The Parliament and the Council approve the Regulation to end geo-blocking

Technology & Outsourcing Commentary 1-2018

On May 25, 2016 the European Commission adopted a proposal for a Regulation to combat geographical blocking practices (geo-blocking) as part of its strategy to achieve a Digital Single Market. The three main objectives of this initiative are:  to ensure that consumers and enterprises have better access to goods online; to create an environment in which digital networks and services can prosper; and to take advantage of the possibilities offered by the digital industry with a view to boosting economic growth.

At the same time, in May 2016 the Commission initiated an industry-wide survey on electronic commerce. Completed in May 2017, this survey disclosed the fact that nearly 60% of the European citizens who make internet purchases experience some type of blocking when they attempt to purchase a good or a service on the internet outside the national market.  The most habitual geo-blocking measures consist of redirecting the customer to a national version of a website, rejecting a credit card from another country in the EU, or even making it impossible to register on a website from another EU Member State. According to the Commission’s proposal, these barriers prevent the full potential of the internal market, as an area without internal frontiers, from being realized.

On February 28, 2018 Regulation (EU) 2018/302 of the Parliament and of the Council, on measures aimed at banning unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market and amending Regulation (EC) 2006/2004 and (EU) 2017/2394 and Directive 2009/22/EC (the “Regulation”) was finally adopted.

The Regulation assumes that differential treatment by enterprises (in particular SMEs) based on the nationality or place of residence of the consumer can, in some cases, be justified by the existence of divergent statutory environments, the legal uncertainty this entails, the risks associated with applicable consumer protection legislation, legislation on environmental matters or labelling, etc. In fact, article 20.2 of Directive 2006/123/EC (Services Directive) recognizes the possibility of providing for differences in the conditions of access directly justified by objective criteria.

Nonetheless, in many other cases traders artificially segment the internal market along internal frontiers and hamper the free movement of goods and services, thus restricting the rights of customers and preventing them from benefitting from a wider choice and optimal conditions.  In this context, the objective of the Regulation is to clarify the scope of article 20 of the Services Directive, specifying in which situations there can be no justification for differential treatment, thus providing g clarity and legal certainty to all participants in cross-border transactions and ensuring that rules on non-discrimination can be effectively applied and enforced across the internal market.  The following are the most notable aspects of the Regulation:

  • Traders cannot block or restrict the access of customers to their online interfaces or redirect to an interface other than the one the customer had initially attempted to access, using technological or other means, based on the nationality, place or residence or place of establishment of the customer.
  • Where a barrier is created (block, redirection or restriction of access), the trader must provide customers with a clear and specific explanation of the reasons why the barrier is necessary (e.g., in order to guarantee compliance with legislation to which the trader is subject).
  • There is a general prohibition against applying different conditions of access to products and services of traders for reasons related to the nationality, place of residence or place of establishment of the customer in three specific situations:  the sale of goods in Member States where the trader offers delivery services or where the goods are picked up by the customer; the sale of electronically supplied services; and the sale of services provided in a physical location where the trader operates.
  • This prohibition does not prevent traders from offering net sale prices that differ between Member States or within a Member State or are offered to customers in a certain territory or to specific customer groups, on a non-discriminatory basis.
  • In general, traders cannot apply different conditions of payment in respect of transactions for reasons related to the nationality, place of residence or place of establishment of the customer, to the location of the payment account, to the place of establishment of the payment services supplier or to the place of issue of the payment instrument, within the Union.
  • The Regulation has the same scope as the Services Directive, and will therefore not apply to financial, audiovisual, transportation, health and social services.
  • Neither will the Regulation apply, as yet, to electronically supplied services, the main feature of which is the provision of access to copyright protected works or other protected subject-matter.
  • The Regulation will not apply to purely internal situations, in which all elements involved in the transaction are located within a single Member State.
  • The Regulation does not apply to agreements restricting active sales within the meaning of Regulation (EU) nº 330/2010, on the application of article 101.3 of the TFUE to categories of vertical agreements and concerted practices, notwithstanding the application of article 101 of the TFUE and Regulation (EU) nº 330/2010 itself.

The Regulation will apply from December 3, 2018. Two years after its entry into force, the Commission will perform an initial assessment of its impact on the internal market, as well as of the scope of the Regulation and its possible extension to certain electronically supplied copyright protected services (such as music, e-books or software) and services in other industries, such as transportation and audiovisuals.