In May 2016 the EU Commission published draft regulations on geo-blocking with the aim of ensuring service providers do not treat customers any differently based on their nationality, country of residence or place of establishment. Craig Giles summarised the key proposals here on MediaWrites.
The final agreed text – Regulation (EU) 2018/302 (the “Regulation”) – was published in the Official Journal on 2 March 2018 and will come into effect from 3 December 2018. This Regulation forms part of the EU’s Digital Market Strategy, with the EU Commission identifying geo-blocking as an obstacle to harmonised cross-border e-commerce and therefore viewing this Regulation as an important step on the path to achieving their aim of an integrated Digital Single Market in Europe.
Interestingly, services linked to non-audiovisual copyrighted content (e.g. e-books and music streaming) are excluded from the scope of the Regulation. However the Commission has left scope in the Regulation for this to change, as discussed below.
What effect will the Regulation have?
The Regulation will prohibit the blocking of access to online interfaces based on the nationality or residency of the customer (for example, by preventing a Spanish user from accessing a website targeted at German nationals), and a business will not be entitled to redirect customers to a different version of the online interface they were seeking to access without the customer’s consent (for example, by redirecting customers with a Spanish IP address to a Spanish website, when they were attempting to access the German version of that website).
Traders will not be able to apply different payment conditions for customers for reasons of nationality, residency or place of establishment where:
- The goods will be delivered to a Member State to which the trader offers delivery (and so, for example, if a trader says they deliver anywhere in Italy, they should not refuse to sell a product to an Irish customer who is happy for the product to be delivered to Italy, but the trader would not be obliged to deliver the product to Ireland);
- There is a provision of electronically supplied services, such as website hosting and cloud services (although services whose main feature is the provision of copyright protected works are excluded); and
- The services provided are received by the customer in the country where the trader operates.
However there is no obligation to harmonise prices in all Member States, provided that customers are entitled to purchase goods and services in different Member States in accordance with the Regulation.
Certain services are excluded from the scope of the Regulation, such as audio-visual services, financial services, transport services, healthcare and social services.
The effects of the new Regulation and the scope of it will be reviewed after two years (by 23 March 2020) and every five years thereafter taking ‘into account the overall impact of the Regulation on the internal market and cross-border e-commerce, including, in particular, the potential additional administrative and financial burden for traders’ (Article 9). As set out above, it will be interesting to see whether the scope of the Regulation will be widened to include any of the above excluded services, or copyright-protected works, following the first review.
What does it mean for businesses?
Any business selling online in an EU Member State will be impacted by this new Regulation and needs to be aware of its effect. Businesses will need to review their current processes to ensure compliance, with particular focus on their terms and conditions and pricing mechanisms. Unless a trader operates solely within an excluded industry, any form of geo-blocking or redirection will need to be assessed for compliance with the new Regulation and, where necessary, amended before 3 December 2018.
Will Brexit have an impact on this?
The EU Commission published a notice to stakeholders on 21 March 2018 regarding the withdrawal of the UK and EU legislation in the field of geo-blocking. Unless the UK reaches a withdrawal agreement (which it may do) establishing a different withdrawal date, all EU primary and secondary law will cease to apply to the UK from 30 March 2019, and this therefore means that customers in the UK will not be able to benefit from this Regulation from the withdrawal date. Traders, however, who are established in the UK but offer goods or services to customers in the EU will continue to be bound by the Regulation and therefore need to be aware of it.
Digital Single Market Update: Part 1, Portability