eu policy lab with dg cnct and dg grow3. reputation, ranking, rating, reviews discussed by 4/6...

EU POLICY LAB with DG CNCT and DG GROW

First results of series of scoping sessions P2B PLATFORM-TO-BUSINESS TRADING PRACTICES IN THE ONLINE PLATFORM

P2B Trading Practices in the Online Platform ¦ Exploratory Sessions - Series ¦ EU POLICY LAB with DG CNCT and DG GROW

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TABLE OF CONTENTS

- Summary of the process - Key EU Policy objectives - Extended Stakeholder map and definition of main actors - Horizontal issues - Individual sessions


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SUMMARY

Between February 8 and 21, six two hours scoping sessions took place with groups of 2 to 5 people from DGCNCT and DG GROW, and on average 2 facilitators from EU Policy Lab, on the following topics: 1. Unfair pricing (e.g. non-transparent pricing, distribution of revenues), starting from App store case study to all platforms; 2. Parity, starting from Booking/Expedia case studies to e-commerce and OTA's; 3. Data access and portability, starting from Financial Times/App store case studies to all platforms; 4. Limitation of payment, starting from ebay/Appstore examples to e-commerce and app stores; 5. Biased or non-transparent search practices, incl. rating/reviews, ranking, algorithmic transparency, starting from Amazon example, to all platforms; 6. Termination policy, unilateral changes T&C's, no prior notice, lack of clarity on full T&C's and interpretation thereof by platform, continuation of use as presumption acceptance to T&C's, no explanation operational decisions, starting from Youtube case study to all platforms. Process The sessions aimed at mapping out the conversation of the group following the process of: 1) unpacking and agreeing on the designated issue, 2) formulating the public interest, 3) defining who the main actors are, 4) reviewing what assets each actor possesses, 5) situating the issues on the map around the involved actors, marking them with a pain point or leverage point card, and finally 6) placing solutions. The scoping session set was composed of the following cards: - Main actors: platform, business, user, public interest; - Other actors; - Asset cards of the platform (value proposition, data center, business model, brand, algorithm, interface and traffic), and asset cards of the business and of the user (brand, business model, properties, activity, profile, relationships, content and ratings) - Pain point and leverage point cards; - Solution cards: impose, negotiate, promote and game changer. Advantages & Limitations Mapping the issues allowed keeping the conversations open by constantly taking into consideration the motivations and impacts, of each issue, on the main actors at play in this project. The pain point, leverage point and solution cards offered a certain level of interpretation which ensured open conversations, but as a result, different meanings were given to them depending on the group (participants & facilitators). This is reflected in the restitution of the individual sessions where the classification of some elements across the sessions is not consistent and therefore may be questionable. The conversation around solutions did not go as far as identifying the intensity to which to impose, negotiate or promote a level of analysis to be brought in the second step of solution development.


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KEY EU POLICY OBJECTIVES

image: scheme of key EU policy objective The two main areas of policy objectives in the platform to business relations are 1) the emergence

of new (EU) platforms, and 2) the growth of European businesses. At platform level the first objective means ensuring a level playing field between platform-owned businesses and others as well as reducing barriers for the emergence of new (EU) platforms. The second, growth of businesses, requires providing a fair distribution of added value (fair balance of risks and costs) and creating a fertile environment (a stable and reliable environment by ensuring due process and conduct of business). Both objectives, in turn should be supporting an increase of innovation and the protection of

consumers' interests. In addition to this general public interest, underlying contextual concerns are to be taken into consideration: the non-abusive handling of data (ensuring a robust data value chain, an awareness of input & output data), and the attention to cross border issues in order to avoid the risk of legal fragmentation and ensure harmonization.


