Forty-fourth Report of Session 2017–19 Contents

1Online platforms

Committee’s assessment

Politically important

Committee’s decision

Not cleared from scrutiny; waiver granted; further information awaited

Document details

Proposal for a Regulation of the European Parliament and of the Council on promoting fairness and transparency for business users of online intermediation services.

Legal base

Article 114; Ordinary Legislative Procedure; QMV

Department

Business, Energy and Industrial Strategy

Document Number

(39665), 8413/18 + ADDs 1–3, COM(18) 238 final

Summary and Committee’s conclusions

1.1On 26 April 2018 the European Commission published a proposal for a regulation to improve fairness and transparency for business users of online platforms (EU) 8413/18.1 The text focussed on transparency for business users of online platforms and redress mechanisms for handling the complaints of business users. The Committee provided a more detailed summary of these provisions in its report on 18 July 2018.2 The European Parliament’s Research Service has also published a comprehensive briefing on the proposal.3

1.2The Government’s initial explanatory memorandum4 provided limited clarity about the Government’s view regarding the proposal. The Parliamentary Under-Secretary of State at the Department of Business, Energy and Industrial Strategy (Lord Henley) said that the Government recognised the benefits and opportunities that platforms can bring to both consumers and businesses, and that the Government was committed to maintaining “the right environment to ensure both platforms and the businesses that use them can thrive”, without specifying whether the proposal would provide that environment. The Government indicated that it was engaging with stakeholders about the proposal in order to better formulate its position.

1.3In its first report on the proposal5 the Committee noted that given the long gestation process the proposal had undergone—the Commission had first proposed to develop “a fit for purpose regulatory environment for platforms and intermediaries” in May 2015—it had been subject to a higher level of scrutiny than most proposals, and was, as a result, more targeted than earlier drafts, which had included business-to-business and peer-to-peer platforms—now excluded because the asymmetries of bargaining power operative in these markets are deemed to be less pronounced. The Committee considered the level of intervention proposed to be, “for the most part, light-touch, with the focus being on improving transparency in these markets”. It also acknowledged that features of the markets within the scope of the proposal, including strong network effects and fragmented supply sides, could lead to certain platforms becoming unavoidable trading partners for dependent businesses and to pronounced asymmetries of bargaining power, which, where exploited, could lead to unfair terms and conditions being imposed on those businesses.

1.4The report expressed the Committee’s disappointment at the Government’s explanatory memorandum, which it described as “exceptionally brief and non-committal”, and asked for clarity on a number of points, including:

1.5In the Minister’s initial response to the Committee’s report6 he said that the proposal appeared to “recognise the importance of adopting a proportionate approach, that takes into account both innovation and addressing unfair business practices”—indicating broad support for the approach the Commission has taken.

1.6In terms of whether the UK intended to retain the terms of the Regulation in UK law outside the EU, the Minister said that the Regulation would apply to UK-based online platforms after our exit from the EU, to the extent that they are providing services to business users in the EU whose customers are based in the EU—and that this would include the requirements relating to terms and conditions and establishing an internal complaints handling system.

1.7In terms of long-term alignment in this area, the Minister said that the Government had been clear that it was not seeking to be part of the Single Market and that this decision extended to the Digital Single Market, which the Government recognised meant that the UK and the EU would not have current levels of access to each other’s markets. Nonetheless, the Minister acknowledged that “digital services trade between the UK and the EU will continue to be important”, and that the UK therefore proposed “to explore new models for regulatory cooperation between the UK and the EU to tackle these shared challenges and advance shared objectives in the future.” The Minister recognised that “the UK’s future action in this area, including issues around competitive advantage, will be informed by the outcome of the UK-EU negotiations on a Future Economic Partnership”.

1.8The Minister has written7 to update the Committee that the Austrian Presidency has moved quickly to reach an agreement and will aim to agree a General Approach at Competitiveness Council on the 29/30 November 2018. He indicates that the Government is “keen to see the proposal agreed swiftly to ensure that the UK is not timed out of negotiations.”

1.9The Minister states that “the UK has been broadly supportive of the proposal to date” and notes that ensuring a balanced approach between promoting innovation and protecting dependent businesses was a key concern of the Committee’s. The Minister states that the proposal has not undergone major changes during negotiations, and states that the changes that have been made include:

The Minister states that he hopes that this update will allow the Committee to grant the Government a scrutiny waiver which would enable it to fully participate in the discussions at Competitiveness Council on 29/30 November.

1.10We have taken note of the Minister’s response and his update regarding the progress of negotiations in the Council of Ministers. Following further engagement with businesses users and other stakeholders, the Government’s assessment is that the proposal “does appear to recognise the importance of adopting a proportionate approach, that takes into account both innovation and addressing unfair business practices”. The Government is therefore “broadly supportive” of the proposal at this stage. The Minister indicates that the text has not undergone major changes during negotiations in the Council and provides a copy of the latest Presidency text and a summary of the changes made, which include the removal of the requirement for platforms to disclose the reasons for the relative importance of ranking criteria (which would have been difficult for platforms to do without breaching trade secrets), and a requirement that explanations of suspension or termination must be communicated to the business users via a durable medium. In our assessment, the changes proposed do not significantly alter the balance of the proposal in favour of either platforms or dependent businesses.

1.11Regarding EU exit, the Regulation would continue to apply directly to UK-based platforms to the extent that they provide services to business users in the EU whose customers are based in the EU. Regarding the extent to which the UK would maintain alignment with this regime domestically in the long-term, and whether the UK could gain a competitive advantage, the Minister implicitly acknowledges the prospect of divergence by responding that the Government’s intention is not to remain part of the Digital Single Market even if this means that “the UK and the EU would in consequence not have current levels of access to each other’s markets”, although digital trade will remain important and the UK will propose “to explore new models for regulatory cooperation between the UK and the EU to tackle these shared challenges and advance shared objectives in the future.” The Minister acknowledges that the UK’s future regulatory approach in this area, including issues around competitive advantage, “will be informed by the outcome of … negotiations on a Future Economic Partnership”.

1.12On the basis of the Minister’s update we are willing to grant the Government a waiver to participate at Council, on the understanding that it will support the General Approach, unless significant last-minute changes to the text are made, outside of the scope of those described in his update, which negatively affect the balance between promoting innovation and protecting independent businesses and alter the Government’s view of the proportionality of the text. In the meantime, we retain the proposal under scrutiny and ask for further updates in due course. We also ask that, in its next update, the Government provide some additional information regarding the types of models for regulatory cooperation in the digital sector which it is exploring.

Full details of the documents:

Proposal for a Regulation of the European Parliament and of the Council on promoting fairness and transparency for business users of online intermediation services: (39665), 8413/18 + ADDs 1–3, COM(18) 238 final

Previous Committee Reports

Thirty Sixth Report HC 301–xxxv (2017—2019), chapter 2 (18 July 2018).


1 Proposal for a Regulation on promoting fairness and transparency for business users of online intermediation services COM(2018) 238 final.

2 Thirty Sixth Report HC 301–xxxv (2017—2019), chapter 2 (18 July 2018).

3 European Parliament Briefing, Fairness and transparency for business users of online services (July 2018).

4 Explanatory memorandum submitted by the Department for Business, Energy and Industrial Strategy (5 June2018).

5 Thirty Sixth Report HC 301–xxxv (2017—2019), chapter 2 (18 July 2018).

6 Letter from the Minister to the Chair of the European Scrutiny Committee (9 August 2018).

7 Department for Exiting the European Union, European Memoranda (accessed 5 November 2018).




Published: 20 November 2018