Regulation on addressing unjustified geo-blocking is imminent

On 2 March 2018, the Regulation on addressing unjustified geo-blocking within the internal market (Geo-blocking Regulation) was published in the Official Journal of the European Union and will therefore apply nine months later, from 3 December 2018. Online providers are thus prohibited from using certain geo-blocking measures.

Geo-blocking within the meaning of the new Regulation covers firstly the blocking of access to online content due to the user’s place of residence, and secondly covers hindrances to use, such as restrictions on certain delivery addresses or credit cards in online shops. Geo-blocking prevents customers from viewing and purchasing goods and services from other Member States online.

The Geo-blocking Regulation is intended to eliminate unjustified geo-blocking, i.e. discrimination based on customers’ nationality, place of residence or place of establishment. Within the meaning of the Geo-blocking Regulation, ‘customers’ can be consumers or also companies making purchases for the purpose of end usage. Only cross-border situations are covered.

Excluded from the scope of the Geo-blocking Regulation, however, are copyrighted content, especially audiovisual media in the form of streaming offerings, and online games and software. The areas of finance, transport, healthcare and social matters are also excluded from the scope. In these areas, the scope is the same as for the Services Directive.

At its heart, the Geo-blocking Regulation covers three prohibitions: (i) access restrictions to online user interfaces, (ii) discrimination in standard business terms and (iii) discrimination in payment methods.

No restriction of online access

Providers are not permitted to restrict access to their online user interfaces (i.e. especially websites and apps) based on nationality or place of residence. If blocking or forwarding is necessary (to comply with the laws of a Member State, for example), the grounds must be clearly explained to the customer.

No discrimination via standard business terms (in three cases):

Treating customers differently in terms of standard business terms based on their origin is inadmissible if the provider sells goods available for delivery or collection by the customer in a particular Member State. However, providers are not additionally required to deliver goods to a Member State in which they do not offer delivery.

Treating customers differently based on their origin is equally inadmissible if services can be rendered electronically in exactly the same way abroad as in the provider’s home country. This applies especially to purely digitally rendered services such as cloud services, data warehousing, web hosting and the provision of firewalls.

Equally inadmissible is discrimination based on origin if the customer uses a service in the country in which the provider offers the service. Good examples of this are hotel reservations, car hire, or tickets for concerts or theme parks.

However, there is no harmonisation of prices. Thus while price discrimination based on the place of residence is prohibited, other charging of different prices is still permitted based on private autonomy. Providers are at liberty to offer certain customer groups different prices and terms.

Payment methods

The Regulation forbids unjustified discrimination of customers with regard to payment methods based on nationality, place or residence or place of establishment. Providers must allow customers from other European countries the same payment methods they offer their domestic customers.

Exceptions

Exceptions from these prohibitions are made in principle if there would otherwise be an infringement of EU law or Member State law in compliance with EU law.

Passive sales

European competition law distinguishes between passive distribution (sale after unrequested orders) and active distribution (customers are specifically approached). Passive distribution restrictions are in general to be seen as an infringement of competition law while active distribution restrictions are attributed to entrepreneurial freedom.

In principle, the new Regulation takes precedence over competition law. Thus the prohibition of restrictions on passive distribution is extended. The right of producers to agree on active distribution restrictions is not affected, however.

Review clause

The European Commission is to review the effect of the Regulation on the internal market two years after commencement, i.e. by 23 March 2020.

The review will consider possibly extending the scope of the Regulation to certain electronically provided services with copyrighted content such as music downloads, e-books, software and online games.

Context

The European Commission presented its original bill for a Geo-blocking Regulation to the Council of the European Union and the European Parliament on 25 May 2016.

At the same time, proposals were made on cross-border package delivery services and a review of the Consumer Protection Cooperation Regulation, with the aim of driving forward the digital European internal market. The Geo-blocking Regulation thus fits into a raft of measures on the digital internal market. The Portability Regulation regarding audiovisual services is already in force.

The European Parliament approved the draft Geo-blocking Regulation on 6 February 2018.

Read about it in the Official Journal of the European Union at: http://eur-lex.europa.eu/legal-content/EN/TXT/?uri=uriserv:OJ.LI.2018.060.01.0001.01.ENG&toc=OJ:L:2018:060I:TOC