The European Commission recently released its draft revised Vertical Block Exemption Regulation (VBER) and Vertical Guidelines (see our previous post here). The drafts suggest a new approach in a number of areas to account for the rise in digital commerce, and importantly look to clarify the application of agency to platforms.
A prominent area of debate in recent years has been the role of digital platforms in connecting consumers and sellers and whether platforms with business models such as Uber and Airbnb can be classified as agents in facilitating transactions between these two groups.
The advantages of falling within the Commission’s definition of agency are clear. Under the current version of the Vertical Guidelines and Vertical Block Exemption certain obligations that would otherwise infringe Article 101(1) TFEU will not do so in the case of a genuine agency agreement. Such agreements attract fewer competition law risks and can therefore contain more stringent restrictions. Any platforms deemed a “genuine” agent would also have no liability towards the customer in relation to the product or service provided.
There have been strong arguments that agreements between platforms and sellers resemble an agency arrangement as opposed to any other. Commentators such as Professor Pinar Akman have previously suggested that platforms are most likely “independent contractors … who are agents of their suppliers”, noting amongst other things, that:
- Platforms hold money for their service providers, and/or
- Receive and communicate information on their service providers’ behalf, and/or
- Ultimately conclude the contract on their service providers’ behalf through the interaction of the customer with the platform (see pages 277-278).
Akman made these observations following analysis of six platforms (Uber, Amazon, eBay, Apple, Airbnb and Booking.com).
The European Courts have adopted a cautious approach to platform agency, the CJEU having been careful to avoid taking any clear position on the contractual relationship between Uber and its drivers in the Uber Spain case, accepting only that Uber is a ‘transport service’ within the meaning of Article 58 TFEU (Case C-434/15). Earlier this year Uber unsuccessfully argued its case for agency before the UK Supreme Court, albeit in an employment rather than competition law context (Uber BV and others v Aslam and others  UKSC 5, e.g. para 49).
The draft Guidelines suggest that in future the provision of online intermediation services will not qualify a platform for agency status, noting further that such companies typically act as ‘independent economic operators’ and not as part of the undertaking of the sellers. For example the size and bargaining power enjoyed by platforms, partly as a result of network effects, allows them to influence both commercial strategy and the conditions of sale. Moreover the fact a large number of sellers will sign up to a platform precludes it from forming a single economic unit with any particular seller. The market-specific investments made by platforms reflect the sizeable financial and commercial risks those platforms bear independent of the sellers on their platforms.
The existing wording of the Vertical Guidelines does not accurately reflect the platform business model where transactions are facilitated either online or through an app. Whilst currently only in draft form and subject to consultation, the updated Guidelines aim to bring some much-needed clarity in this area. However, the suggestion that in future companies may not be able rely on agency arguments to prevent the application of Article 101 TFEU to agreements with sellers on their platforms will not be universally welcomed, and may increase the challenges of selling online, at least for those who have not already taken a cautious approach in relation to this issue.