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STAKEHOLDER MAP

image: stakeholder map across 6 scoping sessions


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image: defining main actors (business, platform & user)


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HORIZONTAL ISSUES

image: 6 sessions board

Across the discussions, TRANSPARENCY, DATA, PLATFORM (& unfairness) were identified as ambiguous and require further definition. Secondly the Member States adopting different positions in regard of the platform to business trading relations was also underlined as a space that requires better coordination (defining common rules across the EU and defining the legal framework of the main actors: platform, business & user). The 4 following issues have been identified as most salient across all sessions:

1. HIGH AND INCREASED FEES, COMMISSIONS, PRICES Discussed by 5/6 groups: pricing practices, price parity, limitation of payment, biased or non-transparent search practices & termination & unilateral ToC changes

Both businesses and users are subject to increase in fees, commissions and prices (encompassing price uniformity, prices charged by analytics, unreliable payment systems). The repercussion is that the service between business and user becomes driven by price rather than by quality. This leads to less space given to innovation and to competition between businesses on one side and on the other to reduced competition on prices for the user.


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The solution space tackle aspects of transparency (dispute resolution, standards, trust marks and predictability of the service) and discrimination issues: raising business intelligence to build the business capacity to challenge the platform, (including regulations to blacklist practices of platforms, liability disclaimers, prior notice requirements on ToC’s).

2. PLATFORMS AS BARRIERS BETWEEN BUSINESS & THEIR CUSTOMER Discussed by 4/6 groups: price parity, limitation of payment, biased or non-transparent search practices, termination unilateral ToC changes

The platform is an intermediary between the business and the user, but in consequence, while offering businesses the possibilities to grow, it prevents them from having a direct link to the user. The platform takes over the market knowledge (volume of data traffic), creating a non-sustainable ecosystem for business competition. Solutions focus on data (a free flow of personal data, interoperability of data, transparency and access to input & output algorithms, awareness of market dynamics and of evolving business model of platform) and on trust of platforms (voluntary standards and reward mechanisms).

3. REPUTATION, RANKING, RATING, REVIEWS Discussed by 4/6 groups: pricing practices, price parity, data access, biased or non-transparent search practices

Reputation strongly impacts the position of the platform and of the businesses on the marketplace. Platforms that act as a market place, by valorising their brand and basing their value proposition on reputation, as a result distort the system to the detriment of the business. Competition between businesses thus becomes limited and non-transparent. Rankings discriminate businesses but also threaten the wellbeing of the user, actor of an "unnatural" competitive environment. Solutions to prevent discrimination focus on making the reputation process more transparent (who rates? How?) by introducing human verification (vs only algorithms) and third actors.

4. EMERGING PLATFORMS Discussed by 4/6 groups: pricing practices, price parity, data access, termination & unilateral ToC changes

Dominant platforms are blocking the emergence of new platforms that are a threat to the current ecosystem, by buying them, or by creating a market entry barrier. At the same time, emerging platforms, exempt of regulations, allow for unsafe exchanges to settle (a multiplication of intermediaries and third party actors with diverging motivations on the market place, as well as a multiplication of places where data is distributed, i.e. user and business online activity data, credit number etc.). In return, the user may not be as well protected by the platform as he is now. The second scenario seems nevertheless more fruitful for balanced and innovative dynamics. Solution directions encompass a raise of awareness on the marketplace and on data to offer the possibility of switching platforms (portability of data), comparing platforms, merging businesses into a platform, supporting start-up platforms, etc.


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INDIVIDUAL SESSIONS

image: session 1 pricing practices related to P2B


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1. (Unfair) Pricing practices related to P2B

Executive summary: In the attempt to find a common understanding of the issue, several questions were raised: what do prices mean for platforms? Is it the practice of changing prices that is at stake or is it the level of prices fixed by the platform? What point of comparison allows defining pricing as excessive? Unfairness was put aside considered too difficult to define. Market power relationships are an important factor for pricing issues to take place. But these issues can only be defined in relation to their specific context (sector specific & actor specific). Depending on the scale of the service provided by the platform, the repercussions are: on the business side, an increase of the service cost, and, on the user side, a decrease on the service costs. In a two-sided market, platforms need to find balance between their relationships with business and with users.

