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欧洲
Distribution through digital platforms | Main novelties
29 3 月 2023
- 分销协议
Summary
On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: “VBER”), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.
The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.
In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.
The general discipline of vertical agreements
Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.
However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.
The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.
In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called “hardcore restrictions” (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.
The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.
The innovations introduced by the new VBER to online platforms
The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.
While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).
With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 (“P2B Regulation”), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.
Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.
Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.
The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.
The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.
Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.
The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.
Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.
The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).
Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.
On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.
Impact and takeaways
The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.
The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.
Here, then, are some tips for managing contracts and relationships with online platforms:
- the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
- platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
- the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which – as we have already seen – is still an open issue.
Summary – The company that incurs into a counterfeiting of its Community design shall not start as many disputes as are the countries where the infringement has been carried out: it will be sufficient to start a lawsuit in just one court of the Union, in its capacity as Community design court, and get a judgement against a counterfeiter enforceable in different, or even all, Countries of the European Union.
Italian companies are famous all over the world thanks to their creative abilities regarding both industrial inventions and design: in fact, they often make important economic investments in order to develop innovative solutions for the products released on the market.
Such investments, however, must be effectively protected against cases of counterfeiting that, unfortunately, are widely spread and ever more realizable thanks to the new technologies such as the e-commerce. Companies must be very careful in protecting their own products, at least in the whole territory of the European Union, since counterfeiting inevitably undermines the efforts made for the research of an original product.
In this respect the content of a recent judgement issued by the Court of Milan, section specialized in business matters, No. 2420/2020, appears very significant since it shows that it is possible and necessary, in case of counterfeiting (in this case the matter is the counterfeiting of a Community design) to promptly take a legal action, that is to start a lawsuit to the competent Court specialized in business matters.
The Court, by virtue of the EU Regulation No. 6/2002, will issue an order (an urgent and protective remedy ante causam or a judgement at the end of the case) effective in the whole European territory so preventing any extra UE counterfeiter from marketing, promoting and advertising a counterfeited product.
The Court of Milan, in this specific case, had to solve a dispute aroused between an Italian company producing a digital flowmeter, being the subject of a Community registration, and a competitor based in Hong Kong. The Italian company alleged that the latter had put on the European market some flow meters in infringement of a Community design held by the first.
First of all, the panel of judges effected a comparison between the Community design held by the Italian company (plaintiff) and the flow meter manufactured and distributed by the Hong Kong company (defendant). The judges noticed that the latter actually coincided both for dimensions and proportions with the first so that even an expert in the field (the so-called informed user) could mistake the product of the defendant company with that of the plaintiff company owner of the Community design.
The Court of Milan, in its capacity as Community designs court, after ascertaining the counterfeiting, in the whole European territory, carried out by the defendant at the expense of the plaintiff, with judgement No. 2420/2020 prohibited, by virtue of articles 82, 83 and 89 of the EU Regulation No. 6/2002, the Hong Kong company to publicize, offer for sale, import and market, by any means and methods, throughout the European Union, even through third parties, the flow meter subject to the present judgement, with any name if presenting similar characteristics.
The importance of this judgement lies in its effects spread all over the territory of the European Union. This is not a small thing since the company that incurs into a counterfeiting of its Community design shall not start as many disputes as are the countries where the infringement has been carried out: it will be sufficient for this company to start a lawsuit in just one court of the Union, in its capacity as Community design court, and get a judgement against a counterfactor who makes an illicit in different, or even all, Countries of the European Union.
Said judgement will be even more effective if we consider that, by virtue of the UE Customs Regulation No. 608/2013, the company will be able to communicate the existence of a counterfeited product to the customs of the whole European territory (through a single request filed with the customs with the territorial jurisdiction) in order to have said products blocked and, in case, destroyed.
Summary: Since 12 July 2020, new rules apply for platform service providers and search engine operators – irrespective of whether they are established in the EU or not. The transition period has run out. This article provides checklists for platform service providers and search engine operators on how to adapt their services to the Regulation (EU) 2019/1150 on the promotion of fairness and transparency for commercial users of online intermediation services – the P2B Regulation.
The P2B Regulation applies to platform service providers and search engine operators, wherever established, provided only two conditions are met:
(i) the commercial users (for online intermediation services) or the users with a company website (for online search engines) are established in the EU; and
(ii) the users offer their goods/services to consumers located in the EU for at least part of the transaction.
Accordingly, there is a need for adaption for:
- Online intermediation services, e.g. online marketplaces, app stores, hotel and other travel booking portals, social media, and
- Online search engines.
The P2B Regulation applies to platforms in the P2B2C business in the following constellation (i.e. pure B2B platforms are exempt):
Provider -> Business -> Consumer
The article follows up on the introduction to the P2B Regulation here and the detailed analysis of mediation as method of dispute resolution here.
Checklist how to adapt the general terms and conditions of platform services
Online intermediation services must adapt their general terms and conditions – defined as (i) conditions / provisions that regulate the contractual relationship between the provider of online intermediation services and their business users and (ii) are unilaterally determined by the provider of online intermediation services.
The checklist shows the new main requirements to be observed in the general terms and conditions (“GTC”):
- Draft them in plain and intelligible language (Article 3.1 a)
- Make them easily available at any time (also before conclusion of contract) (Article 3.1 b)
- Inform on reasons for suspension / termination (Article 3.1 c)
- Inform on additional sales channels or partner programs (Article 3.1 d)
- Inform on the effects of the GTC on the IP rights of users (Article 3.1 e)
- Inform on (any!) changes to the GTC on a durable medium, user has the right of termination (Article 3.2)
- Inform on main parameters and relative importance in the ranking (incl. possible influence of remuneration), without algorithms or business secrets (Article 5.1, 5.3, 5.5)
- Inform on the type of any ancillary goods/services offered and any entitlement/condition that users offer their own goods/services (Article 6)
- Inform on possible differentiated treatment of goods / services of the provider or individual users towards other users (Article 7.1, 7.2, 7.3)
- No retroactive changes to the GTC (Article 8a)
- Inform on conditions under which users can terminate contract (Article 8b)
- Inform on available or non-available technical and contractual access to information that the Service maintains after contract termination (Article 8c)
- Inform on technical and contractual access or lack thereof for users to any data made available or generated by them or by consumers during the use of services (Article 9)
- Inform on reasons for possible restrictions on users to offer their goods/services elsewhere under other conditions (“best price clause”); reasons must also be made easily available to the public (Article 10)
- Inform on access to the internal complaint-handling system (Article 11.3)
- Indicate at least two mediators for any out-of-court settlement of disputes (Article 12)
These requirements – apart from the clear, understandable language of the GTC, their availability and the fundamental ineffectiveness of retroactive adjustments to the GTC – clearly go beyond what e.g. the already strict German law on general terms and conditions requires.
Checklist how to adapt the design of platform services and search engines
In addition, online intermediation services and online search engines must adapt their design and, among other things, introduce internal complaint-handling. The checklist shows the main design requirements for:
a) Online intermediation services
- Make identity of commercial user clearly visible (Article 3.5)
- State reasons for suspension / limitation / termination of services (Article 4.1, 4.2)
- Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3), see above
- Set an internal complaint handling system, with publicly available info, annual updates (Article 11, 4.3)
b) Online search engines
- Explain the ranking’s main parameters and their relative importance, public, easily available, always up to date (incl. possible influence of remuneration), without algorithms or trade secrets (Article 5.2, 5.3, 5.5)
- If ranking changes or delistings occur due to notification by third parties: offer to inspect such notification (Article 5.4)
- Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3)
The European Commission will provide guidelines regarding the ranking rules in Article 5, as announced in the P2B Regulation – see the overview here. At the same time, providers of online intermediation services and online search engines shall draw up codes of conduct together with their users.
Practical Tips
- The Regulation significantly affects contractual freedom as it obliges platform services to adapt their general terms and conditions.
- The Regulation is to be enforced by “representative organisations” or associations and public bodies, with the EU Member States ensuring adequate and effective enforcement. The European Commission will monitor the impact of the Regulation in practice and evaluate it for the first time on 13.01.2022 (and every three years thereafter).
