Online platforms coordinate the activities of millions of businesses and consumers in various areas of activity, such as: retail, transportation, hospitality and leisure and more. Online platforms provide business users with extensive and diverse options to reach consumers quickly and efficiently, they generate great value in their activities and enable business users to reach new and large audiences.
However, as an online platform becomes more central to a particular area of practice, so does the dependence of business (and private) users on it. The capabilities of the online platforms and their dependence on them give them a clear business advantage over business users, which may manifest itself in unfair practices in the terms of trade between them and harm to the potential for economic growth and social well-being inherent in e-commerce areas.
In July 2020, a regulation came into force in the EU that aims to establish rules of transparency and fairness among business users on online platforms. The central idea behind the regulation is to deal with the power gaps between online platforms and their business users by creating fair commercial terms rules that will improve users’ bargaining power, minimize information gaps with online platforms, and increase business certainty.
European regulation provides for direct prohibitions of unfair practices, such as: a duty to notify a change in the terms of use in advance; Prohibition on applying changes retroactively; As well as the obligation to notify in advance of the end or suspension of use and to allow for repair prior to suspension.
The regulation also sets rules regarding exposure to information, transparency and the creation of certainty – such as: presenting the terms of use in a way that is clear and easy to understand on a variety of issues; Discovering the key ranking parameters done on the online platform and search engines; A description of any preferential treatment of a product or service that is in ownership of the Platform; Notice of any access to information and of the transfer of information of the business user to a third party.
In addition, the regulation stipulates a dispute settlement mechanism in three stages – it is mandatory to have a mechanism for receiving inquiries, voting for two external mediators and the possibility of taking private legal proceedings against the online platforms for non-compliance with the provisions of the regulation.
The Competition Authority (the “Authority”) recommends adopting legislation similar to European regulation in Israel and applying all the provisions regarding fairness and transparency in accordance with European regulation. The Authority requests the public’s reference to the following points:
(A) To which online platforms should the regulation be applied in Israel? – The initial assessment of the Authority is that higher threshold conditions should be set than those set in the EU for the application of the regulation. Consideration may be given to setting threshold conditions based on the sales turnover of the platforms, the balance of assets or the number of their employees, the number of private users or business users of the platforms.
(B) What rules of European regulation should be applied in Israel? – The Authority’s recommendation at this stage is that all the provisions of the regulation relating to fairness and transparency should be applied.
(C) What is the appropriate enforcement mechanism in Israel? – The Authority’s recommendation is not to apply the provision relating to the obligation to contract with external mediators as it appears in European regulation. The Authority seeks the public’s reference to the question of whether enforcement should be carried out through private lawsuits in the courts or through enforcement by a regulator.