Google, Apple face EU law on business practices

(Reuters) - Online platforms such as Google (GOOGL.O), Apple (AAPL.O) and Amazon (AMZN.O) face new European Union rules on their commercial practices with smaller businesses that use their services, as Brussels seeks to curtail their huge market power.

The European Commission is drafting a new regulation specifically targeting online platforms such as e-commerce sites, app stores and search engines that will require the companies to be more transparent about how they rank search results and why they delist some services.

The proposal seeks to address potentially harmful trading practices by online platforms and a lack of effective redress mechanisms for smaller businesses that use them to reach consumers.

“Online intermediation services can hold superior bargaining power over their business users, enabling them to behave unilaterally in a way that is capable of harming the businesses using them,” the draft regulation, seen by Reuters, says.

Tech companies have faced significant regulatory pressure from Brussels, be it over their handling of swathes of user data, how much they pay in taxes or the proliferation of extremist content on social media.

The proposal was initially meant to exclude search engines such as Alphabet Inc’s Google and Microsoft’s Bing (MSFT.O), but these will now be included given the impact a business’s ranking in search results can have on its revenues.

The EU’s antitrust chief in June hit Google with a record 2.42 billion euro ($2.99 billion) fine for favoring its own shopping service over those of rivals.

Under the proposal, operators of search engines, app stores as well as e-commerce sites such as eBay (EBAY.O) will have to specify upfront the “most important parameters determining ranking”, such as “specific signals incorporated into algorithms” and adjustment or demotion mechanisms.

The proposal will not force companies to disclose their algorithms but just provide descriptions at a general level explaining “how and to what extent the relevant ranking mechanism takes account of the quality of the products and services offered”.

Online platforms will also have to implement a notice period of at least 15 days for changes to their terms and conditions as well as provide businesses with an “individualized” description of the reasons for which they have been de-listed or suspended - for example from Apple’s App Store or Google Play.

Where companies have their own services competing with other businesses on their platforms - for example Google’s own comparison shopping service in Google search results - their terms and conditions will have to include a description of any preferential treatment they give to their own service including access to consumer data and ranking.

The proposal is expected to be published in April, after which it will have to be agreed by national governments and the European Parliament.

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