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New rules on geo-blocking prohibition

Are you one of those consumers who are trying to find greater choice and better deals by shopping online or at least save some time this way? There is a substantial likelihood that after having finally found the desired product at a favourable price at a foreign trader, you have experienced an unpleasant surprise: The trader does not deliver the goods to Slovenia or you cannot pay for the goods, because your payment card has been issued in Slovenia.

Why, we ask ourselves, is there not supposed to be a single European market? The problem is that these are not direct administrative barriers, but different obstacles created by traders themselves. The traders who are active in a certain Member State block or limit access to their websites for customers from other Member States or apply different general terms for customers from other Member States. Such practices are part of the so-called geo-blocking.

According to the data of the European Parliament, 57% of citizens of the EU Member States bought something online in 2017. The percentage grows if we take into account only internet users; in 2017, 68% of internet users made an online purchase. A third of online purchases were made at a trader from another EU country. In 2015, the survey conducted by the European Commission showed that only 37% of websites actually allow cross-border buyers to complete a purchase successfully (even before entering the payment details). For Slovene buyers the frustration is even greater; if traders place restrictions for buyers from other EU countries, precisely the Slovene buyers – maybe because of the small size and therefore smaller interest in the market – are in the vast majority of cases among those who experience restrictions.

At the end of February the European Parliament and the Council of the European Union adopted a regulation (Regulation (EU) 2018/302), which is aimed at preventing unjustified geo-blocking and discrimination based on customer’s nationality, place of residence or place of establishment in the EU. The Regulation will enter into force on 3 December 2018, right at the beginning of the largest shopping spree in the year.

The Regulation is definitely bringing good news to consumers, however not as good as it might appear at first sight. Namely, the Regulation does not prohibit geo-blocking in general, as it takes into account that the traders may have a well-founded reason why they do now want to sell to other countries. Different regulations continue to apply in the EU Member States, particularly with regard to consumer protection, language requirements, product labelling and similar. Therefore, ensuring compliance in all 28 EU Member States is a complicated and expensive process, which cannot simply be imposed on the traders.

The Regulation has laid down certain situations, where there is no well-founded reason for the different treatment of buyers from different EU Member States. The Regulation thus prohibits geo-blocking in three particular cases, more precisely when the customer wants to:

  • purchase goods. However, in this case an important restriction applies, namely that the trader is not obliged to deliver the goods to the country of buyer’s residence or establishment if it does not deliver goods to this country otherwise. This means that the buyer can still buy the goods, but they have to organise their own transport to the desired location, so the previous actual obstacle to the purchase of goods continues to exist. In this respect, the buyers can use the services of providers that pick up goods on behalf of the buyer in one country and send them to the buyer to another country.
  • purchase electronically supplied goods (for example cloud services). An exception are services that enable access to copyright protected works or other protected subject matter. The geo-blocking prohibition will also not apply to offering services, such as Netflix, Prime Video and similar, neither to the broadcasting of sports events. Excluded are also some other services, e.g. financial services, games of chance and others.
  • purchase services that are not supplied electronically, but are provided at a physical location in the Member State where the trader operates (e.g. hotel services or car rental).

The above-mentioned geo-blocking prohibitions will apply both to consumers and to companies buying goods and services for their own use (the traders will be able to control the latter particularly based on quantities or repeated purchases). The Regulation does not impose any obligation upon the traders to sell goods or services and does not limit the possibility of price differentiation for different groups of customers or for different territories. However, it prohibits the discrimination of customers based on nationality, place of residence or establishment in the above-mentioned situations.

The Regulation also prohibits the traders from blocking and limiting customer’s access to their website due to reasons related to customer’s nationality, place of residence or place of establishment, and redirecting customers to other online interfaces unless the customer has consented thereto. This means that the traders will be able to maintain several online interfaces intended for customers from different countries, and the customers will have the right to choose any of these interfaces for performing their online purchase.

The provision of the Regulation prohibiting discrimination in relation to payments will also contribute significantly to the limitation of geo-blocking. The traders will be able to decide on their own which means of payment will be accepted, for instance whether the payment card of a certain brand and category will be accepted. However, when making such decision, the payment shall not be made subject to the condition that, for instance, such means of payment was issued in a certain Member State.

On the other hand, the provisions of the Regulation mean that also Slovenian traders will have to open their online door somewhat wider and respect the prohibitions and restrictions stipulated by the Regulation in relation to cross-border purchases. Nevertheless, the Regulation will not apply to situations which are purely internal to a Member State where all the relevant elements of the transaction are confined to a single Member State.

Thus, the Regulation does not eliminate geo-blocking in general, yet it represents an important step in this direction. The European legislator is aware of the limitations of the Regulation, therefore it is also foreseen in the Regulation that the European Commission will monitor the impacts of the Regulation periodically and propose its amendments if necessary. Already within the framework of the first evaluation in 2020, the Commission shall consider in particular whether this Regulation should also apply to electronically supplied services for access to copyright protected works or other protected subject matter.