On 18 March 2016, the European Commission published its initial findings on the existence of geo-blocking practices in the e-commerce sector. This report is part of the ongoing sector inquiry into e-commerce, which was launched by the Commission in May 2015 [see our April 2015 newsletter].
The Commission's focus is on (i) retailers selling consumer goods, including clothing, electronics, sports and healthcare products and (ii) providers of digital content, such as films, TV and music. Geo-blocking refers to the practice of restricting cross-border sales via the internet, which can manifest itself in multiple ways. Retailers can prevent online shoppers from purchasing consumer goods on the basis of, for example, the shopper's location or country of residence. Digital content providers can prevent consumers from accessing digital content services, which mainly occurs on the basis of the consumer's IP address.
The conclusion of the Commission is that geo-blocking is widespread throughout the EU. Its initial findings show that 38% of the responding retailers selling consumer goods are involved in geo-blocking practices, against 68% of the responding digital content providers.
The Commission acknowledges that the use of geo-blocking does not automatically imply that there are anticompetitive concerns. Geo-blocking may restrict competition if it is linked to agreements between suppliers and distributors. In contrast, geo-blocking falls outside the scope of EU competition law if it results from a unilateral decision of a non-dominant company.
These initial findings are the first results of the e-commerce sector inquiry. The Commission expects to present a more detailed analysis in a preliminary report in mid-2016, which will be followed by a public consultation. This report will not only cover geo-blocking, but also other potential competition concerns for e-commerce markets. A final Commission report is scheduled for early 2017. The Commission already indicated that it will take a close look at anticompetitive behaviour in the e-commerce sector, which could lead to enforcement measures on a case-by-case basis. If you operate an online distribution network, this could be a good reason to consider possible competition law compliance measures, including a re-assessment of your contracts and business practices.