Pi No public price setting, except: monopolies, essential infrastructures Absolute commission levels (OTA’s) Platform traffic B Hidden non-transparent prices & fees Price based on non-transparent analytics Platform market power: Sudden, one-sided changes of pricing and retroactive changes High fees/commission Parity clauses Brand hijacked by the platform

P Value proposition = reputation is key Business model = depends on reputation & balance between Business and Users, depends on network effect & economy of scale, different business models lead to different pricing Increased income from commission Adapt pricing to user expectations Use algorithms for more efficient pricing U

- Increase of consumer prices: Price fixed by platform (cap) vs price charged to user (final price), price charged to user by platform vs commission charged to user + Reduced search costs Impose Negotiate Promote Game changer - Different payment systems - Transparency of platforms brand and interface - Transparency of platform algorithms - Transparency, change of price is not the responsibility of the business

- Common API - Other actors = Rating platforms from businesses (e.g. conseil numérique)

- Alternative platforms - Open source app store


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image: session 2 price parity


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2. Price parity & Condition parity.

Executive summary: Price parity affects conditions and availability of price. Narrow parity clauses indirectly have the same effects as wide parity clauses. The main issue is that platforms impose parity clauses that are preventing businesses from diversifying and personalizing their offer outside platforms. In consequence, there is price uniformity along with a lack of quality of services provided from the business to the user. In response to this issue, several member states have already put in place laws and regulations that have not been evaluated. A question rose: should any parity clause be accepted? In a two-sided market, the platform protects the consumer, who is providing the data necessary to sustain its success but in return the platform has no enticement to care for businesses. Rather the platform puts pressure on the business by keeping control on the traffic and data generated by both the business (activity, profile and relationships) and the user. There is a clear lack of transparency from the platform but more over lack of knowledge and awareness from the user and business side to be addressed.

Pi Harmonization Divergent laws in member states = cross border issues Emergence of new platforms: limits competition between platforms Better enforcement of rules Switching platforms B Excessive intermediation of the platform: Dependency on OTA’s for most of sales Price uniformity: Competition focuses on room price rather than quality of service No link with user: Prevents personalized offers/discounts/extra services/targeting Network effect creates dependency to the platform Limits business model possibilities Pressure on reviews

P Value proposition = having the best rate Business model = need parity to compensate investment at the beginning, ensure predictability of income, avoid free-rider effects to compensate ad costs, protects from price competition from other OTA’s Increase in bargaining power: Buy meta-platforms, dominance with monopolistic price Market entry barrier for new platforms No incentive to care for business / Care for consumers

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- Increase of hotel costs - Limits competition on prices

+ Hugely protected by the platform, no contact with the business

+ Reduces search costs TRUST: Transaction delays reduced, payment guaranteed, increase of information flows Impose Negotiate Promote Game changer - Better enforcement of rules - Record on status of

- Switching platforms - Raise awareness of possibility to complain

- Change of platform interface - Blockchain, or other


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national laws (EU & global) - Portability of business data (profile, activity & relationships) - Transparency and rise of awareness of market dynamics

- Educate on bigger picture and how to circumvent the platform when banned

technology, that solves the issue of transparency of reviews

image: session 3 data access


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3. Data access (& portability)

Executive summary: For this issue, portability was put aside. Based on the survey, 12% of participants think ToC's are unfair because of limited portability but, there is insufficient knowledge on market and on evolution of business models to be able to define portability. Portability is dependent of trust mechanisms that are now inexistent. On the other hand, the definition of personal data, that it be content of business data or user data, is unclear. Also there are different types of data: meta-data, cross platform or cross medium data, aggregated data, input and output data, private versus public data… The non-clarity in the use of the word data enhances the lack of knowledge of businesses on data and the legal framework that supports them. The platform is portrayed as an intermediary that cares more for the user than for the business, its position as simple intermediary being unclear. A great number of solutions gravitate around the businesses and around the intermediaries between business and platform. It was suggested that none of the "soft" solutions would work if they don't start with imposing.

