On 25 May 2016, the Commission published a package of five proposals aimed at implementing its Digital Single Market (DSM) strategy (see our blog describing the package). The DSM strategy contains 16 aligned initiatives in a variety of fields such as telecommunications, consumer rights and Big Data, each of which is intended to bring the EU one step closer to a digital single market. The DSM strategy is monitored by Hogan Lovells’ cross practice multi-jurisdictional DSM Watch team.

One of the proposals issued on 25 May is a draft regulation on geo-blocking. We already reported on 13 May 2016 in this blog on a leaked earlier draft of the proposal of this regulation. Now that the final Commission proposal is published, we noticed that a few changes were made since the leaked draft. The main changes are the following:

Removal of obligation to provide same general conditions for access to copyright protected goods

We already reported that the leaked draft excluded certain services from its scope, in particular audio-visual services. But while the leaked draft merely foresaw an extended transitional period for traders providing access to other copyright protected works (such as e-books or music), these have now been entirely excluded from the prohibition to apply different general conditions of access based on nationality, place of residence or place of establishment of the customer is concerned. Although traders providing access to such services will still need to comply with other provisions of the regulation (such as the prohibition on blocking access and rerouting without the customer’s explicit consent, and the prohibition on discrimination related to payment methods), they will be allowed to apply different general conditions to customers of different nationality, place of residence or place of establishment (provided, of course, that this is not prohibited by other legislation).

The draft regulation foresees that two years after the entry into force of the regulation the Commission will reassess whether the prohibition to apply different general conditions should be extended to traders providing access to copyright protected works (other than audio-visual media services).

Exception for microenterprises providing electronically supplied services

Note that the prohibition to apply different general conditions to customers based on their nationality, place of residence or place of establishment for goods and other electronically supplied services (e.g. hosting services or cloud services) continues to be included in the final proposal. However, for the provision of other electronically supplied services, the final proposal states that this prohibition does not apply to traders that are exempted from VAT on the basis of Chapter 1 of Title XII of Directive 2006/112/EC (micro-enterprises).

Other obligations contained in the proposed regulation do apply to micro-enterprises.

Amendment to obligations to accept payment instruments

Finally, the current proposal of the draft regulation contains a few tweaks compared to the leaked draft when it comes to the payment instruments that traders are required to accept.

While the leaked draft stated that different payment conditions could not be applied by traders for reasons of the nationality, place of residence or place of establishment of their customers, the final proposal also prohibits discrimination based on the location of the payment account, the place of establishment of the payment service provider or the place of issue of the payment instrument in the EU.

On the other hand, the final proposal limits the obligation to accept electronic transactions by credit transfer, direct credit or card-based payment instruments to payment instruments of the same brand. In the Q&As which the Commission issued on 25 May 2016, it clarifies that this means that if a trader accepts Maestro cards from France, it should accept a payment through a Maestro card from Germany too, but that, if a trader only accepts cards from a specific payment brand such as Bancontact in Belgium, it would not have to accept German cards which only work within the Girocard payment brand.

Next steps

Now that the proposal has been issued, it will need to be reviewed by the European Parliament and the Council of the European Union (representing the Member States) which can amend the draft. The legislative procedure is likely to take well into 2017. The proposal foresees that, after its enactment, a period of six months would be given to companies to implement the legislation.