On 20 November the European Parliament, the Council and the Commission reached an agreement to adopt the proposed Geoblocking Regulation, which will come into force nine months after its publication in the EU Official Journal.
The Regulation is a key plank of the Commission’s Digital Single Market Strategy and it is intended to end unjustified geoblocking for consumers wishing to buy products or services online within the EU.
The Commission’s other measures in relation to the digital single market include its e-commerce sector inquiry (here and here) and its antitrust investigation into absolute territorial restrictions in the distribution arrangements between Sky UK and the six Hollywood film studios (on which we have commented extensively here, here and here).
What about competition law?
An important rationale for the Regulation is that restrictions to cross-border sales by online traders are often unilateral and so do not constitute an “agreement or concerted practice” within the meaning of Article 101 TFEU. Rather, a restriction on cross-border trade will only be caught by competition law if it is due to an agreement with a supplier, or the online trader is in a dominant position.
Competition law’s limited ability to take action against unilateral conduct is underlined by the Commission’s closing of its investigation into Apple’s differential pricing policy for downloads, that resulted in UK consumers paying more than consumers in other Member States. The issue was ultimately resolved by voluntary commitments from Apple in 2008 (here).
What is geoblocking?
Geoblocking is a term given to the practical and technical measures used by online traders to deny access to websites, or online services, to consumers based in Member States other than the website domain. The Commission considers that these restrictions often result in consumers being charged more for products or services purchased online.
A well-known example of geoblocking is the car rental market: renting a car from a company in the UK can cost up to 53% more than renting from the same company in Poland, but a UK consumer cannot access the Polish site for the cheap deals.
What does the Geoblocking Regulation prohibit?
The Regulation prohibits unilateral commercial behaviour which discriminates on the basis of where a person is from, where they live or where a business is established.
It does not (currently) apply to copyright protected works, nor does it harmonise prices between different EU Member States, or impose an obligation to sell. It also prohibits agreements containing passive (or unsolicited) sales restrictions which violate the rules. However, the Commission’s Vertical Agreements Block Exemption permits passive sales in certain circumstances, for example a passive sales restriction could, for a limited time, be lawfully imposed on a distributor in an exclusive distribution agreement with a manufacturer. The Regulation may provide an early indication of potential changes in relation to passive sales when the new Block Exemption enters into force in 2022.
The specific prohibitions are:
- Geoblocking: A trader must not block or limit customers' access to websites because of a customer's nationality, residence or place of establishment.
- Redirecting a customer without permission: A trader must seek permission before redirecting based on nationality or location. Even if a customer agrees to the redirection the trader must make it easy to return to the website originally searched.
- Discrimination: On the grounds of nationality/residence/place of establishment is prohibited; for applying example different terms and conditions on such grounds will not be permitted. This prohibition applies to:
- sales of goods when the trader is based in a different Member State to the customer (for example buying a car or a refrigerator);
- all electronically-supplied services, other than copyright-protected works, (for example internet hosting services); and
- the sale of services provided in a specific physical location (for example buying a trip to an amusement park in another Member State).
When is geoblocking justified?
The Regulation accepts that some forms of geoblocking may be justified, for example in relation to specific national VAT obligations or different legal requirements.