On the 18th of March 2016, the EU Commission published initial findings from its e-commerce sector inquiry. The initial findings show a widespread use of geo-blocking throughout retailers in the EU. The findings reaffirm the Commission’s focus on this area and may lead to actions by the Commission later this year.
Geo-blocking is the practice of blocking online sales across borders by redirecting international customers back to their own domestic websites or blocking the use of foreign delivery addresses or credit cards. The headline findings are that 38% of the responding retailers selling consumer goods and 68% of digital content providers replied that they geo-block consumers located in other EU Member States.
The economic fear is that whilst e-commerce has expanded widely throughout the EU, cross-border e-commerce has expanded much more slowly. Whilst some of this can be put down to language barriers, the fear is that geo-blocking practises are creating artificial barriers, intending to maintain high pricing for goods through a lack of cross-border competition.
The Commission’s greatest obstacle in tacking geo-blocking however is the lack of legal weapon with which to fight it with. This is because the Commission’s findings show that much geo-blocking is done unilaterally by retailers and is not stipulated between suppliers and distributors (or at least not in writing). If a company is in a non-dominant position, then unilateral geo-blocking falls outside the prohibitions in EU competition law, a fact acknowledged by the Commission.
To counter the above obstacle, the Commission is now openly threatening new legislation to combat geo-blocking, likely to be proposed in the coming months. Whilst moves by the Commission in this area are welcome to many EU consumers, retailers and suppliers will likely resist the moves to maintain lucrative national discrepancies in prices.
What the EU Commission cannot tackle however is the most common geo-blocking found for EU consumers, that being for access to American goods and pricing, often put up to protect pricing and geographical commitments, and due to differing EU/US product regulations. For instance, EU consumers are not likely to get access to US TV programming through American sources or able to capitalise on favourable exchange rates to buy branded clothes straight from the US, anytime soon.
The Commission’s final report on this issue is due in the first quarter of 2017.