Foreword

The digital revolution has transformed the landscape for small businesses. Online platforms, from eBay and Amazon to UberEats, Deliveroo and Booking. com, have become indispensable tools for many, as evidenced by the surge in their adoption during the Covid pandemic and their continued use since.

Platforms are present in most sectors, bringing businesses together with other businesses and with consumers, and their business models vary. Some are primarily used as marketplaces, allowing buyers to view what is on offer and go on to buy it. Others offer both the goods and the means of delivery to the customer. This report mainly focuses on platforms that allow businesses to sell to consumers in the retail goods, food, and accommodation sectors because we received most evidence about those sectors from our quantitative and qualitative work.

Over half of small businesses now use these platforms, with seven in ten small businesses saying that they are important or very important to their business. The research has identified that there are benefits platforms can bring, but it is crucial to address the policy and regulatory challenges that have emerged over the last few years. Our research shows that small businesses believe that they too often find themselves at a disadvantage due to the asymmetry of power between them and the platforms they rely on.

Consequently, based upon our research, targeted interventions from competition authorities are considered necessary to level the playing field, and the UK Government must tackle intellectual property rights infringements by strengthening the UK’s intellectual property framework and ensuring its effective enforcement.

Issues such as late payments are not unique to online platforms, but their prevalence among large online platforms has the ability to exacerbate the problem. Large online platforms have the resources to pay small businesses more promptly, and it is only fair and reasonable that they should be held accountable for their payment performance.

Our research shows that small businesses consider that they often struggle to obtain satisfactory remedies from online platforms when disputes arise. Legal action is often too costly and time-consuming for small businesses, to say nothing of the mismatch in legal resources between small businesses and platforms, leaving them without viable recourse. The recommendation based on our research is that the UK Government should create a means for the resolution of such disputes which is rapid, cheap, and effective.

 

Tina McKenzie
FSB Policy and Advocacy Chair

Key Findings

Small firms and online platforms

  • Over half of the small businesses surveyed (53%) stated that they currently use an online platform as part of their business.
  • 3 per cent of the small businesses surveyed stated that they previously used an online platform for their business but stopped in the last 12 months.
  • Of those small businesses that use an online platform or have done so in the last 12 months, 71 per cent say that platforms are ‘important’ or ‘very important’ to their business.
  • Over two in five of the small businesses surveyed (42%) state that they have never used an online platform, or stopped using one more than 12 months ago.
  • When asked the reasons why the small businesses surveyed say that they do not use an online platform, the responses included:
    • Not aware of any suitable online platforms for their business or sector (36%)
    • Interests of an online platform or platforms are not aligned to their business (21%)
    • Subscription and/or joining fees are too expensive (15%)
    • Commission fees are too high (fees per sale) (15%)
    • Do not want to share their sales data (13%)
    • Loss of their business identity (12%)
    • Do not want to be tied into a platform’s payment method (10%)
    • Trading via an online platform is insecure (6%)

Malicious and fake reviews

  • Of those small businesses taking part in the research that use an online platform or have done so in the last 12 months:
    •  12 per cent reported malicious or fake reviews.
    •  25 per cent of the small businesses surveyed that are users of Amazon reported malicious or fake reviews.

Online platforms for cross-border trade

  • Of those small businesses taking part in the research that use an online platform or have done so in the last 12 months:
    •  29 per cent are using those platforms to trade internationally.
    •  6 per cent have stopped trading internationally. 

Infringement of intellectual property

  • Of those small businesses taking part in the research that use an online platform or have done so in the last 12 months:
    • A fifth of small businesses using Amazon (20%) say they have experienced infringement or alleged infringement of intellectual property (their own or a third party’s).
    • A fifth of small businesses using Amazon (20%) and 12 per cent of small businesses using eBay say they have experienced their product being cloned or copied.

Dispute resolution

  • Two in five of the small businesses taking part in the research (39%) who have had an issue with a platform found it ‘difficult’ or ‘very difficult’ to resolve that issue.
  • One in six of the small businesses taking part in the research who reported issues with platforms (16%) said they were resolved ‘very unfairly’, and in a further 16 per cent of cases the small businesses taking part in the research reported that the platform took no action to resolve the issue.

Recommendations

The recommendations we have put forward are our honest opinions, derived from the results of the research we have conducted. We have diligently gathered and scrutinised the data from such research to arrive at and present well-informed conclusions and recommendations.

  • The Competition and Markets Authority (CMA) should accept the proposed commitments from Amazon in respect of the use of thirdparty sales data.
  • The CMA should investigate the charging structures of retail platforms, and the charging levels of accommodation and food delivery platforms, to determine whether these are indicative of monopolistic or oligopolistic behaviour.
  • The CMA should investigate the relationship between platforms and delivery companies to ensure that this is working fairly and effectively for small business users.
  • The CMA’s investigation of reviews on Amazon and Google should include consideration of the mechanisms by which small businesses can bring any fake reviews to the attention of the platforms and get action taken.
  • The UK Government should consider legislation to make it an offence for an individual to post a deliberately fake and malicious online review.
  • The UK Government should legislate to introduce a rapid, effective and affordable dispute resolution procedure that would cover disputes between small businesses and platforms and between small businesses and other platforms users, including both consumers and other businesses.
  • The UK Government should review the intellectual property framework in the UK and work with international partners to improve enforceability and enforcement.
  • Local authorities should consider whether facilitating a local platform in their area could help small businesses sell to consumers while avoiding the costs and other issues associated with the large platforms.
  • Platforms should examine ways to reduce the administrative burden and other costs for small businesses of selling into the European Union.
  • Platforms should commit to paying small businesses within a maximum of thirty days, in line with the Prompt Payment Code which governs standard supplier payments
  • Platforms should avoid sudden changes to their contracts with small business users and only introduce changes in a predictable and pre-notified fashion, with consideration given to the impact of such terms on small businesses.
  • Platforms should invest much more in systems to resolve issues for small businesses, including the provision of dedicated complaint and dispute handling resources where these do not already exist.
  • Food delivery platforms should share aggregated and anonymised information with individual small businesses on the favoured products and broad demographics of their own customers, to allow them to better target their marketing.
  • Retail platforms should put more resources into preventing abuses of intellectual property by third-party sellers and clearly set out their policies and processes to resolve intellectual property disputes.
  • Amazon should commit to give credit to its business customers at its expense, rather than at the expense of other businesses.
  • eBay should allow sellers to decide which buyers they are willing to sell to, within reason, by allowing sellers to filter based on a buyer’s track record on issues such as returns and bad reviews.

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Net Benefits - Small business use of online platforms 2.08MB
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