Pi First, apply standards on transparency. None of the solutions will work if you don’t start with imposing Trust mechanism Mirrors data protection Level playing field between platforms & level playing field between SME’s and platforms (data as an issue) Innovation from new actors and from businesses Robust data value chain Access to input & output data Bad targeting, vertical search, ranking Should not undermine platforms No third-party auditing B

Enhanced service = increase of data collection but, businesses lack information on users & their habits & lack knowledge on data Personal data comes with regulatory burden (need to define personal data, complex legal framework = cross border issue) No link with user = no opportunity for offering personalized services No information on advertising (content providers) Limited role of intermediaries in data Interoperability of data P

Value proposition = platform brand more important than “supplier” control over user experience, guarantee privacy from platform Business model = income from advertising, based on aggregated data, improving own business using the data (e.g. algorithms), reinforcing platform brand at the cost of business, revenue from advertising & data, target at value added insights (activity on interface) & cross medium user experience Intermediary agency roles mixed up Holds back: development of data market standards and data intermediaries Emergent platforms stay out of contractual aspects There are no user privacy friendly platforms


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U

Some like targeting others not - Users are in a complex legal framework + Given more choice through aggregated data Impose Negotiate Promote Game changer - Dispute resolution, ban ToC unfair practices - Open private data

- Platforms to adapt ToC’s

- Awareness on data through training (but which data?) - Data literacy, Business Intelligence, open source data management - Transparency measures on access & use of platforms data - 3rd party trust mechanisms - Trust marks for consumers - Personal data portability right for consumers

- Blockchain to enhance trust on use of data, voluntary measure - PSD II, payment data

- Standards on meta data & FRAND conditions


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image: session 4 limitation of payment & auxiliary services


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4. Limitation of payment possibilities & other auxiliary services

Executive summary: This session focused on the limitation of payment possibilities, but there were various auxiliary services mentioned (business assistance, multilingual support, advertising platforms, support to optimizing presence on the platform). Related to this issue, the main issues that were put forward were: 1) accessibility to payment services, 2) reliability of payment services (recurring payments, cross-border payments,

interoperability issues, payment system not compatible with all mobiles), 3) costs (increases, hidden fees, and extra costs).

Pi Innovation Social Healthy competitive market Fairness and reasonable affordability of costs

B Higher costs Access to fewer services May go against other payment /service arrangements independent of the platform Hidden fee structure, difficult to compare termination fees & increase of payment system costs that reduce competitive forces of the business Platform owned competition gets these services free/has advantage Businesses can’t use other payments systems (=dependent on platform) but, third party payment solution may threat the consumer relationship (enhances the number of places where credit card number is shared) Service provided by platform not always reliable: Interoperability issues (choosing banks, not accepting NFC’s, Cross-border limitations (inefficiency & currency limitations), not adapted to the mobile Reduces content innovation

P Value proposition = Offers security & trust to consumers, good user experience by ensuring predictability vs limitation of payments Business model = boost revenue, limit costs by not dealing with many systems Profit from payment/auxiliary service, restricts access to API Limit user costs of dealing with many services Control over user experience U - Lack of choice

- Higher costs

- Limited services

+ Security & trust of platform’s service (non-dissemination of credit card number)

+ Coherent environment: Good user interface & predictability of service Impose Negotiate Promote Game changer - Reward mechanism for trust of the consumer in the platform and coherent environment

- Access different payment solutions


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image: session 5 biased or non-transparent search practices


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5. Biased or non-transparent search practices within one platform

Executive summary: Regarding the definition of the problem: 1) the word "biased" is inherent to search practices, and 2) "non-transparent" implies vertical discrimination (active at different levels) of the platform in favor of its own services. Transparency itself may take different levels which can be misleading (e.g. amazon discriminating providers, apple discriminating Spotify & amazon). A distinction was made between search and find with particular attention given to the need for the platform to ensure search neutrality (the platform acting as a neutral and loyal service provider). Inversely solutions looked at game changers that would better target user needs while limiting choices (for example Alexa or Siri). Ratings, algorithms as well as user and business activity (relationships and visible / invisible activity on the interface) are the assets that are most involved in this issue and around which solutions emerge. Ways of diluting the power of the platform where discussed.