- The P2B Regulation may affect distribution relationships, in particular platforms as distribution intermediaries. Under German distribution law, platforms and other Internet intermediation services acting as authorised distributors may be entitled to a goodwill indemnity at termination (details here) if they disclose their distribution channels on the basis of corresponding platform general terms and conditions, as the Regulation does not require, but at least allows to do (see also: Rohrßen, ZVertriebsR 2019, 341, 344–346). In addition, there are numerous overlaps with antitrust, competition and data protection law.
In these times of insecurity about the future, we have nevertheless some certitudes. One of them, no doubt about it, is that “online intermediation services are key enablers of entrepreneurship and new business models”. EU Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services is dealing with it. This Regulation shall apply from 12 July 2020.
The purpose of this Regulation is laying down rules to ensure that business users of online intermediation services and corporate website users are granted appropriate transparency, fairness and effective redress possibilities (art. 1). It applies to online intermediation services and online search engines provided to business users and corporate website users having their place of establishment UE and offering goods or services to consumers in the Union, irrespective of the place of establishment of the providers and the applicable law.
The rules shall apply, particularly, to online marketplaces, social media outlets, application distribution platforms, platforms for the collaborative economy and general search engines.
What I would like to underline in this post is that the Regulation foresees (art. 12) the use of mediation as a specific method of conflict resolution between online intermediation service providers and professional users. Mediation is promoted without prejudice to its voluntariness and the right to judicial claim.
In particular, the providers of the intermediation services shall identify in their general terms and conditions, two or more mediators with whom they are willing to engage to attempt to reach —in good faith— an agreement with business users on the settlement, out of court, of any disputes between the provider and the business user. Only service providers that are small companies would be exempted from assuming this obligation, without prejudice to being able to do so voluntarily.
The Regulation also contains the requirements these mediators must meet: some general ones (independence, with affordable services, act without delay, easily accessible) and others more specific or that will need special qualification (ability to mediate in the language of the general conditions and who have sufficient knowledge of intra-company trade relations).
It is also interesting to notice that the service providers shall bear a reasonable proportion of the total costs of mediation in each individual case, according to the indications of the mediator and to some criteria such as relative merits of the claims of the parties, their conduct, as well as the size and their financial strength.
The conclusion seems clear: Mediation, as an alternative to court or arbitral dispute resolution, is increasing its space in the EU regulations. It is always a voluntary way to solve conflicts, and it is worth considering its effectiveness in all business areas. This Regulation is expressly considering it.
Summary – What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform? This issue was addressed in the judgment of C-567/18 of 2 April 2020, in which the Court of Justice of the European Union confirmed that platforms (Amazon Marketplace, in this case) storing goods which infringe trademark rights are not liable for such infringement, unless the platform puts them on the market or is aware of the infringement. Conversely, platforms (such as Amazon Retail) that contribute to the distribution or resell the products themselves may be liable.
Background
Coty – a German company, distributor of perfumes, holding a licence for the EU trademark “Davidoff” – noted that third-party sellers were offering on Amazon Marketplace perfumes bearing the “Davidoff Hot Water” brand, which had been put in the EU market without its consent.
After reaching an agreement with one of the sellers, Coty sued Amazon in order to prevent it from storing and shipping those perfumes unless they were placed on the EU market with Coty’s consent. Both the Court of First Instance and the Court of Appeal rejected Coty’s request, which brought an appeal before the German Court of Cassation, which in turn referred the matter to the Court of Justice of the EU.
What is the Exhaustion of the rights conferred by a trademark
The principle of exhaustion is envisaged by EU law, according to which, once a good is put on the EU market, the proprietor of the trademark right on that specific good can no longer limit its use by third parties.
This principle is effective only if the entry of the good (the reference is to the individual product) on the market is done directly by the right holder, or with its consent (e.g. through an operator holding a licence).
On the contrary, if the goods are placed on the market by third parties without the consent of the proprietor, the latter may – by exercising the trademark rights established by art. 9, par. 3 of EU Regulation 2017/1001 – prohibit the use of the trademark for the marketing of the products.
By the legal proceedings which ended before the Court of Justice of the EU, Coty sought to enforce that right also against Amazon, considering it to be a user of the trademark, and therefore liable for its infringement.
What is the role of Amazon?
The solution of the case revolves around the role of the web platform.
Although Amazon provides users with a unique search engine, it hosts two radically different sales channels. Through the Amazon Retail channel, the customer buys products directly from the Amazon company, which operates as a reseller of products previously purchased from third party suppliers.
The Amazon Marketplace, on the other hand, displays products owned by third-party vendors, so purchase agreements are concluded between the end customer and the vendor. Amazon gets a commission on these transactions, while the vendor assumes the responsibility for the sale and can manage the prices of the products independently.
According to the German courts which rejected Coty’s claims in the first and second instance, Amazon Marketplace essentially acts as a depository, without offering the goods for sale or putting them on the market.
Coty, vice versa, argues that Amazon Marketplace, by offering various marketing-services (including: communication with potential customers in order to sell the products; provision of the platform through which customers conclude the contract; and consistent promotion of the products, both on its website and through advertisements on Google), can be considered as a “user” of the trademark, within the meaning of Article 9, paragraph 3 of EU Regulation 2017/1001.
The decision of the Court of Justice of the European Union
Advocate General Campos Sanchez-Bordona, in the opinion delivered on 28 November 2019, had suggested to the Court to distinguish between: the mere depositaries of the goods, not to be considered as “users” of the trademark for the purposes of EU Regulation 2017/1001; and those who – in addition to providing the deposit service – actively participate in the distribution of the goods. These latter, in the light of art. 9, par. 3, letter b) of EU Regulation 2017/1001, should be considered as “users” of the trademark, and therefore directly responsible in case of infringements.
The Bundesgerichtshof (Federal Court of Justice of Germany), however, had already partially answered the question when it referred the matter to the European Court, stating that Amazon Marketplace “merely stored the goods concerned, without offering them for sale or putting them on the market”, both operations carried out solely by the vendor.
The EU Court of Justice ruled the case on the basis of some precedents, in which it had already stated that:
- The expression “using” involves at the very least, the use of the sign in the commercial communication. A person may thus allow its clients to use signs which are identical or similar to trademarks without itself using those signs (see Google vs Louis Vuitton, Joined Cases C-236/08 to C-238/08, par. 56).
- With regard to e-commerce platforms, the use of the sign identical or similar to a trademark is made by the sellers, and not by the platform operator (see L’Oréal vs eBay, C‑324/09, par. 103).
- The service provider who simply performs a technical part of the production process cannot be qualified as a “user” of any signs on the final products. (see Frisdranken vs Red Bull, C‑119/10, par. 30. Frisdranken is an undertaking whose main activity is filling cans, supplied by a third party, already bearing signs similar to Redbull’s registered trademarks).
On the basis of that case-law and the qualification of Amazon Marketplace provided by the referring court, the European Court has ruled that a company which, on behalf of a third party, stores goods which infringe trademark rights, if it is not aware of that infringement and does not offer them for sale or place them on the market, is not making “use” of the trademark and, therefore, is not liable to the proprietor of the rights to that trademark.
Conclusion
After Coty had previously been the subject of a historic ruling on the matter (C-230/16 – link to the Legalmondo previous post), in this case the Court of Justice decision confirmed the status quo, but left the door open for change in the near future.
A few considerations on the judgement, before some practical tips:
- The Court did not define in positive terms the criteria for assessing whether an online platform performs sufficient activity to be considered as a user of the sign (and therefore liable for any infringement of the registered trademark). This choice is probably dictated by the fact that the criteria laid down could have been applied (including to the various companies belonging to the Amazon group) in a non-homogeneous manner by the various Member States’ national courts, thus jeopardising the uniform application of European law.
- If the Court of Justice had decided the case the other way around, the ruling would have had a disruptive impact not only on Amazon’s Marketplace, but on all online operators, because it would have made them directly responsible for infringements of IP rights by third parties.
- If the perfumes in question had been sold through Amazon Retail, there would have been no doubt about Amazon’s responsibility: through this channel, sales are concluded directly between Amazon and the end customer.
