New EU regulation for major tech companies could help small businesses

15 Mar 2018354 Views

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Google search page. Image: Jeramey Lende/Shutterstock

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The EU is expanding its plans to regulate how tech companies interact with businesses that rely on their platforms.

The European Commission (EC) is in the process of drawing up a regulation specifically targeting online platforms such as e-commerce sites, search engines and app stores.

The entities in question will need to be much more transparent about why they delist some services and why they rank search results in certain ways. 

EU curbing harmful business practices

According to a draft proposal seen by Financial Timesthe EC is seeking to address potentially harmful business practices by online platforms, as well as the dearth of effective redress schemes for smaller businesses that depend on said platforms to reach customers.

The regulation is designed to level the playing field between digital behemoths and small businesses, as the latter can often fear standing up to platforms they need for their businesses to survive.

The EC has been planning to regulate so-called “online intermediation services” to ensure they are not abusing the disproportionate level of power they hold.

While there is no solid information on how the services will be defined, Brussels officials were looking at firms such as Apple and Amazon before widening the remit to include search engines such as Google.

A need for more accountability

The general viewpoint of officials in the EU in terms of tech companies shows a strong desire for accountability, transparency and implementation of fairer rules.

This is exemplified by the recent antitrust fine levelled at Google last year for giving preferential treatment to its shopping service over competitors. Google is still appealing the fine.

The regulation laid out the case against the current practices of tech firms in the EU: “Online intermediation services can hold superior bargaining power over their business users, enabling them to behave unilaterally in a way that is capable of harming the businesses using them.”

The companies will need to provide small businesses with more information about the machinations of their ranking algorithms. As well as this, tech firms will need to offer businesses, app developers and other traders a formal complaint process if they are delisted or demoted without an explanation.

Platforms will have to implement a notice period of at least 15 days for changes to terms and conditions.

The draft stated that search engines would need to provide firms with assurances that their search ranking “is conducted in good faith” and also inform companies if they can pay to be ranked more prominently in search results.

It continued, stating that “the dependency-induced fear of retaliation of business users limits the effectiveness of any existing type of redress, whether out of court or judicial”.

The proposal is expected to be published in April and will then need to be agreed upon by national governments and the European Parliament.

Google search page. Image: Jeramey Lende/Shutterstock

Ellen Tannam is a writer covering all manner of business and tech subjects

editorial@siliconrepublic.com