On 18 March 2016, the European Commission published an issues paper on geo-blocking in e-commerce containing its initial findings from the e-commerce sector inquiry it launched on 6 May 2015. The Commission stated that geo-blocking practices are widespread and reconfirmed its intention to assess such practices under the EU antitrust rules and to propose further legislative action to address what it sees as unjustified barriers to cross-border e-commerce.
The Digital Single Market (DSM) strategy presented in May 2015 contains 16 initiatives in a variety of fields such as telecommunication, consumer rights and Big Data, each of which is intended to bring the EU one step closer to a digital single market.
One of the issues focused on by the Commission as part of the DSM strategy is unjustified geo-blocking. Geo-blocking refers to practices used by online sellers that result in the denial of access to websites based in other Member States. Either consumers are unable to access websites in other Member States or they can access but not purchase products or services from a website in other Member States, or consumers are re-routed to a local website of the same company which may have different prices or a different product or service.
The Commission considers in its DSM strategy that, because it limits consumer opportunities and choice, geo-blocking is a significant cause of consumer dissatisfaction and of fragmentation of the Internal Market. Although the Commission accepts that geo-blocking can be justified in some circumstances, it also considers that it may amount to a restriction of competition or an abuse of dominance contrary to Article 101 and 102 of the Treaty on the Functioning of the European Union.
What steps have already been taken?
When the Commission launched its DSM strategy on 6 May 2015, the Commission's DG Competition started an e-commerce sector inquiry with the aim of gathering data on the functioning of e-commerce markets so as to identify possible restrictions or distortions of competition, in particular in relation to cross-border online trade. The sector inquiry involved information requests to a variety of actors in e-commerce markets throughout the EU both in relation to the online sales of consumer goods (such as electronics, clothing, shoes and sports equipment) as well as in relation to the online distribution of digital content. Both retailers and manufacturers/suppliers and right holders were questioned.
In parallel to this sector inquiry, DG Competition continued its investigation into the cross-border provision of Pay-TV services in the UK and Ireland, with the issuing of a Statement of Objections on 23 July 2015. In this case, DG Competition contested the use of contractual provisions preventing Sky UK from allowing EU consumers located elsewhere to access, via satellite or online, Pay-TV services available in the UK and Ireland. The investigation in this case is still on-going.
From September to December 2015, the Commission ran a public consultation on geo-blocking and other geographically based restrictions, in order to gather views and opinions on the restrictions faced by users, consumers and businesses when they access or provide information, shop or sell across borders in the European Union. The initial results of this consultation were announced on 27 January 2016 and a full report became available on 18 March 2016.
On 9 December 2015, the Commission published three legislative proposals, one of which specifically relates to the cross-border portability of online content services, thereby tackling at least one aspect of geo-blocking.
Initial findings of the e-commerce sector inquiry
On 18 March 2016, the Commission reported the initial findings of the sector inquiry.
The Commission reported that it had received responses from more than 1400 companies active in the distribution of consumer goods and digital content. According to the Commission, these responses show that geo-blocking is widespread throughout the EU.
As regards consumer goods, 38 % of respondents indicated that they use geo-blocking. Refusal to deliver abroad is the main restriction affecting consumers from other Member States but refusal to accept foreign payment methods, and, to a lesser extent, re-routing and website access blocks are also used. While a majority of such geo-blocking results from unilateral business decisions of retailers, 12% of retailers reported contractual restrictions to sell across borders.
As regards digital content, geo-blocking is applied by the majority of online digital content providers participating in the inquiry (68 %) and, according to the Commission, appears to be largely based on contractual restrictions, with 59 % of respondents indicating that they are contractually required by right holders to geo-block. The techniques used for geo-blocking are mainly the user’s internet protocol (IP) address that identifies and gives the location of a computer/smartphone. There appear to be significant differences in both the extent to which geo-blocking of online digital content services takes place in different Member States, and the extent to which different types of operators implement geo-blocking in relation to different categories of digital content.
The Commission has stated that a more detailed analysis of the findings from the sector inquiry will be presented in a preliminary report which the Commission plans to publish for public consultation in mid-2016. The final report is scheduled for the first quarter of 2017.
By May 2016, the Commission furthermore intends to issue another legislative package to address what it sees as unjustified barriers to cross-border e-commerce.