20/11/2018

The Geo-Blocking Regulation enters into force on 3 December 2018. What to expect?

Written byAndreas Reygaert

“Geo-blocking” is a phenomenon whereby companies refuse a sale to a customer based on geographical factors such as their nationality or location.

Common geo-blocking practices are the denial of access to customers to a website of another EU member state or to reroute customers to their “local website” while digitally restricting their ability to purchase products or services offered on the website that was initially visited.

These practices have been found inconsistent with EU’s internal market principles of free movement of goods and services. Customers should be able to pick the fruits of an integrated market and the Geo-Blocking Regulation aims to achieve this goal.

Who is concerned?

The Geo-Blocking Regulation is relevant for all traders offering their goods or services to EU customers (B2C and B2B) in the EU. The Regulation applies regardless of whether the trader is established in the EU or in a third country. Customers are individuals or companies resident or established in the EU who buy goods or services for their end-use (without the goal to re-sell, transform, process, rent or subcontract).

Some significant industries are specifically excluded from the Regulation:

  • audiovisual services, including services providing access to film and television content;
  • financial services, including payment services;
  • services in the field of transport

The text of the Regulation suggests that, contrary to audiovisual services, non-audiovisual electronically supplied services are within the scope of the Regulation. Both audiovisual and non-audiovisual services have as a main feature the provision of access to and use of copyright protected works or other subject–matters protected by intellectual property rights. It seems inconsistent that, while film and television content is explicitly excluded, services providing access to, for example games, e-books or music are in the scope of the geo-blocking prohibitions.

The Regulation provides for a review of the scope of application of the Regulation at the end of 2020, when it has been in force for some time. 

Main changes

The Geo-blocking Regulation focusses on three major changes.

  1. Access to online interfaces

Customers must be permitted to independently choose an online shopping website and cannot be blocked or automatically rerouted to another “local” website. In other words, a customer must have unlimited access to the online interface of a website, irrespective of its geographical direction, and the redirection to a different online interface than initially sought requires the customer’s explicit consent.

  1. Access to goods and services

Customers must be entitled to engage in transactions under the same conditions as the local, national customer. Full and equal access to goods and services offered must be ensured. However, the impact of the Regulation is different for physical goods and services:

  • Physical goods: Traders cannot treat customers from other member states any differently than national customers. Yet, a trader will not be forced to deliver its goods cross-border. If the trader decides only to deliver its goods domestically, he can continue to do so under the new Regulation. Customers from outside of that territory may order goods (under the same conditions as local customers), but they will need to make sure they have a local delivery address or collect the goods in that state.
  • Services: Service providers will be allowed to continue to apply different conditions and prices or make special offers only to customers of a specific EU member state. However, such differentiations may not solely be based on geographical factors.
  1. Means of payment

Traders remain free to determine which payment means they accept (credit card, debit card, card-based payment instrument within the same brand and category). However, once this choice is made, a difference in treatment based on customer’s nationality, place of residence or place of establishment, in the form of, for example, additional costs or not accepting certain cards, is not allowed.

Enforcement

Each EU member state must designate the responsible authorities for the effective enforcement of the Regulation. In Belgium, the competent body will be the Economic Inspection.

What to watch out for

Not every different treatment of customers will infringe the Regulation. After all, differentiation is not necessarily discrimination.

This being said, internationally active companies, selling fast moving consumer goods to different countries under different conditions will feel repercussions on their business models. Rerouting and restriction practices, country specific terms and conditions and distribution contracts must all be evaluated in light of the new Regulation.

Companies must further be aware of possible competition from outside the national borders. The Geo-Blocking Regulation could incentivize solutions for easier cross-border deliveries.

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