- The Court has not considered whether: (i) Amazon could be held indirectly liable within the meaning of Article 14(1) of EU Directive 2000/31, as a “host” which – although aware of the illegal activity – did not prevent it; (ii) under Article 11 of EU Directive 2004/48, Coty could have acted against Amazon as an intermediary whose services are used by third parties to infringe its IP right. Therefore, it cannot be excluded that Amazon may be held (indirectly) liable for the infringements committed, including on the Marketplace: this aspect will have to be examined in detail on a case-by-case basis.
Practical tips
What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform?
- Gather as much evidence as possible of the infringement in progress: the proof of the infringement is one of the most problematic aspects of IP litigation.
- Contact a specialized lawyer to send a cease-and-desist letter to the unauthorized seller, ordering the removal of the products from the platform and asking the compensation for damages suffered.
- If the products are not removed from the marketplace, the trademark owner might take legal action to obtain the removal of the products and compensation for damages.
- In light of the judgment in question, the online platforms not playing an active role in the resale of goods remain not directly responsible for IP violations. Nevertheless, it is suggested to consider sending the cease-and-desist letter to them as well, in order to put more pressure on the unauthorised seller.
- The sending of the cease-and-desist letter also to the platform – especially in the event of several infringements – may also be useful to demonstrate its (indirect) liability for lack of vigilance, as seen in point 4) of the above list.
The concept of privacy by design has been around for a few decades. Although it has been referred to in studies since the 1970s and present in legislation since as far as the early 1990s, it was consolidated only in 2009 with the work of Ann Cavoukian, the Information & Privacy Commissioner of Ontario, Canada
This author defined the seven foundational principles of privacy by design: (i) to be proactive not reactive, preventative not remedial; (ii) privacy as the default setting; (iii) privacy embedded into design; (iv) full functionality – positive-sum, not zero-sum; (v) end-to-end security – full lifecycle protection; (vi) visibility and transparency – keep it open; and (vii) respect for user privacy – keep it user-centric.
After being adopted as a privacy standard by the International Data Protection and Privacy Commissioners in 2010, privacy by design was also included in the General Data Protection Regulation (GDPR – Regulation (EU) 2016/679 of the European Parliament and of the Council, of 27 April 2016). However, in the GDPR (article 25) it no longer remains as a mere principle. Instead, it has become a mandatory legal obligation and failure to comply can lead to severe administrative fines (article 83/4/a).
Regarding privacy by design, the GDPR establishes that the data controller shall implement the appropriate technical and organisational measures designed to implement data protection principles in an effective manner and to integrate the necessary safeguards into the processing. The appropriate technical and organisational measures are to be determined taking into account (i) the nature, scope, context and purpose of processing, (ii) the risks for rights and freedoms, (iii) the state of the art, and (iv) the cost of implementation.
Regarding privacy by default, the GDPR establishes that the controller shall implement the appropriate technical and organisational measures to ensure that, by default, (i) only the necessary data is processed, (ii) only to the necessary extent of processing, (iii) is only accessible by the necessary individuals, and (iv) is only stored by the necessary period of time.
Both privacy by design and privacy by default are established around the idea of the implementation of the appropriate technical and organisational measures to safeguard the personal data protection principles and rules. The GDPR provides some examples of these measures (such as pseudonymisation, encryption, anonymisation), but it is not a catalogue for these measures or other privacy enhancing technologies (PET) and the provided examples should not be seen as mandatory measures.
Clear guidance on privacy by design and by default is not to be found in the GDPR and it is a work in progress by all the community and parties involved. But the GDPR has the clear intention of impacting the core of the digital age system, reshaping its values regarding privacy.
The success of this ambition is uncertain, but some important challenges are already very clear, such as the role of the producers of products, services and applications, the integration of data protection principles in the design of User Experience (UX) and User Interface (UI) and also in the software development planning (agile and scrum, for instance).
In the meantime, examples of the real impact of privacy by design and by default are coming to light. In 2018, Valve changed the privacy settings of the users of the gaming platform Steam, making games owned private by default. As a direct consequence, the analytics activity provided by SteamSpy and other similar companies was severely damaged.
Privacy by design certainly is, for those closely involved in the design process of products, services and applications, one of the most interesting and challenging topics in personal data protection.
On February 14, 2019, the European Commission proudly announced in a press release that the night before, the European Parliament, the Council of the European Union and the European Commission reached a political deal on the first-ever rules aimed at creating a fair, transparent and predictable business environment for businesses and traders when using online platforms.
The new Regulation is part of the strategic plan of the European authorities to establish a digital single market and has its origin in the Commission Communication on Online Platforms of May 2016. As a result, in April 2018 the Commission presented the proposal of a new regulation.
The new rules will apply to companies such as Google AdSense, DoubleClick , eBay and Amazon Marketplace, Google and Bing Search , Facebook and YouTube, Google Play and App Store, Facebook Messenger, PayPal, Zalando and Uber.
After having conducted a series of studies, workshops and a large public consultation, the European Commission explained in its 2016 Communication the importance of creating in Europe a favorable environment for the development of new online platforms. Indeed, the statistics are very disappointing: only 4% of the world’s market capitalization is represented by online platforms created in Europe. The champions in the field are the United States and Asia.
On the basis of this observation, the Commission has drawn up a list of challenges for the European lawmaker as follows:
- Ensuring a level playing field for comparable digital services
- Ensuring that online platforms act responsibly
- Fostering trust, transparency and ensuring fairness
- Keeping markets open and non-discriminatory to foster a data-driven economy
- Safeguarding a fair and innovation-friendly business environment
2 years after the Communication of the Commission, the new Regulation was born.
First of all, what are the conditions for the application of the regulation?
- companies using online platforms must have their place of establishment or residence in the European Union and
- goods or services must be offered to consumers in the Union.
(the place of establishment or residence of the providers of these services is not relevant to the application of the Regulation).
A strengthened obligation of transparency
The Regulation makes online platforms subject to transparency by obliging them to ensure that their terms and conditions:
- are drafted in a clear and unambiguous manner;
- are easily available for business users at all stages of their commercial relationship with the provider of online intermediation services, including in the pre-contractual stage;
- set out the objective grounds for decisions to suspend or terminate, in whole or in part, the provision of their online intermediation services to business users.
Ranking
Online platforms will have to indicate in their terms and conditions the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters
Where those main parameters include the possibility to influence ranking against any direct or indirect remuneration paid by business users to the provider of online intermediation services concerned, that online platform shall also include in its terms and conditions a description of those possibilities and of the effects of such remuneration on ranking.
Differentiated treatment of goods or services
The online platform shall also include in their terms and conditions a description of any differential treatment they give on the one hand in relation to goods and services offered to consumers through these online intermediation services, either by the supplier himself or by any user enterprise controlled by that supplier and, secondly, in relation to other business users.
Access to data
The platforms will have to establish a description of the technical and contractual access, or lack of such access for business users, to any personal data or other data, or both, that user companies or the consumers transmit for the use of the online intermediation services concerned or which are generated through the provision of those services.
Prohibition of certain unfair practices
Prohibition of modification of the terms and conditions without notice
Any proposed amendment of terms and conditions shall be notified to users and the notice period shall be at least 15 days from the date on which the online platform notifies the business users concerned about the envisaged modifications.
Prohibition of suspension or termination without cause
Under Article 4 of the Regulation when intermediation service provider decides to suspend or terminate, in whole or in part, providing its services to a given user company, it shall provide the business user without undue delay, with the motivation for such a decision.
New avenues for dispute resolution
Internal complaint-handling system
Providers of online intermediation services will have to provide an internal complaint handling the complaints from user companies.
Mediation
The platforms shall identify in their terms and conditions one or more mediators with which they are willing to engage to attempt to reach an agreement with business users on the settlement, out of court, of any disputes between the provider and the business user arising in relation to the provision of the online intermediation services concerned, including complaints that could not be resolved by means of the internal complaint-handling system.
The Regulation specifies the conditions that mediators shall met in order to be able to carry out their mission.
Judicial proceedings by representative organizations or associations and by public bodies
Organisations and associations which have a legitimate interest in representing user undertakings or entities using a corporate website, as well as public bodies established in the Member States, shall have the right to bring an action before the national courts in the Union, in accordance with the rules of the law of the Member State in which the action is brought, with a view to putting an end to or prohibiting any infringement, by providers of online intermediation services or on-line search engines.
