When launching its Digital Marketing Strategy in May 2015, the Commission highlighted that one of the major aims of the strategy would be to introduce clearer rules to enable businesses and consumers to buy and sell online with greater transparency and greater confidence. A key facet of this was to end what the Commission described as ‘unjustified’ geo-blocking, where traders directly or indirectly discriminate between customers looking to purchase goods and services online based on their nationality, or country of residence (for consumers) or country of establishment (for businesses).

The proposed text of the Regulation published by the Commission seeks to take concepts that currently already exist in the Services Directive (2006/123/EC) – which provides that service providers should not treat customers differently based on their nationality or country of residence unless this can be objectively justified – and apply them to geo-blocking practices in the online retail environment.

The key proposals in the Regulation are:

Access to websites and other online interfaces

The Regulation contains a prohibition on:

  1. the absolute blocking of access to websites (and similar electronic interfaces such as apps) based on the nationality or country of residence of the customer; and
  2. automatically re-routing customers to a different country version of a website without the customer’s consent (and, where consent is obtained, ensuring that all versions of the website should remain easily accessible to the customer).

As an exception to these prohibitions, traders are entitled to block access to websites where they would be required to do so in order to comply with an EU law or local law of the applicable Member State.

Access to goods and services

There are further specific prohibitions on a trader discriminating between customers based on their nationality or country of residence/establishment:

  1. because the trader does not deliver to the customer’s country of residence/establishment (for example, if the customer is willing to travel to a country where the trader does deliver, or able to organise delivery to the customer’s address independently);
  2. in the provision of certain electronically supplied services, such as cloud computing or website hosting services;
  3. in the provision of non-electronic services either at the trader’s premises or in a physical location in which the trader operates, on the basis that the customer is not a national of, or resident in, the trader’s Member State. An example of this would be if a French trader selling tickets to a concert in Paris applied different terms to French and Italian customers; and
  4. based on the country of origin/issue of the customer’s chosen payment mechanism, although the trader would still be free to choose which brand of payment mechanism it accepts. So, for example, if a trader accepts Visa cards it should accept those cards irrespective of the Member State in which the card is issued.

It is worth noting that these provisions would also apply to similar discrimination in the offline world, as well as online.

Copyright materials

In a previous draft of the Regulation, there was an additional restriction on traders discriminating against customers from another Member State in the supply of non-audiovisual works protected by copyright (such as e-books, music or games) where the trader had obtained the relevant rights for the customer’s Member State. This provision was not included in the current proposal, although the draft expressly provides for a review of the scope of the Regulation to determine whether it should extend to these services.

Application of the new rules

The Regulation is intended to apply to all traders who sell to businesses or consumers within the EU, irrespective of whether the trader is itself situated inside or outside of the EU. However, it does not apply to sales to businesses who are purchasing goods for resale, as these are already covered by existing vertical agreement exemptions under EU competition law. Importantly for traders, the Regulation further provides that traders should not be deemed to be directing their activities at consumers based in each of the Member States – and hence potentially be required to comply with local consumer laws in each Member State – purely by virtue of complying with the Regulation.

Audio-visual services

A large degree of speculation over the Commission’s geo-blocking proposals has concerned the extent to which they would prohibit geo-blocking of audio-visual services such as Netflix or Sky Go. Audio-visual services are expressly excluded from the scope of the current draft of the Regulation – in all likelihood because such services are also excluded from the scope of the Services Directive. However, this does not necessarily entail that these services will not be affected by forthcoming changes under the DSM. In particular:

  • In December 2015, the Commission published the draft text of a proposed Regulation to facilitate the cross-border ‘portability’ of online content services within the EU (see our update for further information).
  • The EU is conducting a separate review of the EU copyright regime, including in relation to audio-visual services, and is due to publish further proposals in Autumn 2016. As part of this review, the Commission issued a consultation over whether the Satellite and Cable Directive (93/83/EEC) should be updated to apply to the online activities of broadcasters.
  • The Commission is also currently running a widespread enquiry into the e-commerce sector, with a particular focus on geo-blocking. The results of that enquiry may well lead to additional specific legislation, or other clarification from the Commission as to its view of the legality of the geo-blocking practices used by operators in the audio-visual services industries.

 


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