, including reviewing their terms and conditions, establishing a data policy and creating a complaint handling system. The Platform to Business Regulation is directed towards companies that offer platforms to other companies who want to service consumers. Typical examples are online market places, app stores and search engines.

Online platforms: unfair trading practices?

Online platforms play a prominent role in the digital economy. According to Copenhagen Economics, more than one million EU enterprises trade through online platforms in order to reach their customers, and it is estimated that around 60 percent of private consumption and 30 percent of public consumption of goods and services related to the total digital economy are transacted via online intermediaries. Online platforms have brought important benefits to the society and the economy. They cover a wide range of activities, including online advertising platforms, marketplaces, search engines, social media and creative content outlets, application distribution platforms, communications services, payment systems, and platforms for the collaborative economy.

In 2016, the European Commission launched a comprehensive assessment of the online platform ecosystem. This analysis identified a number of issues that needed to be addressed. In particular, it highlighted a number of concerns about unfair trading practices taking place on online platforms. The European Commission identified the following issues:

  • platforms imposing unfair terms and conditions, in particular for access to important user bases or databases
  • platforms refusing market access or unilaterally modifying the conditions for market access, including access to essential business data
  • the dual role that platforms play when they both facilitate market access and compete at the same time with suppliers, which can lead to platforms unfairly promoting their own services to the disadvantage of these supplier;
  • unfair ‘parity’ clauses with detrimental effects for the consumer and
  • lack of transparency − notably on tariffs, use of data and search results − which could result in harming suppliers’ business activities.

In order to address these pitfalls, the European Institutions adopted, on June 20, 2019, Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services The Regulation on platform-to-business relations, also called the P2B Regulation, will become applicable from July 12, 2020 onwards, which means that online platforms will need to comply with the new requirements imposed on them by this date.

What is the purpose of the P2B Regulation?

The purpose of the Regulation is 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. The Regulation aims at:

  • increasing innovation opportunities in the online ecosystems through binding rules and enhancing transparency to foster trust and fairness in the market
  • laying down common rules based on transparency, dispute resolution and monitoring
  • providing greater regulatory predictability for businesses
  • providing greater legal certainty for platforms and general online search engines within the EU.

To whom does it apply?

The Regulation applies to online intermediation services and online search engines that aim to connect EU businesses and professional websites with EU consumers . This includes:

  • online e-commerce market places, including collaborative ones on which business users are active
  • online software applications services, such as application stores and
  • online social media services, irrespective of the technology used to provide such services.

It applies irrespective of any monetary payment.

However, it does not apply to online payment services or to online advertising tools or online advertising exchanges, which are not provided with the aim of facilitating the initiation of direct transactions and which do not involve a contractual relationship with consumers. This means that the Regulation 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
  • online advertising tools and online advertising exchanges which are not provided with the aim of facilitating the initiation of direct transactions and which do not involve a contractual relationship with consumers
  • search engine optimisation software services as well as services which revolve around advertising-blocking software and
  • technological functionalities and interfaces that merely connect hardware and applications.

The Regulation applies to providers regardless of whether they are established in a Member State or outside the Union, provided that the following cumulative conditions are met:

  • the business users or corporate website users are established in the EU
  • 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.

In other words, the Regulation applies to online intermediation service providers and search engine service providers that provide their services to businesses established in the EU which in their turn offer goods or services to consumers located in the EU (eg, app stores, social media pages, online market places)

Which rules should B2B online platforms comply with?

Providers of online intermediation services must ensure that they comply with the following requirements.

  1. Terms and conditions

Terms and conditions must :

  • be drafted in plain and intelligible language
  • be easily available to business users at all stages of their commercial relationship with the provider of online intermediation services
  • set out the grounds for decisions to suspend or terminate or impose any other kind of restriction upon the provision of their online intermediation services to business users
  • include information on any additional distribution channels and potential affiliate programmes through which providers of online intermediation services might market goods and services offered by business users
  • include general information regarding the effects of the terms and conditions on the ownership and control of intellectual property rights of business users
  • not impose retroactive changes, except when they are required to respect a legal or regulatory obligation or when the retroactive changes are beneficial for the business users
  • include information on the conditions under which business users can terminate the contractual relationship with the provider of online intermediation services
  • include a description of the technical and contractual access, or absence thereof, to the information provided or generated by the business user, which they maintain after the expiry of the contract between the provider of online intermediation services and the business user.