Coming into force
As it is announced by The European Commission, the new rules will apply 12 months after its adoption and publication, and will be subject to review within 18 months thereafter, in order to ensure that they keep pace with the rapidly developing market. The EU has also set up a dedicated Online Platform Observatory to monitor the evolution of the market and the effective implementation of the rules.
Online platforms regardless of your size, start drafting your new terms and conditions!
Franchisors may run ad campaigns with low prices. Such campaigns, however, can come costly if they have an anticompetitive effect, especially if they factually force the franchisees to offer the products for the low prices.
Best example: pricing campaigns for the “burger of the week”, as decided by the Munich Regional Court in its decision of 26 October 2018 (Case No. 37 O 10335/15).
The situation
The plaintiffs are franchisees of the defendant’s franchise network, a restaurant chain. In addition to the obligation to pay “royalties” in return for the use of the franchise systems and its trade marks (5%), the franchise agreements also obliged the franchisees to pay a sales-related advertising fee. The defendant and franchisor used the advertising fees of the franchisees, among others, to advertise products from the plaintiffs’ menu at low prices, e.g. under the slogan “King of the Month“. By participating in the advertising campaigns and its low prices, the sales of the franchisees increased and thus the franchise fee they had to pay. After some time, the franchisees decided that this advertising campaign caused them financial damage – because the products offered for a low price affected the sale of products offered at a normal price (“cannibalism effect”). They no longer participated in the campaign and demanded an appropriate reduction of their advertising fee. Among other things, they brought an action for an injunction against the use of the advertising fee for the campaign complained of and for a declaratory judgment of the liability to pay damages. The Regional Court granted both motions.
The main reason. The advertising campaigns had the effect of restricting competition, namely the franchisees’ ability to determine their sale prices (contrary to sec. 1 and 2 (2) German Act against Restraints of Competition and Art. 2 (1), Art. 4 a) Vertical Block Exemption Regulation). After all, the franchisor set – so the court – the resale price through the de facto binding effect of the ad campaign.
The decision stands in line with the previous case law, especially of the German Federal Court’s decisions on low-price campaigns by franchisors of
- self-drive rental vehicles (“Sixt ./. Budget”, 02.02.1999, Case No. KZR 11/97, para.30),
- pet food (“Fressnapf”, 04.02.2016, Case No. I ZR 194/14, para. 14), and
- glasses within a dual distribution system where the franchisor sold the products through its own branches and through franchisees without differentiating between branch and franchise operations (“Apollo Optik”, 20.05.2003, Case No. KZR 27/02, para. 37).
Practical tips
- Obligations that are essential for running the franchise system do not restrict competition for the purposes of the EU antitrust rules (similar to the US law’s “ancillary restraints doctrine”). In particular, the following restrictions are typically indispensable components of a functioning franchise agreement:
- Restrictions of the transfer of know-how;
- Non-compete obligations (during and after the term of the agreement), prohibiting the franchisee from opening a shop of the same or similar nature in an area where he may compete with other members of the franchise network;
- Obligations of the franchisee not to transfer his shop without the franchisor’s prior approval.
(cf. EU Court of Justice, 28.01.1986, Case “Pronuptia”, Case No. 161/84 para. 16. 17).
- However, franchise systems are not per se exempted from the prohibition of restricting competition. Therefore, watch out to comply with the EU antitrust rules to avoid painful fines and ensure that the franchise agreement can be enforced.
- The prohibition of price-fixing (or Resale Price Maintenance) applies to the relationship between franchisor and franchisee if the franchisee bears the economic risk of its enterprise. To avoid that an ad campaign with recommended resale prices constitutes an anticompetitive price-fixing, the concrete situation needs to be assessed thoroughly. What helps to avoid also any factual binding effect:
- Add a clarifying note: “Only at participating restaurants in … . As long as stocks last.”
- Ensure that such note is clearly visible, e.g. by adding an asterisk “*” to the price.
- Avoid any measures that could be interpreted as pressure or incentive for the franchisees and which would turn the recommended price into a fixed price (e.g. because other pricing would otherwise lead to negative evaluations).
- Such ad campaigns may work, as a UK court’s decision shows: According to the BBC, Burger King franchisees sued the franchisor in 2009 “because a corporate promotion required franchisees to sell a double cheeseburger for $1 that cost a $1.10 to make. The court ruled for Burger King.” Under the above circumstances and also for short-term promotions, franchisors may even impose the resale price – such campaigns just need to be well prepared.
- For an overview on resale price maintenance, see the Legalmondo article Resale Price Maintenance and Exceptions for short-term promotions.
- Resale Price Maintenance can come costly – in 2018, the European Commission imposed fines of EUR 111 million in total on four consumer electronics manufacturers – Asus, Denon & Marantz, Philips and Pioneer – for fixing online resale prices (cf. the Press release of 24 July2018).
阿根廷 
巴西 
意大利 
乌拉圭 
德国 
西班牙 
法国 
写信给 Giuliano
The Protection of Community Design in the European Union
17 9 月 2020
-
欧洲
- 知识产权
- 诉讼
Summary
On 1 June 2022, Regulation EU n. 720/2022, i.e.: the new Vertical Block Exemption Regulation (hereinafter: “VBER”), replaced the previous version (Regulation EU n. 330/2010), expired on 31 May 2022.
The new VBER and the new vertical guidelines (hereinafter: “Guidelines”) have received the main evidence gathered during the lifetime of the previous VBER and contain some relevant provisions affecting the discipline of all B2B agreements among businesses operating at different levels of the supply chain.
In this article, we will focus on the impact of the new VBER on sales through digital platforms, listing the main novelties impacting distribution chains, including a platform for marketing products/services.
The general discipline of vertical agreements
Article 101(1) of the Treaty on the Functioning of the European Union (“TFEU”) prohibits all agreements that prevent, restrict, or distort competition within the EU market, listing the main types, e.g.: price fixing; market partitioning; limitations on production/development/investment; unfair terms, etc.
However, Article 101(3) TFEU exempts from such restrictions the agreements that contribute to improving the EU market, to be identified in a special category Regulation.
The VBER establishes the category of vertical agreements (i.e., agreements between businesses operating at different levels of the supply chain), determining which of these agreements are exempted from Article 101(1) TFEU prohibition.
In short, vertical agreements are presumed to be exempted (and therefore valid) if they do not contain so-called “hardcore restrictions” (i.e., severe restrictions of competition, such as an absolute ban on sales in a territory or the manufacturer’s determination of the distributor’s resale price) and if neither party’s market share exceeds 30%.
The exempted agreements benefit from what has been termed the “safe harbour” of the VBER. In contrast, the others will be subject to the general prohibition of Article 101(1) TFEU unless they can benefit from an individual exemption under Article 101(3) TFUE.
The innovations introduced by the new VBER to online platforms
The first relevant aspect concerns the classification of the platforms, as the European Commission excluded that the online platform generally meets the conditions to be categorized as agency agreements.
While there have never been doubts concerning platforms that operate by purchasing and reselling products (classic example: Amazon Retail), some have arisen concerning those platforms that merely promote the products of third parties without carrying out the activity of resale (classic example: Amazon Marketplace).
With this statement, the European Commission wanted to clear the field of doubt, making explicit that intermediation service providers (such as online platforms) qualify as suppliers (as opposed to commercial agents) under the VBER. This reflects the approach of Regulation (EU) 2019/1150 (“P2B Regulation”), which has, for the first time, dictated a specific discipline for digital platforms. It provided for a set of rules to create a “fair, transparent, and predictable environment” for smaller businesses and customers” and for the rationale of the Digital Markets Act, banning certain practices used by large platforms acting as “gatekeepers”.
Therefore, all contracts concluded between manufacturers and platforms (defined as ‘providers of online intermediation services’) are subject to all the restrictions imposed by the VBER. These include the price, the territories to which or the customers to whom the intermediated goods or services may be sold, or the restrictions relating to online advertising and selling.
Thus, to give an example, the operator of a platform may not impose a fixed or minimum sale price for a transaction promoted through the platform.
