A few months ago I had the opportunity to participate in some working sessions organised by the Digital Future Society (DFS) on the European Platform to Business (P2B) Regulation. The actions and recommendations that resulted from these sessions were included in the report that this organisation has recently published "Regulating relationships between platforms and businesses: How to maximise the opportunities offered by the P2B Regulation to SMEs and platforms in Spain and other countries".
The P2B Regulation came into force in July 2019 and sets out a series of rules that aim to regulate the relationships between online platforms and businesses. More specifically and as defined by the European Commission itself, it is the "first set of rules to create a fair, transparent and predictable business environment for small businesses and online platform sellers."
Today, the role of platforms in e-commerce is crucial. Among the data provided by the DFS report, it is worth noting that one million European companies use platforms to reach their customers and 82% of them rely on search engines to promote their goods and services. In addition, the top three European online retailers are third-party merchants on Amazon, Amazon itself and third-party merchants on eBay. These well-known platforms have shares up to three times higher than the next competitor.
The main explanation for this success is that the platforms offer unparalleled opportunities as gateways to new markets - such as cross-border markets - and are thus crucial for many companies' businesses. This relevance of platforms in connecting companies and potential customers around the world is of particular interest to SMEs. The study recently published by Orkestra on the Digital Economy and Society of the Basque Country, referring to the DESI 2020 index (Digital Economy and Society Index), indicates that the percentage of SMEs that carry out online commerce in this territory is 12% -a percentage that is halved if only sales abroad are considered-, which translates into a turnover of this type of sales of 5.6% of the total. In these three indicators, the results for the Basque Country are somewhat distant from those of Spain or the EU as a whole, which are higher. In a context such as the current one, in which the pandemic has led to a sudden increase in digital commerce, the use of platforms by SMEs may represent both an additional boost to their positioning in this type of market, and a fundamental element for maintaining activity in the domestic market itself.
However, as the DFS report points out, in addition to these advantages of collaboration between platforms and companies, there may be certain significant risks for the latter. Indeed, the relationship that is established is not always characterised by balance, giving rise to situations of abuse of power, especially on the part of large platforms towards SMEs. From the Commission's analysis of these relationships in 2017, it concluded that "potentially 'unfair' commercial practices were detected, ranging from unfair conduct in terms of imposing terms and conditions, inserting 'parity' clauses or promoting their own services, to refusing or modifying access conditions, all under the cover of an evident lack of transparency".
Regulation (EU) 2019/1150, which is part of Europe's Digital Single Market Strategy, aims to tackle this problem. It aims to promote fairness and transparency on the part of online intermediation services towards their commercial users. One of the central elements is that of ranking parameters, as it concerns search engines. The ranking position, which is crucial for visibility compared to competitors and therefore crucial for standing out from the crowd, is determined by algorithmic parameters. The P2B Regulation requires platforms to include a description in their terms and conditions of the main parameters that establish the prominence in which their users' goods and services appear. In addition to these ranking transparency requirements, platforms must make their policies on access and management of confidential data available to businesses.
On the other hand, companies have new options available for the resolution of conflicts that may arise in their commercial relations with these intermediaries, such as, for example, internal complaint mechanisms (mandatory only for large platforms). The figure of the external mediator is also established, with a view to facilitating out-of-court settlements.
However, not all opinions have been favourable to the P2B Regulation. Among the limitations pointed out by the DFS report are, on the one hand, those expressed by SMEs, and that is that the demand for more transparency is not enough to effectively mitigate the dominant position of the platforms. Among other reasons, they claim that the deterrents to asking platforms for explanations are still present (lack of resources, lack of specific knowledge, possible retaliation from platforms, etc.). In turn, the platforms have been reluctant to such a demand for transparency, arguing that it carries the risk of revealing details about the functioning of their algorithms, which are, to a large extent, their competitive advantage.
In line with what is stated in the report, the conclusion of all this is that, even with challenges ahead, the P2B Regulation can be seen as a first step that offers opportunities and that will be further strengthened by future regulations, such as the Digital Services Act and the Digital Markets Act, proposed in December 2020.
But the world of platforms should not lead us to think only about Amazon, Google, etc. At this point I would like to change the focus and make a brief mention of local platforms, especially those driven by the public sector or public-private partnerships. Although the scale of these platforms is by no means comparable, they have other types of advantages and their impact on the local fabric can be much more direct and immediate. Platforms, when applied at the local level (suburbs, districts, towns and cities), radically change their conception to give rise to alternative models with a marked social component. Through this formula, which combines the local and the digital, the platforms, which are closer to the users - both traders and end consumers, whose interests are not perceived as conflicting - are placed at the service of the users.
In the Basque Country we find examples such as "DendaGo!", a platform for the sale of products and services via the internet for businesses, craftsmen and producers in the Basque Country. This project emerged in 2018 under the impetus of the Euskal Dendak association and with funding from the Basque Government, with the participation of 50 businesses, which now reach almost a hundred. Other relevant initiatives are the "Eup" platform, under the support of the Provincial Council and BBK, aimed at promoting local commerce in Bizkaia and "Donostia Market Plaza", in this case with a temporary nature with the aim of helping shops and catering establishments in the city, especially affected by the pandemic.
All in all, let us bear in mind that the complexity of the digital world, caused by its transversality, its constant dynamism, the magnitude and quantity of its components or, as we have seen, the weight and influence of some of the groups of actors who lead it, does not imply that innovative digital ideas have to be thought of on a large scale. Sometimes, digital can contribute to the competitiveness and wellbeing of a territory thanks to small initiatives whose key lies precisely in giving them a local focus.
Carla Peletier, research facilitator at Orkestra, completed a Bachelor's degree in Economics at the Autonomous University of Madrid. Upon finishing her last year of study at Dauphine University in Paris, she was awarded a double degree in Applied Economics (Dauphine University). She also has a Master's degree in International Relations and Foreign Trade, ALITER International Business School.