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Three key concepts to comply with the new transparency obligations in e-commerce: Are you ready to sell online?
Cristina Mesa, Principal Asssociate in the Intellectual Property practice.
One of the advantages of e-commerce is the practically infinite number of catalogs available to users, where products, services and digital content are just a click away. The variety of catalogs is even bigger in online marketplaces, which are e-commerce sites that connect thousands of sellers with potential buyers worldwide. European legislation encourages these types of commercial practices, which are essential for the economy of the EU, but at the same time requires greater transparency in order to protect final consumers. This article looks at the main legislative changes and how you can adapt to the new, rather substantial, transparency obligations.
Can you pay to improve the positioning of products and services?
Yes. Online stores decide which parameters they are going to use to position their products, services or digital content. That said, a higher ranking or a prominent position on a website has a big impact on consumers’ purchasing decisions. This is why stores and marketplaces must clearly explain why some products and services appear before others. For example, if a vendor can pay to have its products appear first, the online search provider should inform consumers of that fact in a concise, easily accessible and intelligible manner.
This obligation also applies in B2B relationships between owners of marketplaces or online search engines and the professional sellers that use them to reach the final user, the so-called professional users.
Do online stores and marketplaces have to explain their main ranking parameters?
Yes. Online marketplaces that provide tools allowing consumers to search for goods and services, such as travel, accommodation and leisure activities, offered by different traders or consumers, should inform consumers about the default main parameters determining the ranking of offers. They should also disclose their relative importance as opposed to other parameters. It is important to bear in mind that this obligation applies even if payment is not among these factors. Take, for example, a tourist accommodation search engine: How does it rank the accommodation? By the size of the rooms? Customer ratings? Closeness to tourist sites? And why are these parameters chosen above others? These are the answers users need.
This raises the question: do marketplaces have to reveal their ranking algorithms? Absolutely not. The regulations require greater information on general criteria, processes and specific signals incorporated into algorithms or other adjustment or demotion mechanisms used in connection with the ranking, but marketplaces are not being asked to reveal minute details of how their ranking mechanisms and algorithms work. Neither are they being required to explain the personalized parameters used for each specific search. As stated, the disclosure requirement relates only to the main ranking parameters.
Who am I buying from? An intermediary? A third-party seller? Another consumer?
This aspect, which must be explained clearly, is another bone of contention between lawmakers and marketplaces. Lawmakers are demanding greater transparency when defining existing contractual relations. The reason is clear: consumers need to know that they are not entering into a contract with an intermediary but rather with a third-party vendor, and they must be informed of the liabilities each party assumes in this contractual relationship.
One particularly important point is that consumers must be informed of whether they are entering into a contract with a business or with another consumer, since, in the latter case, the additional guarantees provided in the General Consumer and User Protection Law do not apply. It should be stressed that intermediaries are not required to verify that the seller is who it claims to be; rather, these marketplaces must request a statement from the seller and warn consumers that the safeguards and rights inherent in consumer relations are not applicable if the seller is an individual.
Deadline for implementing changes
The adaptation process has been designed at two different speeds. In the case of the obligations applicable in connection with B2B2C intermediation, adaptation is more pressing, since Regulation (EU) 2019/1150 on promoting fairness and transparency for business users of online intermediation services, which imposes them directly, considers the obligations applicable as from July 12, 2020.
In the area of B2C, Directive (EU) 2019/2161 as regards the better enforcement and modernization of Union consumer protection rules must be transposed no later than November 28, 2021 and will be applicable in all Member States as from November 28, 2022. It remains to be seen how Spanish lawmakers will proceed and whether they will also include additional information requirements, a possibility that is envisaged in the Directive, provided that such additional requirements do not impose supervision obligations that are contrary to E-Commerce Directive 2000/31/EC and that their provisions are proportionate, not discriminatory, and justified for the protection of consumers. Are we ready?