The second most impactful aspect concerns hybrid platforms, i.e., competing in the relevant market to sell intermediated goods or services. Amazon is the most well-known example, as it is a provider of intermediation services (“Amazon Marketplace”), and – at the same time – it distributes the products of those parties (“Amazon Retail”). We have previously explored the distinction between those 2 business models (and the consequences in terms of intellectual property infringement) here.
The new VBER explicitly does not apply to hybrid platforms. Therefore, the agreements concluded among such platforms and manufacturers are subject to the limitations of the TFEU, as such providers may have the incentive to favour their sales and the ability to influence the outcome of competition between undertakings that use their online intermediation services.
Those agreements must be assessed individually under Article 101 of the TFEU, as they do not necessarily restrict competition within the meaning of TFEU, or they may fulfil the conditions of an individual exemption under Article 101(3) TFUE.
The third very relevant aspect concerns the parity obligations (also referred to as Most Favoured Nation Clauses, or MFNs), i.e., the contract provisions in which a seller (directly or indirectly) agrees to give the buyer the best terms it makes available to any other buyer.
Indeed, platforms’ contractual terms often contain parity obligation clauses to prevent users from offering their products/services at lower prices or on better conditions on their websites or other platforms.
The new VBER deals explicitly with parity clauses, making a distinction between clauses whose purpose is to prohibit users of a platform from selling goods or services on more favourable terms through competing platforms (so-called “wide parity clauses”), and clauses that prohibit sales on more favourable terms only in respect of channels operated directly by the users (so-called “narrow parity clauses”).
Wide parity clauses do not benefit from the VBER exemption; therefore, such obligations must be assessed individually under Article 101(3) TFEU.
On the other hand, narrow parity clauses continue to benefit from the exemption already granted by the old VBER if they do not exceed the threshold of 30% of the relevant market share set out in Article 3 of the new VBER. However, the new Guidelines warn against using overly narrow parity obligations by online platforms covering a significant share of users, stating that if there is no evidence of pro-competitive effects, the benefit of the block exemption is likely to be withdrawn.
Impact and takeaways
The new VBER entered into force on 1 June 2022 and is already applicable to agreements signed after that date. Agreements already in force on 31 May 2022 that satisfy the conditions for exemption under the current VBER but do not satisfy the requirements under the new VBER shall benefit from a one-year transitional period.
The new regime will be the playing field for all platform-driven sales over the next 12 years (the regulation expires on 31 May 2034). Currently, the rather restrictive novelties on hybrid platforms and parity obligations will likely necessitate substantial revisions to existing trade agreements.
Here, then, are some tips for managing contracts and relationships with online platforms:
- the new VBER is the right opportunity to review the existing distribution networks. The revision will have to consider not only the new regulatory limits (e.g., the ban on wide parity clauses) but also the new discipline reserved for hybrid platforms and dual distribution to coordinate the different distribution channels as efficiently as possible, by the stakes set by the new VBER and the Guidelines;
- platforms are likely to play an even greater role during the next decade; it is, therefore, essential to consider these sales channels from the outset, coordinating them with the other existing ones (retail, direct sales, distributors, etc.) to avoid jeopardizing the marketing of products or services;
- the European legislator’s attention toward platforms is growing. Looking up from the VBER, one should not forget that they are subject to a multitude of other European regulations, which are gradually regulating the sector and which must be considered when concluding contracts with platforms. The reference is not only to the recent Digital Market Act and P2B Regulation but also to the protection of IP rights on platforms, which – as we have already seen – is still an open issue.
Summary – The company that incurs into a counterfeiting of its Community design shall not start as many disputes as are the countries where the infringement has been carried out: it will be sufficient to start a lawsuit in just one court of the Union, in its capacity as Community design court, and get a judgement against a counterfeiter enforceable in different, or even all, Countries of the European Union.
Italian companies are famous all over the world thanks to their creative abilities regarding both industrial inventions and design: in fact, they often make important economic investments in order to develop innovative solutions for the products released on the market.
Such investments, however, must be effectively protected against cases of counterfeiting that, unfortunately, are widely spread and ever more realizable thanks to the new technologies such as the e-commerce. Companies must be very careful in protecting their own products, at least in the whole territory of the European Union, since counterfeiting inevitably undermines the efforts made for the research of an original product.
In this respect the content of a recent judgement issued by the Court of Milan, section specialized in business matters, No. 2420/2020, appears very significant since it shows that it is possible and necessary, in case of counterfeiting (in this case the matter is the counterfeiting of a Community design) to promptly take a legal action, that is to start a lawsuit to the competent Court specialized in business matters.
The Court, by virtue of the EU Regulation No. 6/2002, will issue an order (an urgent and protective remedy ante causam or a judgement at the end of the case) effective in the whole European territory so preventing any extra UE counterfeiter from marketing, promoting and advertising a counterfeited product.
The Court of Milan, in this specific case, had to solve a dispute aroused between an Italian company producing a digital flowmeter, being the subject of a Community registration, and a competitor based in Hong Kong. The Italian company alleged that the latter had put on the European market some flow meters in infringement of a Community design held by the first.
First of all, the panel of judges effected a comparison between the Community design held by the Italian company (plaintiff) and the flow meter manufactured and distributed by the Hong Kong company (defendant). The judges noticed that the latter actually coincided both for dimensions and proportions with the first so that even an expert in the field (the so-called informed user) could mistake the product of the defendant company with that of the plaintiff company owner of the Community design.
The Court of Milan, in its capacity as Community designs court, after ascertaining the counterfeiting, in the whole European territory, carried out by the defendant at the expense of the plaintiff, with judgement No. 2420/2020 prohibited, by virtue of articles 82, 83 and 89 of the EU Regulation No. 6/2002, the Hong Kong company to publicize, offer for sale, import and market, by any means and methods, throughout the European Union, even through third parties, the flow meter subject to the present judgement, with any name if presenting similar characteristics.
The importance of this judgement lies in its effects spread all over the territory of the European Union. This is not a small thing since the company that incurs into a counterfeiting of its Community design shall not start as many disputes as are the countries where the infringement has been carried out: it will be sufficient for this company to start a lawsuit in just one court of the Union, in its capacity as Community design court, and get a judgement against a counterfactor who makes an illicit in different, or even all, Countries of the European Union.
Said judgement will be even more effective if we consider that, by virtue of the UE Customs Regulation No. 608/2013, the company will be able to communicate the existence of a counterfeited product to the customs of the whole European territory (through a single request filed with the customs with the territorial jurisdiction) in order to have said products blocked and, in case, destroyed.
Summary: Since 12 July 2020, new rules apply for platform service providers and search engine operators – irrespective of whether they are established in the EU or not. The transition period has run out. This article provides checklists for platform service providers and search engine operators on how to adapt their services to the Regulation (EU) 2019/1150 on the promotion of fairness and transparency for commercial users of online intermediation services – the P2B Regulation.
The P2B Regulation applies to platform service providers and search engine operators, wherever established, provided only two conditions are met:
(i) the commercial users (for online intermediation services) or the users with a company website (for online search engines) are established in the EU; and
(ii) the users offer their goods/services to consumers located in the EU for at least part of the transaction.
Accordingly, there is a need for adaption for:
- Online intermediation services, e.g. online marketplaces, app stores, hotel and other travel booking portals, social media, and
- Online search engines.
The P2B Regulation applies to platforms in the P2B2C business in the following constellation (i.e. pure B2B platforms are exempt):
Provider -> Business -> Consumer
The article follows up on the introduction to the P2B Regulation here and the detailed analysis of mediation as method of dispute resolution here.
Checklist how to adapt the general terms and conditions of platform services
Online intermediation services must adapt their general terms and conditions – defined as (i) conditions / provisions that regulate the contractual relationship between the provider of online intermediation services and their business users and (ii) are unilaterally determined by the provider of online intermediation services.
