Time is running out for Geo-blocking

From 3 December 2018, the EU Geo-blocking Regulation (Regulation) will prohibit unjustified geo-blocking within the European Union. This legislative change will particularly affect all companies selling goods or providing services online to EU customers. Companies need to act now and review the implications of the Regulation on their businesses and, where necessary, amend their sales methods and terms and conditions.

When does the Regulation apply?

The Regulation does not differentiate between traders established in the EU and those established in third countries. Instead, retailers, marketplaces and service providers targeting customers in at least one EU/EEA Member State are subject to the Regulation. The Regulation applies to the sale of goods, as well as to the provision of many services. The Regulation also covers all sales channels (online and offline), B2C and B2B sales or services (if the
goods or services are used for the company‘s own end use, e.g. office supplies).

What is Geo-blocking?

In short, geo-blocking refers to a contractual or technical restriction that prevents customers from buying or accessing a product or service based on their location, residence or nationality.

What kind of measures are prohibited by the Regulation?

A trader may not, for reasons related to a customer‘s nationality, place of residence or place of establishment,

• apply different net prices or different general conditions of access to goods or services where the customers seeks to receive the goods or services in an EU Member State where the trader operates;
• apply different conditions for a payment transaction;
• block a customer‘s access to its online interface; and
• automatically redirect a customer to a different version of its online interface.

These prohibitions also apply to indirect discrimination, based, e.g. on the customer‘s IP address or on the place of issue of the customer‘s payment instrument.

Do we need to sell our products to all European Countries now?

The Regulation does not force traders to extend their business activities (i.e. delivery area) to additional EU Member States. However, a customer situated in one EU Member State needs to be able to have the goods delivered to another EU Member State where the trader already offers a delivery or a pick-up service. For example, if a German online retailer only offers delivery to Germany and Austria, it does not need to deliver its goods to France. However, a French customer with a French credit card
and a French home address in Strasbourg needs to be able to access, order and pay for the goods and have them delivered to his workplace address in neighbouring Kehl, Germany.

Do we need to sell at the same price on our .de and our .fr Website?

The Regulation neither forces traders to abandon their localised website versions nor does it require them to harmonise their prices and sales conditions across different EU websites or other points of sale. However, all EU customers need to be able to buy products from all EU websites/website versions. For example, if a German online retailer has a German .de and a French .fr website, it does not need to offer its German promotional price on its French .fr website, too. However, that French customer from Strasbourg needs to be able to access, order and pay for the goods from the German .de website and have them delivered to his German workplace in Kehl.

What parts of the sales process are affected?

Geo-blocking can take many forms. Changes may be required, for example, to the following processes:

• order procedures (e.g. order forms);
• payment methods (e.g. acceptance of credit cards);
• customer authentication processes;
• pricing;
• terms and conditions (e.g. conditions concerning the customer‘s location);
• information texts (e.g. Q&A for potential customers);
• website and app availability and redirections (e.g. IP checks, automatic referrals) and
• distribution agreements.

Are the any exceptions?

The Regulation does not apply, for example, to audio-visual services, radio broadcasting, financial retail services, healthcare services, transport services and gambling. A provider may also be exempted from some of the Regulation‘s obligations where required by national (e.g. pricing of books) or where its services are copyright protected (e.g. online music).

How will the rules be enforced?

The Regulation will be subject to both private enforcement (by competitors and consumer organisations) and public enforcement (by national authorities). In Germany, the German Federal Network Agency (Bundesnetzagentur) will be in charge of enforcing the Regulation and will be able to impose fines of up to EUR 300,000 for intentional or negligent infringements of the Regulation. We expect that the European Commission will closely monitor the Regulation‘s decentralised enforcement.

What are the motives behind the Regulation?

The European Commission views cross-border e-commerce as contributing to the integration of the EU internal market. That is why the Commission is fighting hard to end any impediments to cross-border e-commerce. In 2015, the Commission launched its Digital Single Market strategy to address such impediments. From the outset, geo-blocking was high on the Commission‘s agenda. The Commission‘s concerns were corroborated when its inquiry into the e-commerce sector indicated that approx. 38 percent of responding retailers implement geo-blocking measures.

Last but not least...

European competition law may also prohibit companies from using geo-blocking measures:

• Typically, supply agreements limiting the trader‘s ability to passively sell to customers in certain territories are illegal under EU competition law.
• Geo-blocking measures implemented by dominant companies may be considered an illegal abuse of that dominant position.
• In contrast, under EU competition law, it is legal for non-dominant traders to unilaterally decide not to sell cross-border.

The stakes are high if a geo-blocking measure infringes EU competition law. For example, the European Commission recently fined Pioneer EUR 10 million for, inter alia, allegedly limiting “the ability of its retailers to sell-cross border to consumers in other Member States in order to sustain different resale prices in different Member States”.

If you have any questions don't hesitate to contact Christoph Heinrich.