Geo-blocking: unlocking e-commerce in the EU
Geo-blocking is a discriminatory practice that prevents online customers from accessing and purchasing products or services from a website based in another member state. In order to remove this barrier, the EU is putting in place a geo-blocking regulation.
On 27 February 2018, the Council adopted the regulation to ban unjustified geo-blocking in the internal market.
"The end of geo-blocking means wider choice, better deals for consumers and more opportunities for businesses", said Lilyana Pavlova, Minister for the Bulgarian Presidency of the Council of the EU.
The regulation will remove discrimination based on:
- customers' nationality
- place of residence
- place of establishment
The ban on geo-blocking is an important element of the digital single market strategy.
Once it takes effect, the geo-blocking regulation will supplement other landmark achievements such as the end of roaming charges for mobile phones and the introduction of cross-border portability for online subscriptions.
Geo-blocking in the EU (infographic)
Why do we need it?
At present, only 15% of Europeans buy products from online shops based in another EU country. One of the reasons is precisely the 'geo-blocking' practice.
The geo-blocking regulation will lift such restrictions and unlock e-commerce for the benefit of both consumers and companies.
It will also prevent discrimination for consumers and companies on access to prices, sales or payment conditions when buying products and services in another EU country.
The end of unjustified geo-blocking will greatly enlarge the choice available to citizens when shopping online and will give a major boost to e-commerce. Consumers will be able to shop around for the best deals within the internal market. Kadri Simson, Minister of Economic Affairs and Infrastructure of Estonia
In detail
Equal access to goods and services
Under the new rules, traders will not be able to discriminate between customers with regard to the general terms and conditions - including prices - in three cases:
- for goods that are either delivered in a member state to which the trader offers delivery or are collected at a location agreed with the customer
- for electronically supplied services such as cloud, data warehousing and website hosting
- for services such as hotel accommodation and car rental which are received by the customer in the country where the trader operates
Payment transactions
Unjustified discrimination of customers in relation to payment methods will be forbidden.
Therefore traders will not be allowed to apply different payment conditions for customers for reasons of nationality, place of residence or place of establishment.
E-commerce website access
Traders will not be allowed to block or limit customers' access to their online interface for reasons of nationality or place of residence.
A clear explanation will have to be provided if a trader blocks or limits access or redirects customers to a different version of the online interface.
Passive sales
As a general rule, the new regulation will prevail in cases of conflict with competition law. However, the right of suppliers to impose active sales restrictions will not be affected.
EU competition law distinguishes between passive sales (when sales are made in response to unsolicited orders) and active sales (when retailers are actively targeting customers).
Passive sales restrictions are generally considered as an infringement to competition law while active sales restrictions are a common practice which stems from commercial freedom.
Exceptions
Services linked to copyright-protected content or works in an intangible form - such as music streaming services and e-books - will be excluded from the scope of the regulation. But this will be subject to a review by the European Commission.
Other services such as financial, audio-visual, transport, healthcare and social services will also be excluded.
Unlike price discrimination, price differentiation will not be prohibited. Therefore traders will be free to offer different general conditions, including prices, and to target certain groups of customers in specific territories.
Moreover, traders will not be obliged to deliver goods to customers outside the member state to which they offer delivery.
The objective: a truly single market
Background
In May 2016, the European Commission put forward a proposal on geo-blocking. It was presented together with supplementary legislative proposals on cross-border parcel delivery services and a review of the consumer protection cooperation regulation. The objective of these initiatives is to move towards the integration of a truly single market.
On 22-23 June 2017, the European Council asked for the implementation of the digital single market strategy 'in all its elements'. The EU leaders mentioned that this would allow the European Union to face up to the challenges and use the opportunities flowing from the '4th industrial revolution'.
Entry into force
The Council adopted the geo-blocking regulation in February 2018 following the final agreement from November 2017. The regulation is set to be published in the EU's Official Journal.
It will be applicable nine months after publication.
Review clause
Two years after the new rules enter into force, the Commission will carry out a first evaluation of their impact on the internal market.
The evaluation will include a possible application of the new rules to certain electronically supplied services which offer copyrighted content such as downloadable music, e-books, software and online games.