The Geo-blocking Regulation – a DSM success?

The Geo-blocking Regulation enters into force on 3 December 2018 (nine months after publication) and each Member State must designate one or more bodies to be responsible for the effective and adequate enforcement of the Regulation within their Territory.

What is Geo-blocking?

Geo-blocking is where companies restrict online products or services to customers, largely based on the customer's location, as a means of controlling the price, distribution and the terms on which the products or services are sold. This has the effect of creating artificial borders within the European Union, where certain customers are unable to access certain products that other European consumers enjoy, against the Single Market Principle. As a result of the impact this has on free access to goods across the EU, the Geo-blocking Regulation was adopted, with the objective of preventing unjustified geo-blocking and other discriminatory practices based on:

• Nationality
• Place of residence, and
• Place of establishment.

After an initial two year period to enforcement, it is intended that there will be a review of the legislation in December 2020, to establish the effect and success of the Regulation.

Prohibited practices

There are a number of practices that have been prohibited and that are intended to tackle attempts by businesses to restrict cross-border sales. In principle, the Regulation applies to all traders and websites that operate within the European Union. This includes online marketplaces and any non-EU trader that sells online within the EU. In short, traders that are covered by the Regulation must not engage in any non-justified discriminatory practices such as:

• Online interface: Customers must be able to access a trader's online interface (website, mobile app etc) wherever they are located. Traders must not automatically redirect to affiliates located in a customer's territory without that customer's consent.
• Payment: Traders must not discriminate by refusing certain transactions or applying different conditions of payment, due to the customer's nationality, location of the account or place of establishment of the payment service provider.
• Access to goods or services: Traders must not apply different trading conditions to transactions involving customers in its own Member State as opposed to customers located in another Member State, where the customers seek to:
• Buy physical goods from a trader offering delivery to or collection in a Member State.
• Receive electronically supplied services from a trader (eg cloud services, data warehousing, website hosting etc).
• Receive services in the Member State where the trader operates (eg car hire, hotels, tickets).

Carve outs

There are a number of exemptions from the ambit of the Regulation. In particular, it only applies to cross-border situations, and does not apply to financial services, electronic communications services and networks, transport services, healthcare services, audio-visual services and private security services. Further, electronically supplied services offering copyrighted content are specifically excluded, and these include online TV, games, films, e-books and streamed sports services. In addition, traders are not forced to deliver goods cross-border and if a trader's general terms and conditions establish that only domestic delivery is available, customers in another Member State can order the goods, but there is no obligation on the trader to deliver the products – it is up to the customer to pick the products up or provide an alternate address. There is also no requirement for traders to offer a single EU-wide shopfront and it is permissible for traders to continue to use country-specific online interfaces.

It is important to note that there is no obligation on traders to harmonise pricing across the EU and traders can have different pricing according to the Member State in which the goods and services are offered. Consumers in one Member State cannot be, however, prevented from availing themselves of the offers available to consumers in another Member State.

Sanctions

In short, there are no sanctions provided for in the Regulation and it is up to each Member State to determine appropriate measures for businesses that fail to comply with the requirements. As noted above, Member States are obliged to designate a body responsible for enforcing the Regulation and there will also be a body responsible for assisting customers in disputes arising from the Regulation's application in each jurisdiction.

Next steps and Brexit

The conclusion of the Geo-blocking Regulation is one of the successes of the Digital Single Market project. From 3 December 2018, traders operating across the EU will need to take account of the Regulation and adapt to the rules as they enter into force to ensure that there is no unjustified discrimination between customers in different locations. As part of this, businesses caught by the Regulation will need to check their terms and conditions, website access, logistics and distribution systems to ensure compliance. Taylor Wessing is very happy to assist with any queries that you may have.

What impact will Brexit have on the Regulation, which will have been in force for a number of months before Brexit takes effect in March 2019? At this stage (as with most things Brexit related), there is no clear answer and the effect will largely be dependent on the final terms that are agreed between the UK and the EU. The UK has, however, recently issued a notice giving guidance on the situation in the event of a 'no deal' scenario. In the event of a 'no deal' Brexit, the UK version of the Regulation will cease to have effect in UK law, which means that traders operating across the UK, EU and other third countries will be able to discriminate freely between EU customers and UK customers in relation to the sale of online goods and services. The Regulation will however continue to apply to UK and any other traders which operate and sell goods and services within the EU, and these parties will not be able to discriminate between EU customers.

The likelihood of a 'no deal' Brexit is certainly on the increase but it is impossible to predict what will happen over the next few months, including what would happen to the Geo-blocking Regulation during any transition period. It's yet another case of "watch this space"!

If you have any questions on this article please contact us.

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