What is the Geo-blocking Regulation and how does it affect companies?

On 3 December 2018, the EU Regulation on me­a­su­res against unjusti­fi­ed geo-bloc­king and ot­her forms of di­scri­mi­na­tion on the grounds of custo­mers’ na­tio­na­li­ty, pla­ce of re­si­dence or pla­ce of establish­ment (“the Geo-blocking Regulation”) beca­me ap­pli­cab­le. The key aspects of the Regulation and the way in which it may af­fect com­pa­ni­es is descri­bed be­low.

What is geo-bloc­king?

Geo-blocking, or geo­grap­hic bloc­king, is when a par­ticu­lar web si­te or in­for­ma­tion sour­ce is not ma­de avai­lab­le in a par­ticu­lar geo­grap­hi­cal area. All ty­pes of restric­tions ba­sed on na­tio­na­li­ty, pla­ce of re­si­dence or geo­grap­hi­cal loca­tion of the con­nec­tion is thus a form of geo-bloc­king.

The un­der­ly­ing pur­po­se of the Regulation

Geo-blocking and ot­her geo­grap­hi­cal­ly-ba­sed restric­tions un­der­mi­ne on­li­ne shop­ping and cross-bor­der sa­les by li­mi­ting the pos­si­bi­li­ty for con­su­mers and bu­si­nes­ses to be­ne­fit from the ad­van­ta­ges of on­li­ne com­mer­ce. The pro­blem equal­ly af­fects con­su­mers and bu­si­nes­ses as end users of pro­ducts and ser­vices and ex­ists both in the on­li­ne en­vi­ron­ment and in re­al-world si­tu­a­tions.

The Geo-blocking Regulation is part of a se­ri­es of new ru­les on e-com­mer­ce ai­med at boosting cross bor­der on­li­ne sa­les in the EU, both for the be­ne­fit of the con­su­mer, who will ha­ve a wi­der range of pos­si­bi­li­ti­es and op­tions in the on­li­ne com­mer­ce are­na as well as for tho­se con­ducting on­li­ne bu­si­ness wit­hin sa­les.

Examples of unjusti­fi­ed geo-bloc­king

There may be justi­fi­ed re­a­sons for on­li­ne sel­lers not to sell cross-bor­der, such as the need to re­gis­ter at the tax aut­ho­ri­ty in the country, hig­her ship­ping costs or costs ari­sing from the ap­pli­ca­tion of fo­rei­gn con­su­mer law. Even though out­si­de bar­ri­ers can cre­a­te ad­di­tio­nal com­pli­ca­tions and ex­tra costs for the sel­ler, dif­fe­rences in the tre­at­ment of custo­mers in the­se si­tu­a­tions are ba­sed on ob­jecti­ve cri­te­ria.

However, di­scri­mi­na­tion between EU custo­mers ba­sed on the desi­re to seg­ment mar­kets along na­tio­nal bor­ders, in or­der to incre­a­se pro­fits to the de­tri­ment of fo­rei­gn custo­mers, is con­si­de­red as unjusti­fi­ed geo-bloc­king. Some ex­amples are:

• bloc­king ac­cess to web­si­tes ac­ross bor­ders;
• deny­ing the pos­si­bi­li­ty to com­ple­te an or­der, to pur­cha­se goods or to down­lo­ad con­tent when ac­ces­sing a web­si­te from ab­ro­ad;
• using dif­fe­rent ty­pes of pay­ment and sa­les con­di­tions for cross bor­der pur­cha­ses;
• pro­vi­ding dif­fe­rent pri­ces and con­di­tions de­pen­ding on na­tio­na­li­ty, country of re­si­dence or loca­tion of the custo­mer.

The Geo-blocking Regulation do­es not pro­hi­bit com­pa­ni­es from ha­ving dif­fe­rent pri­cing for the sa­me pro­ducts in dif­fe­rent countri­es wit­hin the EU. Companies may use dif­fe­rent pri­ces for the sa­me pro­duct on dif­fe­rent web­si­tes or in sto­res in dif­fe­rent countri­es, but custo­mers wit­hin the EU, not de­pen­ding on which mem­ber sta­te, must be gi­ven ac­cess to the va­ri­ous of­fers in a non-di­scri­mi­na­to­ry way. However, this do­es not me­an that com­pa­ni­es are ob­li­ged to de­li­ver goods and ser­vices to any and all mem­ber sta­tes throug­hout the EU. The custo­mer has to pro­vi­de for the ship­ping or de­li­ve­ran­ce of the pro­duct on their own ac­count. To ex­emp­li­fy, if a per­son in the Netherlands ma­kes a pur­cha­se of a pro­duct that the sel­ler on­ly de­li­vers wit­hin the bor­ders of Austria, the custo­mer has to ar­range for the con­ti­nu­ed de­li­ve­ran­ce af­ter the sel­ler has de­li­ve­red in ac­cor­dan­ce with their ap­pli­cab­le terms, as long as the­se terms ap­pli­es to all custo­mers wit­hin the EU.

Furthermore, the Regulation do­es not ap­p­ly to in­di­vi­du­al­ly ne­go­ti­a­ted agre­e­ments and not when so­met­hing is pur­cha­sed for resa­le. Additionally, the Regulation is not ap­pli­cab­le for all sa­les and ser­vices, i.e. fi­nan­ci­al ser­vices and au­di­o­vi­su­al ser­vices are ex­emp­ted.

Sanctions

According to the pro­po­si­tion for the Swedish Act with com­ple­men­ta­ry pro­vi­sions to the Geo-blocking Regulation (Prop. 2018/19:26), com­pa­ni­es that vi­o­la­te the Regulation may be requi­red to pay fi­nes of up to SEK 5 mil­li­on, but a max­i­mum of 10 per­cent of their re­venue for the pre­vious fi­nan­ci­al ye­ar. Other mem­ber sta­tes may choo­se ot­her san­c­tions for com­pa­ni­es that vi­o­la­te the ru­les of tho­se countri­es.

What will hap­pen next?

The Geo-blocking Regulation en­te­red in­to for­ce on 22 March 2018 but beca­me ap­pli­cab­le from 3 December 2018, to al­low in par­ticu­lar small com­pa­ni­es to ad­apt. It is dif­ficult to com­ment on the im­por­tan­ce of the Regulation at this ear­ly stage, but it is of cour­se wel­come with mo­re ge­ne­ral ru­les for the on­li­ne com­mer­ce in the EU.

Within two ye­ars af­ter the entry in­to for­ce of the new ru­les, the Commission will car­ry out a first eva­lu­a­tion of the Regulations 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 as well as of ser­vices in sectors such as trans­port and au­dio-vi­su­al.

Författare är Thomas Nygren och Alexandra von Perner.