Business users must be informed of any modification of the terms and conditions. Providers of online intermediation services need to respect a reasonable notice period depending on the nature of the modification (minimum is fixed at 15 days) unless a business user gives an explicit agreement for this period to be shortened.

Non-compliant terms and conditions should be null and void, that is, deemed to have never existed, with effects erga omnes and ex tunc. This should however only concern the specific provisions of the terms and conditions which are not compliant.

  1. Restriction, suspension or termination of accounts

Providers of online intermediation services will have to provide business users with the reasons for restricting or suspending individual products/services.

In case of definitive termination of the online intermediation service offered, the platform will provide the business user concerned with a statement of reasons at least 30 days in advance.

The provider of online intermediation services must give the business user the opportunity to clarify the facts and circumstances in the framework of the internal complaint-handling process.

  1. Ranking

Providers of online intermediation services must set out in their terms and conditions the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters.Providers of online search engines must set out the main parameters, which individually or collectively are most significant in determining ranking and the relative importance of those main parameters, by providing an easily and publicly available description, drafted in plain and intelligible language, on the online search engines of those providers. Where the main parameters include the possibility to influence ranking against any direct or indirect remuneration paid by business users or corporate website users to the respective provider, that provider shall also set out a description of those possibilities and of the effects of such remuneration on ranking.

  1. Ancillary goods and services

Where ancillary goods and services, including financial products, are offered to consumers through the online intermediation services, the provider of online intermediation services must set out in its Terms and conditions a description of the type of ancillary goods and services offered and a description of whether and under which conditions the business user is also allowed to offer its own ancillary goods and services through the online intermediation services.

  1. Differentiated treatment

Providers of online intermediation services and providers of online search engines must set out a description of any differentiated treatment which they give to their own products and services or to other business users. That description must include the main economic, commercial or legal considerations for such differentiated treatment.

  1. Access to data

Providers of online intermediation services must include in their terms and conditions a description on what data generated through their services can be accessed, by whom and under what conditions.

  1. Restrictions to offer different conditions through other means

Where providers of online intermediation services restrict the ability of business users to offer the same goods and services to consumers under different conditions through other means, they must include the grounds for that restriction in their terms and conditions and make those grounds easily available to the public. Those grounds shall include the main economic, commercial or legal considerations for those restrictions.

  1. Redress mechanisms

Providers of online intermediation services must provide for an internal system for handling the complaints of business users (small enterprises with less than 50 staff members and generating ≤€10 million turnover are exempted from this obligation).That internal complaint-handling system must be easily accessible and free of charge for business users and shall ensure handling within a reasonable time frame. Providers of online intermediation services must provide in their terms and conditions all relevant information relating to the access to and functioning of that internal complaint-handling system.

Providers of online intermediation services must identify in their terms and conditions two 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 between the provider and the business user arising in relation to the provision of the online intermediation services concerned, including complaints that could not be resolved by means of the internal complaint-handling system.

Representative organisations or associations will be able to defend businesses in courts against possible infringements by providers of online intermediation services and providers of online search engines.

When will the rules become applicable, and what should you do?

The rules of the P2B Regulation will become applicable from July 12, 2020 onwards. By this date, if you are a company active in offering online intermediation services or online search engine services, you should in particular:

  • review your terms and conditions
  • implement a process for restricting, suspending and terminating the service to individual users
  • review and explain your ranking parameters
  • review and explain the modalities of differential treatment between your own offers and those of users
  • establish your data policy
  • establish an internal system for handling complaints
  • appoint mediators.

Companies working with online platforms should require their service providers to ensure that the above action items have been complied with.

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Technology

WATRA Advocates E-Governance and Technology to Boost Jobs for Youths In Nigeria, W/Africa

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WEST Africa Telecommunications Regulators Assembly (WATRA) has advocated greater adoption of e-Governance and concerted effort to expand the digital economy in Nigeria and other countries of West Africa. 

The executive secretary of WATRA, Aliyu Yusuf Aboki stated that this will boost investment and create quality jobs for young people in Nigeria and West Africa. He stated that despite the comparatively low rate of literacy in West Africa, there is a very wide scope for digitizing government services. 

He said he sees the enormous opportunity for e-governance as he travels across the 15 ECOWAS states. He explained that governments at all levels could increase their taxes dramatically by digitizing the identities of taxpayers and tax collection processes. He also emphasized that there is a great opportunity to expand access to education and healthcare through digital tools. 

