The EU fights against geo-blocking of digital content

On February 28, 2018, the European Parliament and the Council adopted Regulation (EU) No 2018/302, which aims to prohibit unjustified geo-blocking in the EU. Unjustified geo-blocking is a discriminatory practice that prevents customers from accessing websites, purchasing goods and services from those websites or using certain means of payment on the basis of their nationality, place of residence or place of establishment.

The approval of the regulation brings the removal of geo-blocking in the EU internal market closer to reality. However, this new instrument does not prohibit all geo-blocking practices, the complete elimination of which will therefore continue to be the subject of debate in the coming years. This is because the scope of Regulation (EU) No 2018/302 excludes audiovisual, financial and transport services (Article 1(3)) as well as restrictions deriving from the rules applicable in the field of copyright (Article 1(5)).

This is a significant omission given that, as the Commission found in its Final report on the E-commerce Sector Inquiry, geo-blocking is common practice among the vast majority of digital content providers (68%). The Commission’s investigation revealed that the prevalence of this practice in e-commence is less widespread among retailers of physical goods and services not covered by copyright (38%).

The reason for this divergence seems to lie in the territorial nature of copyright, which allows copyright holders to license protected works to different distributors in each EU Member State. In a digital environment, where content is able to circulate frictionlessly between countries, geo-blocking has become the norm, enabling copyright holders to rely on the territorial nature of their rights as enshrined in copyright law.

That being said, however, the European Commission is using antitrust rules to fight against the geo-blocking of digital content. In that regard, the Commission takes the view that agreements between the holders of rights and the distributors of such rights which provide for geo-blocking measures to enforce the territorial nature of copyright may be anti-competitive. This approach is discernible in two ongoing investigations affecting pay-TV services and the distribution of online video games. In parallel, the Commission also has pre-empted legislative action with another series of investigations related to goods and services not covered by copyright.

In spite of the European Commission’s active stance — prioritizing investigations into geo-blocking — it is clear that the new regulation will also catch practices which have so far escaped the reach of competition law. The Regulation prohibits unilateral geo-blocking (which is not the result of any agreement between undertakings) by undertakings that do not hold a dominant position. The Regulation also introduces a new competition rule. Article 6 prohibits any contractual restriction requiring traders not to respond to unsolicited requests from individual customers (passive sales) where the result is to prevent customers from accessing a web site, purchasing goods and services from that website or using certain means of payment based on their nationality, place of residence or place of establishment.

Geo-blocking will, in any event, continue to be a discussion topic in the months ahead. The European Commission and the EU Courts will have to decide whether the competition rules are the appropriate vehicle to tackle geo-blocking practices in relation to content protected by copyright that has not expired, or whether, by contrast, the full completion of the digital single market will necessitate a reform of copyright law.