The checklist shows the new main requirements to be observed in the general terms and conditions (“GTC”):
- Draft them in plain and intelligible language (Article 3.1 a)
- Make them easily available at any time (also before conclusion of contract) (Article 3.1 b)
- Inform on reasons for suspension / termination (Article 3.1 c)
- Inform on additional sales channels or partner programs (Article 3.1 d)
- Inform on the effects of the GTC on the IP rights of users (Article 3.1 e)
- Inform on (any!) changes to the GTC on a durable medium, user has the right of termination (Article 3.2)
- Inform on main parameters and relative importance in the ranking (incl. possible influence of remuneration), without algorithms or business secrets (Article 5.1, 5.3, 5.5)
- Inform on the type of any ancillary goods/services offered and any entitlement/condition that users offer their own goods/services (Article 6)
- Inform on possible differentiated treatment of goods / services of the provider or individual users towards other users (Article 7.1, 7.2, 7.3)
- No retroactive changes to the GTC (Article 8a)
- Inform on conditions under which users can terminate contract (Article 8b)
- Inform on available or non-available technical and contractual access to information that the Service maintains after contract termination (Article 8c)
- Inform on technical and contractual access or lack thereof for users to any data made available or generated by them or by consumers during the use of services (Article 9)
- Inform on reasons for possible restrictions on users to offer their goods/services elsewhere under other conditions (“best price clause”); reasons must also be made easily available to the public (Article 10)
- Inform on access to the internal complaint-handling system (Article 11.3)
- Indicate at least two mediators for any out-of-court settlement of disputes (Article 12)
These requirements – apart from the clear, understandable language of the GTC, their availability and the fundamental ineffectiveness of retroactive adjustments to the GTC – clearly go beyond what e.g. the already strict German law on general terms and conditions requires.
Checklist how to adapt the design of platform services and search engines
In addition, online intermediation services and online search engines must adapt their design and, among other things, introduce internal complaint-handling. The checklist shows the main design requirements for:
a) Online intermediation services
- Make identity of commercial user clearly visible (Article 3.5)
- State reasons for suspension / limitation / termination of services (Article 4.1, 4.2)
- Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3), see above
- Set an internal complaint handling system, with publicly available info, annual updates (Article 11, 4.3)
b) Online search engines
- Explain the ranking’s main parameters and their relative importance, public, easily available, always up to date (incl. possible influence of remuneration), without algorithms or trade secrets (Article 5.2, 5.3, 5.5)
- If ranking changes or delistings occur due to notification by third parties: offer to inspect such notification (Article 5.4)
- Explain possible differentiated treatment of goods / services of providers themselves or users in relation to other users (Article 7.1, 7.2, 7.3)
The European Commission will provide guidelines regarding the ranking rules in Article 5, as announced in the P2B Regulation – see the overview here. At the same time, providers of online intermediation services and online search engines shall draw up codes of conduct together with their users.
Practical Tips
- The Regulation significantly affects contractual freedom as it obliges platform services to adapt their general terms and conditions.
- The Regulation is to be enforced by “representative organisations” or associations and public bodies, with the EU Member States ensuring adequate and effective enforcement. The European Commission will monitor the impact of the Regulation in practice and evaluate it for the first time on 13.01.2022 (and every three years thereafter).
- The P2B Regulation may affect distribution relationships, in particular platforms as distribution intermediaries. Under German distribution law, platforms and other Internet intermediation services acting as authorised distributors may be entitled to a goodwill indemnity at termination (details here) if they disclose their distribution channels on the basis of corresponding platform general terms and conditions, as the Regulation does not require, but at least allows to do (see also: Rohrßen, ZVertriebsR 2019, 341, 344–346). In addition, there are numerous overlaps with antitrust, competition and data protection law.
In these times of insecurity about the future, we have nevertheless some certitudes. One of them, no doubt about it, is that “online intermediation services are key enablers of entrepreneurship and new business models”. EU Regulation 2019/1150 on promoting fairness and transparency for business users of online intermediation services is dealing with it. This Regulation shall apply from 12 July 2020.
The purpose of this Regulation is laying down rules to ensure that business users of online intermediation services and corporate website users are granted appropriate transparency, fairness and effective redress possibilities (art. 1). It applies to online intermediation services and online search engines provided to business users and corporate website users having their place of establishment UE and offering goods or services to consumers in the Union, irrespective of the place of establishment of the providers and the applicable law.
The rules shall apply, particularly, to online marketplaces, social media outlets, application distribution platforms, platforms for the collaborative economy and general search engines.
What I would like to underline in this post is that the Regulation foresees (art. 12) the use of mediation as a specific method of conflict resolution between online intermediation service providers and professional users. Mediation is promoted without prejudice to its voluntariness and the right to judicial claim.
In particular, the providers of the intermediation services shall identify in their general terms and conditions, two or more mediators with whom they are willing to engage to attempt to reach —in good faith— an agreement with business users on the settlement, out of court, of any disputes between the provider and the business user. Only service providers that are small companies would be exempted from assuming this obligation, without prejudice to being able to do so voluntarily.
The Regulation also contains the requirements these mediators must meet: some general ones (independence, with affordable services, act without delay, easily accessible) and others more specific or that will need special qualification (ability to mediate in the language of the general conditions and who have sufficient knowledge of intra-company trade relations).
It is also interesting to notice that the service providers shall bear a reasonable proportion of the total costs of mediation in each individual case, according to the indications of the mediator and to some criteria such as relative merits of the claims of the parties, their conduct, as well as the size and their financial strength.
The conclusion seems clear: Mediation, as an alternative to court or arbitral dispute resolution, is increasing its space in the EU regulations. It is always a voluntary way to solve conflicts, and it is worth considering its effectiveness in all business areas. This Regulation is expressly considering it.
Summary – What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform? This issue was addressed in the judgment of C-567/18 of 2 April 2020, in which the Court of Justice of the European Union confirmed that platforms (Amazon Marketplace, in this case) storing goods which infringe trademark rights are not liable for such infringement, unless the platform puts them on the market or is aware of the infringement. Conversely, platforms (such as Amazon Retail) that contribute to the distribution or resell the products themselves may be liable.
Background
Coty – a German company, distributor of perfumes, holding a licence for the EU trademark “Davidoff” – noted that third-party sellers were offering on Amazon Marketplace perfumes bearing the “Davidoff Hot Water” brand, which had been put in the EU market without its consent.
After reaching an agreement with one of the sellers, Coty sued Amazon in order to prevent it from storing and shipping those perfumes unless they were placed on the EU market with Coty’s consent. Both the Court of First Instance and the Court of Appeal rejected Coty’s request, which brought an appeal before the German Court of Cassation, which in turn referred the matter to the Court of Justice of the EU.
What is the Exhaustion of the rights conferred by a trademark
The principle of exhaustion is envisaged by EU law, according to which, once a good is put on the EU market, the proprietor of the trademark right on that specific good can no longer limit its use by third parties.
This principle is effective only if the entry of the good (the reference is to the individual product) on the market is done directly by the right holder, or with its consent (e.g. through an operator holding a licence).
On the contrary, if the goods are placed on the market by third parties without the consent of the proprietor, the latter may – by exercising the trademark rights established by art. 9, par. 3 of EU Regulation 2017/1001 – prohibit the use of the trademark for the marketing of the products.
By the legal proceedings which ended before the Court of Justice of the EU, Coty sought to enforce that right also against Amazon, considering it to be a user of the trademark, and therefore liable for its infringement.
What is the role of Amazon?
The solution of the case revolves around the role of the web platform.
Although Amazon provides users with a unique search engine, it hosts two radically different sales channels. Through the Amazon Retail channel, the customer buys products directly from the Amazon company, which operates as a reseller of products previously purchased from third party suppliers.
The Amazon Marketplace, on the other hand, displays products owned by third-party vendors, so purchase agreements are concluded between the end customer and the vendor. Amazon gets a commission on these transactions, while the vendor assumes the responsibility for the sale and can manage the prices of the products independently.
According to the German courts which rejected Coty’s claims in the first and second instance, Amazon Marketplace essentially acts as a depository, without offering the goods for sale or putting them on the market.
Coty, vice versa, argues that Amazon Marketplace, by offering various marketing-services (including: communication with potential customers in order to sell the products; provision of the platform through which customers conclude the contract; and consistent promotion of the products, both on its website and through advertisements on Google), can be considered as a “user” of the trademark, within the meaning of Article 9, paragraph 3 of EU Regulation 2017/1001.
