Commission proposal to target geo-blocking

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The European Commission launched a competition inquiry into the e-commerce sector on 6 May last year, with a view to enabling the Commission to identify possible competition concerns in European e-commerce markets.  The focus of the sector inquiry is on those goods and services in which e-commerce is most widespread, such as electronics, clothing and shoes as well as digital content.  The initial findings from the inquiry, published in March this year, suggest that the practice of “geo-blocking” is widespread in the EU.  Geo-blocking is the practice of online providers preventing users from accessing and purchasing consumer goods or digital content services offered on their website based on the location of the user in a Member State different from that of the provider.

The Commission is investigating contractual restrictions in agreements that amount to geo-blocking and which may well be anti-competitive. In parallel, the Commission has published a draft new Regulation whose focus is on unilateral geo-blocking.  The proposals follow a consultation that took place at the end of last year.

The proposals in the draft Regulation provide that:

  • a trader must not block or limit customers’ access to online interfaces because of a customer’s nationality, residence or place of establishment
  • a trader must seek permission from a customer before re-routing a customers based on that customer’s nationality or location. Even if the customer agrees to be re-routed, the trader must make it easy for the customer to return to the original website, if the customer so wishes
  • discrimination on grounds of nationality, place of residence or establishment is prohibited. This means that a trader cannot use different terms and conditions for customer based in different Member States.  This applies to sales of goods and services, both physical and electronic (e.g. cloud-based services or website hosting), save that there is an exception for copyright-related content
  • a trader must not apply different conditions of payment based on nationality, residence, place of establishment of the customer or for any reasons based on the location of the payment account or payment service provider or the country in which the payment instrument is issued.

The Regulation also provides that any agreement requiring traders to act in violation of the Regulations in relation to passive sales – where the trader does not actively solicit the customer’s business – will be automatically void.

Certain sectors are exempt from the proposed Regulation, notably in the intellectual property context, audio-visual services.

The proposed Regulation is still a long way from becoming law. However, it would be a surprise if legislation does not emerge in a form substantially similar to the proposed Regulation.