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24 Aug 2021
BY Ridwaan Boda , Rakhee Dullabh AND Priyanka Naidoo

The platform economy series: what are the legal implications?

For the past several years, the platform economy has been changing and disrupting the way in which companies work, allowing them to shift from traditional processes to platforms that are less linear and more interactive.

We have seen such disruptions in industries like telecommunications, media outlets, and automobiles. We have also seen companies in the financial services industry (banks, insurance and investments) initially explore and now firmly establish themselves as active and firm participants in the platform economy.

This disruption has become more rapid during the COVID-19 pandemic, which forced a number of companies to reconsider the way in which they do business and how they sell products and services to customers.

Typically, the participants in the platform economy are the platform provider, the developer and the customer. A platform provides infrastructure that:

  • allows the developer market access to customers of more established companies ie, the platform provider;
  • gives the customer more choice as to the products and services being offered;
  • enables the platform provider and the developer to interact with the customer more efficiently; and
  • enables the platform provider to leverage data in order to gain better insights into its customers in order to position themselves as market-leaders.

For platform providers and developers, there are various legal considerations to bear in mind:

  • data privacy and commercialisation: Customer data drives the platform economy, so the impact of privacy laws is unavoidable. Platform providers and developers must ensure that:
    • they themselves are cognisant and compliant with data privacy laws at an organisational level;
    • the app itself must be developed with privacy laws in mind ie, privacy by design;
    • the platform needs to be configured in such a way so as not to violate privacy laws;
    • the end-customer’s right to privacy must be clearly communicated through an appropriately drafted privacy policy and where applicable privacy consents. To the extent that data is shared with third parties, or transmitted to other countries, additional risks will be triggered and proportionate measures must be accordingly implemented.
  • client-facing T’s and C’s: The platform provider and/or developer’s engagement and interaction with the customer on the platform and the app must be in accordance with electronic communication and consumer laws and subject to appropriate terms and conditions, that must be brought to the attention of the customer in a manner that is easy and transparent from the customer’s perspective. It should be made clear to the customer how their behaviour and interaction with the platform provider on the platform will work and likewise with the developer on the app.
  • platform access T’s and C’s: In order to allow developers access to the platform, the platform provider must ensure that appropriate terms and conditions are drafted governing, inter alia, design and integration requirements, security commitments, commercial/revenue sharing arrangements, data sharing rights and responsibilities, applicable service levels, marketing commitments, regulatory compliance obligations, branding and intellectual property, exclusivity arrangements, and termination and post-termination rights. This list is not exhaustive but it is essential that any aspirant platform provider carefully consider these terms before launching its platform.
  • IP protection: As with any IP developed, parties must have regard to the usual protections such as registration and use of trade marks, licences, copyrights, patents, as well as appropriate non-disclosure/non-circumvention considerations.
  • regulatory requirements: For certain types of apps, especially in more regulated industries such as banking, the developer in particular needs to ensure that their app is compliant with legislation, for example FICA and FAIS. However, in certain instances the platform providers themselves would need to be compliant. A careful risk assessment will have to be undertaken.
  • other considerations: These include employment considerations (especially linked to concepts such as the gig economy), competition and anti-trust considerations, consumer protection considerations, electronic communications and transactions compliance etc.

The shift towards the platform economy is a major existing trend with a number of companies already transforming their traditional business models towards becoming platform providers. Our specialist team have assisted a number of clients including telcos, banks, and other companies with all of their requirements in this transformative journey.

 

Ridwaan Boda

Corporate Commercial | Executive

rboda@ENSafrica.com

+27 83 345 1119

 

Rakhee Dullabh

Corporate Commercial | Executive

rdullabh@ENSafrica.com

+27 82 509 6565

 

Priyanka Naidoo

Corporate Commercial | Associate

pnaidoo@ENSafrica.com

+27 72 662 4355