The decision of the Court of Justice of the European Union
Advocate General Campos Sanchez-Bordona, in the opinion delivered on 28 November 2019, had suggested to the Court to distinguish between: the mere depositaries of the goods, not to be considered as “users” of the trademark for the purposes of EU Regulation 2017/1001; and those who – in addition to providing the deposit service – actively participate in the distribution of the goods. These latter, in the light of art. 9, par. 3, letter b) of EU Regulation 2017/1001, should be considered as “users” of the trademark, and therefore directly responsible in case of infringements.
The Bundesgerichtshof (Federal Court of Justice of Germany), however, had already partially answered the question when it referred the matter to the European Court, stating that Amazon Marketplace “merely stored the goods concerned, without offering them for sale or putting them on the market”, both operations carried out solely by the vendor.
The EU Court of Justice ruled the case on the basis of some precedents, in which it had already stated that:
- The expression “using” involves at the very least, the use of the sign in the commercial communication. A person may thus allow its clients to use signs which are identical or similar to trademarks without itself using those signs (see Google vs Louis Vuitton, Joined Cases C-236/08 to C-238/08, par. 56).
- With regard to e-commerce platforms, the use of the sign identical or similar to a trademark is made by the sellers, and not by the platform operator (see L’Oréal vs eBay, C‑324/09, par. 103).
- The service provider who simply performs a technical part of the production process cannot be qualified as a “user” of any signs on the final products. (see Frisdranken vs Red Bull, C‑119/10, par. 30. Frisdranken is an undertaking whose main activity is filling cans, supplied by a third party, already bearing signs similar to Redbull’s registered trademarks).
On the basis of that case-law and the qualification of Amazon Marketplace provided by the referring court, the European Court has ruled that a company which, on behalf of a third party, stores goods which infringe trademark rights, if it is not aware of that infringement and does not offer them for sale or place them on the market, is not making “use” of the trademark and, therefore, is not liable to the proprietor of the rights to that trademark.
Conclusion
After Coty had previously been the subject of a historic ruling on the matter (C-230/16 – link to the Legalmondo previous post), in this case the Court of Justice decision confirmed the status quo, but left the door open for change in the near future.
A few considerations on the judgement, before some practical tips:
- The Court did not define in positive terms the criteria for assessing whether an online platform performs sufficient activity to be considered as a user of the sign (and therefore liable for any infringement of the registered trademark). This choice is probably dictated by the fact that the criteria laid down could have been applied (including to the various companies belonging to the Amazon group) in a non-homogeneous manner by the various Member States’ national courts, thus jeopardising the uniform application of European law.
- If the Court of Justice had decided the case the other way around, the ruling would have had a disruptive impact not only on Amazon’s Marketplace, but on all online operators, because it would have made them directly responsible for infringements of IP rights by third parties.
- If the perfumes in question had been sold through Amazon Retail, there would have been no doubt about Amazon’s responsibility: through this channel, sales are concluded directly between Amazon and the end customer.
- The Court has not considered whether: (i) Amazon could be held indirectly liable within the meaning of Article 14(1) of EU Directive 2000/31, as a “host” which – although aware of the illegal activity – did not prevent it; (ii) under Article 11 of EU Directive 2004/48, Coty could have acted against Amazon as an intermediary whose services are used by third parties to infringe its IP right. Therefore, it cannot be excluded that Amazon may be held (indirectly) liable for the infringements committed, including on the Marketplace: this aspect will have to be examined in detail on a case-by-case basis.
Practical tips
What can the owner (or licensee) of a trademark do if an unauthorized third party resells products with its trademark on an online platform?
- Gather as much evidence as possible of the infringement in progress: the proof of the infringement is one of the most problematic aspects of IP litigation.
- Contact a specialized lawyer to send a cease-and-desist letter to the unauthorized seller, ordering the removal of the products from the platform and asking the compensation for damages suffered.
- If the products are not removed from the marketplace, the trademark owner might take legal action to obtain the removal of the products and compensation for damages.
- In light of the judgment in question, the online platforms not playing an active role in the resale of goods remain not directly responsible for IP violations. Nevertheless, it is suggested to consider sending the cease-and-desist letter to them as well, in order to put more pressure on the unauthorised seller.
- The sending of the cease-and-desist letter also to the platform – especially in the event of several infringements – may also be useful to demonstrate its (indirect) liability for lack of vigilance, as seen in point 4) of the above list.
The concept of privacy by design has been around for a few decades. Although it has been referred to in studies since the 1970s and present in legislation since as far as the early 1990s, it was consolidated only in 2009 with the work of Ann Cavoukian, the Information & Privacy Commissioner of Ontario, Canada
This author defined the seven foundational principles of privacy by design: (i) to be proactive not reactive, preventative not remedial; (ii) privacy as the default setting; (iii) privacy embedded into design; (iv) full functionality – positive-sum, not zero-sum; (v) end-to-end security – full lifecycle protection; (vi) visibility and transparency – keep it open; and (vii) respect for user privacy – keep it user-centric.
After being adopted as a privacy standard by the International Data Protection and Privacy Commissioners in 2010, privacy by design was also included in the General Data Protection Regulation (GDPR – Regulation (EU) 2016/679 of the European Parliament and of the Council, of 27 April 2016). However, in the GDPR (article 25) it no longer remains as a mere principle. Instead, it has become a mandatory legal obligation and failure to comply can lead to severe administrative fines (article 83/4/a).
Regarding privacy by design, the GDPR establishes that the data controller shall implement the appropriate technical and organisational measures designed to implement data protection principles in an effective manner and to integrate the necessary safeguards into the processing. The appropriate technical and organisational measures are to be determined taking into account (i) the nature, scope, context and purpose of processing, (ii) the risks for rights and freedoms, (iii) the state of the art, and (iv) the cost of implementation.
Regarding privacy by default, the GDPR establishes that the controller shall implement the appropriate technical and organisational measures to ensure that, by default, (i) only the necessary data is processed, (ii) only to the necessary extent of processing, (iii) is only accessible by the necessary individuals, and (iv) is only stored by the necessary period of time.
Both privacy by design and privacy by default are established around the idea of the implementation of the appropriate technical and organisational measures to safeguard the personal data protection principles and rules. The GDPR provides some examples of these measures (such as pseudonymisation, encryption, anonymisation), but it is not a catalogue for these measures or other privacy enhancing technologies (PET) and the provided examples should not be seen as mandatory measures.
Clear guidance on privacy by design and by default is not to be found in the GDPR and it is a work in progress by all the community and parties involved. But the GDPR has the clear intention of impacting the core of the digital age system, reshaping its values regarding privacy.
The success of this ambition is uncertain, but some important challenges are already very clear, such as the role of the producers of products, services and applications, the integration of data protection principles in the design of User Experience (UX) and User Interface (UI) and also in the software development planning (agile and scrum, for instance).
In the meantime, examples of the real impact of privacy by design and by default are coming to light. In 2018, Valve changed the privacy settings of the users of the gaming platform Steam, making games owned private by default. As a direct consequence, the analytics activity provided by SteamSpy and other similar companies was severely damaged.
Privacy by design certainly is, for those closely involved in the design process of products, services and applications, one of the most interesting and challenging topics in personal data protection.
On February 14, 2019, the European Commission proudly announced in a press release that the night before, the European Parliament, the Council of the European Union and the European Commission reached a political deal on the first-ever rules aimed at creating a fair, transparent and predictable business environment for businesses and traders when using online platforms.
The new Regulation is part of the strategic plan of the European authorities to establish a digital single market and has its origin in the Commission Communication on Online Platforms of May 2016. As a result, in April 2018 the Commission presented the proposal of a new regulation.
The new rules will apply to companies such as Google AdSense, DoubleClick , eBay and Amazon Marketplace, Google and Bing Search , Facebook and YouTube, Google Play and App Store, Facebook Messenger, PayPal, Zalando and Uber.
After having conducted a series of studies, workshops and a large public consultation, the European Commission explained in its 2016 Communication the importance of creating in Europe a favorable environment for the development of new online platforms. Indeed, the statistics are very disappointing: only 4% of the world’s market capitalization is represented by online platforms created in Europe. The champions in the field are the United States and Asia.
