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Regulation between online platforms and business users in Israel: ISOC-IL Position

February 25, 2021

The majority of commercial activity in the Internet age is carried out through online platforms: search engines, social networks, and other platforms that connect consumers to businesses in various fields (such as Gett or Yango for ordering taxis, Wolt or 10bis for ordering food deliveries). Therefore, online platforms are of immense importance for business users, who depend on them to reach the target audience efficiently and quickly.

Following the expansion of online intermediaries in recent years, and the growing dependence of business users on these platforms to reach their target audiences efficiently and quickly, the question arises of the need to regulate the operation of the platforms vis-à-vis their business users. This is in light of the recognition of the significant power gaps between them: Online platforms can remove users from the platform without prior notice or allowing a user response, and affect the prominence and visibility of business users in exchange for monetary payment or receiving information about business users’ customers.

Against this background, in February 2021, the Competition Authority published a position paper calling for the adoption in Israel of a regulation that will ensure fair trading conditions between online platforms and their business users, similar to the one that exists in the EU as of 2019. This is on two levels:

  • Prohibition of unfair activity of online platforms vis-à-vis business users such as a ban on blocking a user without prior notice or without being given an opportunity to correct his breaches.
  • The obligation of transparency regarding the terms of use of the platform, its results rating mechanism and information on any preferential treatment given to the product or service within its framework.

Position of the Israel Internet Association on the subject

The Israel Internet Association shares the position that it is appropriate to anchor regulation between online brokerage service providers and business users, and has presented the Competition Authority with a number of guiding principles for further design of regulatory and enforcement arrangements:

  1. A distinction must be made between a situation where the online intermediary competes with its business users (e.g., online app stores) and a situation where the online intermediary only provides brokerage services (e.g., advertising on social networks). In the first situation, the intensity of the concern of harm to competition and consumers is particularly high in light of the huge power and information gaps between the dominant platforms and most of its business users and the platform’s ability to direct users to the services they produce.
  2. The approach emerging from the position paper, that the relationship between a business user and an online intermediary service is necessarily a contract between equal parties, must be denied, as it can also be a consumer contract (for example, if a business user uses a free social network to advertise itself and generate an online presence). Thus, the development of regulation over online platforms must also be done within the framework of consumer protection law (and not just competition law), both vis-à-vis business users as consumers of the intermediary service and vis-à-vis “regular” users, who rely on the information and ratings provided to them by intermediary services for their decision to purchase a product or service.
  3. Enforcement mechanisms – private lawsuits in courts against regulatory enforcement: The Israel Internet Association believes that regulatory enforcement and its public resources should focus on enforcing transparency obligations, and disclosure regarding the ranking mechanism or prominence of business users on platforms, since existing civil law in Israel already provides for private law enforcement under contract law. Regulatory enforcement efforts should focus on platforms where consideration of money or personal information from their business customer affects its rating or exposure to the platform’s users (or a targeted part of them), in collaboration with the Consumer Protection Authority and the Privacy Protection Authority.

ISOC-IL Response on Regulation between online platforms and business users (Hebrew)

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