At a Glance…
Regulation (EU) 2018/302, which addresses unjustified geo-blocking, applies from Monday 3 December 2018 in all EU member states (the ‘Regulation’).
The Regulation is aimed at restricting traders from blocking access to websites by customers from other European countries, preventing geographic discrimination through use of different online terms and conditions or refusal of means of online payment.
Who do the new Regulations apply to?
1. Traders – who are defined as natural or legal persons who act for purposes related to that person’s: trade business, craft or profession. The Regulation has ‘extra-territorial’ effect and means that traders do not need to be established in the EU for the Regulation to apply. The applicable test is whether they offer goods or services to customers in the EU.
2. Customers – who are defined as: (a) consumers who are nationals of, or have their place of residence in, an EU member state; or (b) undertakings which are established in an EU member state; AND they receive services or purchase goods, or seeks to do so, within the EU, for the sole purpose of end use. This means that the Regulation covers sales to businesses and not just consumers. However, the goods or services being purchased should be for end use and the recitals clarify that the Regulation is without prejudice to non-discriminatory practices of traders limiting transactions or repetitive transactions, in order to prevent customers from purchasing quantities exceeding their internal needs.
Exceptions - the Regulation currently does not apply to audio-visual services, services in the field of transport and financial services / retail financial services.
Key points for Traders:
- Access to online interfaces: Traders shall not, through the use of technological measures or otherwise, block or limit a customer's access to the trader's website or application for reasons related to the customer's nationality, place of residence or place of establishment. The Regulation also stops traders from rerouting customers to another version of its website (i.e. automatically redirecting a customer in Italy trying to access a retailer’s UK website to the retailer’s Italian website) unless:
i. the customer has explicitly consented (and where the customer does consent, the original website that they were redirected from remains easily accessible to that customer); or
ii. to comply with EU or national law (in such cases an explanation of why the customer cannot access the website should be given in the language of the website or application that the customer initially sought to access).
- Delivery: Though traders cannot select the EU countries that they will sell to customers in (i.e. they must not discriminate customers on their nationality, place of residence or establishment) traders can select which countries (or parts of countries) they will deliver to. For instance, traders are allowed to have terms which set out they only deliver to certain countries, so if customers order from outside of the countries where delivery is available then they must be able to collect from the trader or a pick up point in the country where delivery is available.
- Payment: Traders are free to choose which payment method they accept. However, the trader must not discriminate the payment method based on the customer’s nationality, place of residence, establishment or place of issue of the payment instrument, where:
i. the payment transaction is made through an electronic transaction by credit transfer, direct debit or a card-based payment instrument within the same payment brand and category;
ii. authentication requirements are fulfilled; and
iii. the payment transactions are in a currency that the trader accepts.
- Restriction of passive sales: Trader’s cannot prohibit ‘passive sales’ in situations covered by the Regulation and any such restriction will lead to such contractual requirements prohibiting the passive sales to be void. This means that traders are free to serve all customers in the EU regardless of the place of their nationality. For instance, a trader in the UK cannot be prohibited by its supplier in Spain from making sales to Spanish customers if the Spanish customers order directly from the traders UK site. The Regulation will not affect agreements restricting active sales or passive sales within the meaning of the vertical block exemption and therefore, in most cases, the Regulation is not more restrictive than current competition rules. However, there are some instances where passive sales restrictions are allowed in accordance with EU competition rules. In respect of this there is a transitional period to allow relevant distribution agreements to be adapted and so for agreements concluded before 2 March 2018 that are compliant with Article 101 TFEU the article of the Regulation dealing with passive sales (Article 6) will only apply from 3 March 2020.
Once the UK leaves the EU, consumers and undertakings in the United Kingdom will no longer fit within the definition of ‘customers’ and therefore the Regulation will not apply to them. However, traders located in the UK selling into the EU will still have to comply with the Regulation due to its ‘extra-territorial’ effect.