The EU geo-blocking Regulation (Regulation 2018/302 of 28 February 2018) (the Regulation) comes into force on 3 December 2018. The Regulation aims to remove barriers to cross-border trade and enable consumers to purchase goods and services from businesses located in different Member States on equal terms to nationals of that Member State. Businesses selling online in the EU, regardless of where they are based, will need to make sure that their terms and conditions, including payment methods, do not discriminate against online customers on the basis of their nationality, place of residence or place of establishment.
Ending unjustified geo-blocking has been an important goal for the Commission under its Digital Single Market initiative which aims to break down barriers to cross-border online activity and remove key differences between online and offline markets. Other measures which are aimed at promoting cross-border e-commerce in the EU include:
- a new Regulation on cross-border parcel delivery services making pricing more transparent and affordable (which came into effect on 22 May 2018);
- new rules to reduce the VAT related administrative burden of cross-border transactions (which come into effect in January 2021);
- a new revised Consumer Protection Cooperation Regulation (which will take effect from 17 January 2020) which will allow national authorities to cooperate to jointly address breaches of consumer law with a cross-border element.
Background to the Regulation
A Commission consultation in 2015 confirmed widespread geo-blocking experienced by consumer respondents and respondents from companies strongly agreed that geo-blocking and other geographically-based restrictions represent significant obstacles to the single market. Fashion, books, computer hardware and electronics, travel tickets and car rental services were flagged as the goods and services most affected by geo-blocking.
Where geo-blocking is the result of a contractual restriction imposed on the retailer, the restriction needs to comply with Article 101 TFEU on anti-competitive agreements or its national equivalent. Restrictions on active sales by retailers outside their allocated territory may be permitted in an exclusive distribution context provided the restriction relates to sales into a territory exclusively allocated to another distributer or reserved to the supplier. Restrictions on passive sales (where the customer approaches the retailer directly) will not be permitted. A unilateral decision by the supplier not to sell its goods or services across borders in the EU can only be scrutinised for compliance with competition law under Article 102 TFEU on abuse of a dominant position. Therefore, unless the supplier has a dominant position, the competition rules will not be applicable and will not be able to address the issue of geo-blocking.
As the Commission identified that most geo-blocking is the result of a unilateral decision by the retailers, competition law will often not be the appropriate tool to prevent these practices. The Commission therefore committed to put in place separate legislation aimed at ending unjustified geo-blocking and adopted a Regulation on 'addressing unjustified geo-blocking and other forms of discrimination based on customers' nationality, place of residence or place of establishment within the internal market'.
Key provisions of the Regulation
The Regulation does not apply to:
- Audio-visual services, including services the principal purpose of which is the provision of access to broadcasts of sport events and which are provided on the basis of exclusive territorial licenses. The Regulation on cross-border portability of online content services (Regulation 2017/1128) which came into effect in March this year, does however allow EU nationals to travel with the digital content (streaming or downloads of films, sports broadcasts, music etc.) for which they have subscribed in their Member State of residence.The provision of non-audio-visual copyright protected services (e-books, online music, software, video games) is subject to the Regulation, but is excluded from the requirement not to apply different general conditions of access related to the nationality, place of residence or establishment of the customer set out in Article 4. This exclusion will be reviewed by 23 March 2020.
- Transport services are excluded from the Regulation, but EU transport legislation already prohibits discrimination similar to that prohibited by the Regulation in respect of air transport tickets, bus and coach transport and waterborne transport.
- Financial services, including payment services, are outside the scope of the Regulation. This is without prejudice to the requirement under the Regulation not to discriminate in relation to the range of payment means accepted by traders.
- The Regulation does not apply to transactions which have no cross-border element and are purely internal to one Member State, nor does it apply to business transactions which are not made for the purpose of end use but are made with the intention to resell, transform, process, rent or subcontract.
