חזרה לעמוד הקודם

Regulation between online platforms and business users in Israel: The position of Israel Internet Association

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.
  • 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.

The Israel Internet Association’s response to the tender to encourage the deployment of fiber networks in incentive areas (July 2021)

The Ministry of Communications’ strategic plan for deploying fiber-optic infrastructure for the Israeli public, which is also enshrined in legislation, consists of two pillars: (a) Bezeq is committed to deploying fiber-optic networks to 80% of the various regions in Israel, at its selection (in other words, the reasons most beneficial for it from a business perspective); (B) The deployment of fiber infrastructure to the rest of the areas in the country, which is not economically profitable, will be done through state grants (an “incentive fund”) that will be allocated through tenders in which companies interested in deploying and operating fiber infrastructure will compete.

On June 15, 2016, the Ministry of Communications published a document of principles regarding the furthering of the deployment of fiber optic networks in areas lacking economic profitability, detailing the incentive fund’s operating plan and the mechanism for dealing with business entities in the various geographical areas in which Bezeq chose not to deploy fiber infrastructure.

On May 4, 2121, the Israel Internet Association submitted its response to the Ministry of Communications’ document of principles, in which the following points were emphasized:

  • The need to provide the deployment costs analysis performed by Bezeq for the review of the bidders in the tender for the deployment of fiber infrastructure in the incentive areas. This is to maximize the efficiency of the tender (and accordingly, the efficiency of the deployment procedure in the incentive areas), by reducing the degree of uncertainty of the bidders in the planned tender and saving on the costs of gathering information about the characteristics of the statistical areas at the subject of the tender.
  • The restrictions of the tender to ensure the deployment of fiber in particularly unprofitable areas among the incentive areas: As stated, the incentive areas intended to be handled by the incentive fund and the tenders for which there is tender competition, are generally not economically viable, given high paving costs and/or low profit potential. However, it is clear that even among the statistical areas defined as incentive areas there is a degree of lack of profitability. Therefore, it is likely that the planned tender (or at least in its first launch) will not receive any bids for deployment in remote geographical areas or particularly sparsely populated areas, which are often also characterized by low socio-economic status and level of services. Therefore, the Israel Internet Association calls on the Minister of Communications to exercise his authority under Section 14D(e) of the Communications Law and to order and include a limited number of “mandatory areas” that tender participants are required to include (or at least bids with a wide geographical scope). This is to ensure that the deployment progress in the incentive areas will not be made solely in accordance with the relative economic profitability of the geographical areas.
  • The need to examine 5G mobile internet infrastructure as a better alternative than deploying fiber in remote or sparsely populated areas: Given the existence of a scientific and professional consensus that 5G mobile technology can provide a complete (and sometimes better) alternative to fixed fiber infrastructure, eliminating the need for complex and costly paving activity for every home or neighborhood, the Ministry of Communications must re-examine the necessity of distributing the fiber infrastructure to all households in Israel. That is, even if the Ministry of Communications believes that there is a need to deploy fiber infrastructure across the country, it can exclude localities where the economic profitability of the deployment or operation of fiber is particularly low “in exchange” for ensuring the existence of 5G cell coverage in those localities in the near future. Economically, too, this move is likely to maximize the public interest in nationwide access to ultra-high-speed Internet infrastructure, as a more effective and efficient use of the incentive fund.