TMT | IP Publications

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.

The au­thors are Thomas Nygren and Alexandra von Perner.