Pi Consumer interest Level playing field – fair competition for EU businesses Dispute resolution for lack of transparent reply when issue arises Standards to avoid discrimination Forum for discussion & common rules

B High costs to get better visibility Lose competition to platform’s own services and/or products No transparency of algorithms used by platform Discrimination from platform Ranking criteria: determine who rates and why, Interoperability, unlawful ratings, trust enhancing mechanism decentralized, User abuse in ranking against businesses Dependency on the platform P

Value proposition = provide easy access to best choices, Volume & direction of traffic Business model = Intermediary but selects business to best fir their brand Potential advantage to own services and/or products Convenience for user U

Interface dependent - No visibility on criteria, need visibility of all options

- Publishing Space: Determine window of reasonable results - Limited trust in search results

+ Options for advanced search

+ Ensuring diversity


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Impose Negotiate Promote Game changer - Choice for user of

full personalization to full randomization - Dispute resolution on lack of transparent reply when issue abuse - Access to input & output of algorithm

- Principles & Standards to avoid discrimination through reviews - Forum for discussion & common rules

- Unbundling - Industrial platforms - App streaming (hatch) - Voice tech (Alexa & Siri)


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image: session termination & unilateral ToC changes


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6. Termination & unilateral ToC changes

Executive summary: In discussion, the termination issue focused on the lack of communication with businesses and unilateral ToC changes (often connected to changes in community guidelines) were driven by the platforms' reputation and business models. It was noted that termination could also be done in more subtle way through influencing the accessibility of business to users (ranking, search). Many of the solutions revolved around improving the communication and dispute resolution mechanisms, but also putting more responsibilities on platforms.

Pi Fair balance of risk Innovation Risk of legal fragmentation Due process vs inefficient takedown process Right to stability/reliability

B Termination policy unclear: Uncertainty, when takedown platform keeps information tainted ToC change can lead to price change Danger of blocking business and its bankruptcy Receive notice but No redress possibility and limited legal options Dependent on platform (must accept all changes, including in regards of pricing) Risk for illegal/inappropriate content shifted from platform to business Not aware of potential to challenge

P Value proposition = eliminate competition (e.g. amazon marketplace banned from apple) analyze risk factors & potential vulnerabilities of apps (need to vet apps) to ensure liability for illegal Business model = care for consumer (need to fight for his rights), No incentive to attract/better treat businesses Ensure safety of platform and compliance with legal requirements Restrict competition to platform services Using power position to force higher commissions Protect brand/image in community guidelines Needs to act quickly to please consumer U - Favorite content not available

- Increase of commissions

+ Highly protected by platform + Can switch platforms

Impose Negotiate Promote Game changer - Model contract terms & penalties on ToC’s - Prior notice requirement

- Human verification after algorithm - Blacklisting practices (economic dependency rules), list of what platforms can

- Better internal resolution by ensuring human contact - Industry trust marks - Raise awareness on

- Unbundling - Transparency on commissions & other price elements - Platforms provide


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- Authority vetting general ToC

do and not do at moment of discussion - Transparency obligation: on reason & on process - Cross-border business associations anonymous redress & collective redress dedicated body

redress for businesses insurance to business (way to insert trust)

- Negotiate under threat of imposing (by acting on EU values vs US values promoted by platforms) - Independent redress mechanism

eu policy lab with dg cnct and dg grow3. reputation, ranking, rating, reviews discussed by 4/6...

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