Access to online interfaces (Article 3)
A trader is not allowed to block or limit a customer's access to its online interface (which means any software, including a website and mobile applications operated by the trader or on its behalf in order to give consumers access to its goods or services) for reasons related to the customer's nationality, place or residence or place of establishment. Traders are also not permitted to redirect customers to a different version of the online interface which the customer tried to access, unless the customer has expressly consented to such redirection.
Blocking or redirecting is however permitted where it is necessary to comply with an EU legal requirement or Member State legislation in accordance with EU law. Where that is the case the trader must give a clear and specific explanation of the reasons for the blocking or redirecting, in the language of the online interface the customer tried to access.
Traders are permitted to have different versions of their website with different prices, conditions and offers aimed at different countries, but customers must be able to purchase the goods or services from all versions of the website.
Non-discrimination in access to goods or services (Article 4)
Traders are not permitted to apply different general conditions of access to goods or services for reasons related to the customer's nationality, place of residence or place of establishment. The Regulation does not impose an obligation on traders to deliver across the EU, or to set up pick up points for their goods in other countries. Where this option is available however, customers from other Member States should be able to access it regardless of their nationality, residence or establishment.
The Regulation does not require traders to harmonise prices or other terms across all Member States, provided they are offered to all customers on a non-discriminatory basis.
Non-discrimination for reasons related to payment (Article 5)
Traders are free to decide which means of payment they will accept but once the choice has been made they should not apply different conditions to a payment transaction for reasons related to the customer's nationality, place of residence or place of establishment, the location of the payment account, the place of establishment of the payment service provider or the place of issue of the payment instrument. This non-discrimination requirement applies to payment transactions where:
- payments are made through electronic transactions by credit transfer, direct debit or a cart-based payment instrument within the same payment brand and category;
- the authentication requirements are met, and
- the payment transactions are in a currency accepted by the trader.
Agreements restricting active and passive sales (Article 6)
The Regulation does not affect restrictions on active sales which are permitted under the EU competition rules, as set out in the EU vertical agreements block exemption Regulation. It remains possible to prevent an exclusive distributor from actively promoting and selling the contract goods into the territory allocated to other exclusive distributors or reserved by the supplier.
Restrictions on passive sales, under which the trader is prevented from selling to a customer outside his allocated territory where approached directly by the customer, are not permitted under the Regulation or under the EU competition rules.
Enforcement of the Regulation (Article 7)
Article 7(1) of the Regulation requires Member States to designate one or more bodies responsible for adequate and effective enforcement of the Regulation and Article 7(2) requires Member States to put in place the necessary enforcement measures, including sanctions.
Enforcement in the UK
The Competition and Markets Authority (CMA) will be responsible for enforcement of the geo-blocking Regulation in the UK. The Geo-Blocking (Enforcement) Regulations 2018 provide that failure to comply with the Regulation by a trader may be enforced under Part 8 of the Enterprise Act 2002 if the breach harms the collective interests of consumers. Failure by a trader to comply with Article 3, Article 4(1) or Article 5(1) of the Regulation is a breach of an obligation by a trader to a customer and where loss or damage is caused the customer can bring a civil action against the trader for that loss or damage.
Impact of Brexit
The Commission and the UK Government have published notices on the impact of a no-deal Brexit for the UK in the field of geo-blocking. The Regulation will cease to have effect in the UK on 29 March 2018. UK nationals residing in the UK or undertakings established in the UK will not be able to benefit from the Regulation and it will be possible for traders in the EU to block, limit or redirect access to their websites. UK customers may also be subject to different terms and conditions when purchasing goods and services from an EU trader and their UK based payment methods may be refused or subject to different conditions than those offered to EU customers.
UK traders selling into the EU will remain subject to the requirements of the Regulation which applies to all traders operating within the EU, regardless of where they are established.
The EU Withdrawal Agreement provides for a transition period until the end of December 2020 with the possibility of an extension. If the Withdrawal Agreement is adopted, the Regulation will remain in force in the UK until the end of the transition period. A future trade deal between the EU and the UK may provide for a similar regime, but as the Regulation is very much an EU single market measure this is unlikely to be the case.