On the basis of this observation, the Commission has drawn up a list of challenges for the European lawmaker as follows:
- Ensuring a level playing field for comparable digital services
- Ensuring that online platforms act responsibly
- Fostering trust, transparency and ensuring fairness
- Keeping markets open and non-discriminatory to foster a data-driven economy
- Safeguarding a fair and innovation-friendly business environment
2 years after the Communication of the Commission, the new Regulation was born.
First of all, what are the conditions for the application of the regulation?
- companies using online platforms must have their place of establishment or residence in the European Union and
- goods or services must be offered to consumers in the Union.
(the place of establishment or residence of the providers of these services is not relevant to the application of the Regulation).
A strengthened obligation of transparency
The Regulation makes online platforms subject to transparency by obliging them to ensure that their terms and conditions:
- are drafted in a clear and unambiguous manner;
- are easily available for business users at all stages of their commercial relationship with the provider of online intermediation services, including in the pre-contractual stage;
- set out the objective grounds for decisions to suspend or terminate, in whole or in part, the provision of their online intermediation services to business users.
Ranking
Online platforms will have to indicate in their terms and conditions the main parameters determining ranking and the reasons for the relative importance of those main parameters as opposed to other parameters
Where those main parameters include the possibility to influence ranking against any direct or indirect remuneration paid by business users to the provider of online intermediation services concerned, that online platform shall also include in its terms and conditions a description of those possibilities and of the effects of such remuneration on ranking.
Differentiated treatment of goods or services
The online platform shall also include in their terms and conditions a description of any differential treatment they give on the one hand in relation to goods and services offered to consumers through these online intermediation services, either by the supplier himself or by any user enterprise controlled by that supplier and, secondly, in relation to other business users.
Access to data
The platforms will have to establish a description of the technical and contractual access, or lack of such access for business users, to any personal data or other data, or both, that user companies or the consumers transmit for the use of the online intermediation services concerned or which are generated through the provision of those services.
Prohibition of certain unfair practices
Prohibition of modification of the terms and conditions without notice
Any proposed amendment of terms and conditions shall be notified to users and the notice period shall be at least 15 days from the date on which the online platform notifies the business users concerned about the envisaged modifications.
Prohibition of suspension or termination without cause
Under Article 4 of the Regulation when intermediation service provider decides to suspend or terminate, in whole or in part, providing its services to a given user company, it shall provide the business user without undue delay, with the motivation for such a decision.
New avenues for dispute resolution
Internal complaint-handling system
Providers of online intermediation services will have to provide an internal complaint handling the complaints from user companies.
Mediation
The platforms shall identify in their terms and conditions one or more mediators with which they are willing to engage to attempt to reach an agreement with business users on the settlement, out of court, of any disputes between the provider and the business user arising in relation to the provision of the online intermediation services concerned, including complaints that could not be resolved by means of the internal complaint-handling system.
The Regulation specifies the conditions that mediators shall met in order to be able to carry out their mission.
Judicial proceedings by representative organizations or associations and by public bodies
Organisations and associations which have a legitimate interest in representing user undertakings or entities using a corporate website, as well as public bodies established in the Member States, shall have the right to bring an action before the national courts in the Union, in accordance with the rules of the law of the Member State in which the action is brought, with a view to putting an end to or prohibiting any infringement, by providers of online intermediation services or on-line search engines.
Coming into force
As it is announced by The European Commission, the new rules will apply 12 months after its adoption and publication, and will be subject to review within 18 months thereafter, in order to ensure that they keep pace with the rapidly developing market. The EU has also set up a dedicated Online Platform Observatory to monitor the evolution of the market and the effective implementation of the rules.
Online platforms regardless of your size, start drafting your new terms and conditions!
Franchisors may run ad campaigns with low prices. Such campaigns, however, can come costly if they have an anticompetitive effect, especially if they factually force the franchisees to offer the products for the low prices.
Best example: pricing campaigns for the “burger of the week”, as decided by the Munich Regional Court in its decision of 26 October 2018 (Case No. 37 O 10335/15).
The situation
The plaintiffs are franchisees of the defendant’s franchise network, a restaurant chain. In addition to the obligation to pay “royalties” in return for the use of the franchise systems and its trade marks (5%), the franchise agreements also obliged the franchisees to pay a sales-related advertising fee. The defendant and franchisor used the advertising fees of the franchisees, among others, to advertise products from the plaintiffs’ menu at low prices, e.g. under the slogan “King of the Month“. By participating in the advertising campaigns and its low prices, the sales of the franchisees increased and thus the franchise fee they had to pay. After some time, the franchisees decided that this advertising campaign caused them financial damage – because the products offered for a low price affected the sale of products offered at a normal price (“cannibalism effect”). They no longer participated in the campaign and demanded an appropriate reduction of their advertising fee. Among other things, they brought an action for an injunction against the use of the advertising fee for the campaign complained of and for a declaratory judgment of the liability to pay damages. The Regional Court granted both motions.
The main reason. The advertising campaigns had the effect of restricting competition, namely the franchisees’ ability to determine their sale prices (contrary to sec. 1 and 2 (2) German Act against Restraints of Competition and Art. 2 (1), Art. 4 a) Vertical Block Exemption Regulation). After all, the franchisor set – so the court – the resale price through the de facto binding effect of the ad campaign.
The decision stands in line with the previous case law, especially of the German Federal Court’s decisions on low-price campaigns by franchisors of
- self-drive rental vehicles (“Sixt ./. Budget”, 02.02.1999, Case No. KZR 11/97, para.30),
- pet food (“Fressnapf”, 04.02.2016, Case No. I ZR 194/14, para. 14), and
- glasses within a dual distribution system where the franchisor sold the products through its own branches and through franchisees without differentiating between branch and franchise operations (“Apollo Optik”, 20.05.2003, Case No. KZR 27/02, para. 37).
Practical tips
- Obligations that are essential for running the franchise system do not restrict competition for the purposes of the EU antitrust rules (similar to the US law’s “ancillary restraints doctrine”). In particular, the following restrictions are typically indispensable components of a functioning franchise agreement:
- Restrictions of the transfer of know-how;
- Non-compete obligations (during and after the term of the agreement), prohibiting the franchisee from opening a shop of the same or similar nature in an area where he may compete with other members of the franchise network;
- Obligations of the franchisee not to transfer his shop without the franchisor’s prior approval.
(cf. EU Court of Justice, 28.01.1986, Case “Pronuptia”, Case No. 161/84 para. 16. 17).
- However, franchise systems are not per se exempted from the prohibition of restricting competition. Therefore, watch out to comply with the EU antitrust rules to avoid painful fines and ensure that the franchise agreement can be enforced.
- The prohibition of price-fixing (or Resale Price Maintenance) applies to the relationship between franchisor and franchisee if the franchisee bears the economic risk of its enterprise. To avoid that an ad campaign with recommended resale prices constitutes an anticompetitive price-fixing, the concrete situation needs to be assessed thoroughly. What helps to avoid also any factual binding effect:
- Add a clarifying note: “Only at participating restaurants in … . As long as stocks last.”
- Ensure that such note is clearly visible, e.g. by adding an asterisk “*” to the price.
- Avoid any measures that could be interpreted as pressure or incentive for the franchisees and which would turn the recommended price into a fixed price (e.g. because other pricing would otherwise lead to negative evaluations).
- Such ad campaigns may work, as a UK court’s decision shows: According to the BBC, Burger King franchisees sued the franchisor in 2009 “because a corporate promotion required franchisees to sell a double cheeseburger for $1 that cost a $1.10 to make. The court ruled for Burger King.” Under the above circumstances and also for short-term promotions, franchisors may even impose the resale price – such campaigns just need to be well prepared.
- For an overview on resale price maintenance, see the Legalmondo article Resale Price Maintenance and Exceptions for short-term promotions.
- Resale Price Maintenance can come costly – in 2018, the European Commission imposed fines of EUR 111 million in total on four consumer electronics manufacturers – Asus, Denon & Marantz, Philips and Pioneer – for fixing online resale prices (cf. the Press release of 24 July2018).