 WATRA is a regional organisation that has the mandate to promote the adoption and harmonization of regulations that stimulate investment in telecommunications and increase affordable access for citizens.

 The WATRA boss cited the example of India where over 1 billion citizens, including the poorest citizens, could easily receive or make payments using their telephones through a government-supported platform, the Unified Payments Interface (UPI).

 Other government-backed digital schemes in the country enable municipal governments to manage healthcare online and citizens to store and readily access government documents such as tax returns on their phones. 

Aliyu pointed out that the digitalization of government services has transformed the lives of the 273 million Indians who are classified as living in poverty. While noting progress in the adoption of ICT to deliver and manage government services in West Africa, the WATRA boss emphasized the need to scale up existing schemes in the sub-region. 

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Africa Region

Africa’s Smartphone Market Declines 3.4% In Q1

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Africa’s smartphone market declined 3.4 per cent quarter on quarter (QoQ) in Q1 2023 to total 17 million units, the lowest level of shipments since the start of the COVID-19 pandemic in Q1 2020.  That’s according to the latest figures announced by International Data Corporation (IDC), with the firm’s newly released Worldwide Quarterly Mobile Phone Tracker showing that rising inflation and local currency depreciations against the U.S. dollar have negatively impacted demand for smartphones across the continent.

Shipments of feature phones across Africa also declined in Q1 2023, although not to the same extent as smartphones. Feature phones remain relatively affordable and are still the preferred secondary device option for many consumers.

“Africa’s smartphone declined throughout 2022 amid weak consumer demand, and this has been exacerbated by rising inflation and higher device prices,” says George Mbuthia, a senior research analyst at IDC. “The average selling price (ASP) for smartphones grew QoQ due to high import costs and the fact that many vendors’ flagship devices are now equipped with 5G and have therefore moved up in price to the premium segment.”

Africa’s top 3 smartphone markets recorded a mixed performance in Q1 2023. South Africa and Nigeria both saw shipments decline QoQ, while the Egyptian market registered growth. South Africa was impacted by seasonality issues and weak demand, meaning vendors were unable to bring in new units while they continued to clear the channel. Egypt remains below its potential, but local assembly is picking up in the country and the government has now dropped its “letters of credit” requirement for vendors, both of which have helped the market to recover from its low base.

Transsion (Tecno, Itel, and Infinix) accounted for the largest share for smartphone shipments across Africa in Q1 2023, despite experiencing a decline in units. Samsung placed second, while Xiaomi came in third.

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Africa Region

M-KOPA raises $250m to scale high-impact consumer fintech across Africa

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M-KOPA, a leading fintech platform, today announced it successfully closed over $250m in new debt and equity funding to expand its financial services offering to underbanked consumers across Sub-Saharan Africa. This marks one of the largest combined debt and equity raises in the African tech sector, enabling M-KOPA to continue its rapid growth.

Over $200m in sustainability-linked debt financing was led and arranged by Standard Bank Group, Africa’s largest bank and long-term strategic partner to M-KOPA. Other participating lenders include The International Finance Corporation (IFC), funds managed by Lion’s Head Global Partners, FMO: Dutch Entrepreneurial Development Bank, British International Investment, Mirova SunFunder and Nithio. A further $55m in equity investment was backed by existing strategic investor Sumitomo Corporation, which is contributing $36.5m to the total raise and will engage closely with M-KOPA on new growth markets and products. Blue Haven Initiative, Lightrock, Broadscale Group and Latitude, the sister fund to Local Globe, also participated in the transaction.

M-KOPA’s fintech platform combines the power of digital micropayments with the Internet-of-Things (IoT) to provide customers with access to productive assets. In markets where individuals have limited pre-existing financial identities and conventional collateral, M-KOPA’s flexible credit model allows individuals to pay a small deposit and get instant access to everyday essentials, including smartphones, electric motorcycles and solar power systems, and then graduate to digital financial services such as loans and health insurance. M-KOPA’s solution embeds credit into the product through a smart digital connection, giving customers ownership instantly, which they can pay off through micro-instalments over time. The company has sold over 3 million of these products through a unique direct sales model that includes more than 10,000 agents. M-KOPA’s operations started in East Africa and successfully expanded to Nigeria in 2021 and, more recently, Ghana. From 2020 to 2022, M-KOPA recorded a compound annual growth rate of 85% in new customer acquisition, and was recently recognised as one of Africa’s Fastest-Growing Top 100 companies by the Financial Times for two consecutive years, in 2022 and 2023.

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