The New EU Geo-blocking Regulation and why it Affects You

Dr. Bettina Kövecses, Senior Associate, Bird & Bird.

Geo-blocking is an important focus area of both the European Commission’s E-commerce competition law sector enquiry and the Commission’s Digital Single Market strategy. The aim of the latter is to remove barriers to online trade within the EU and so to strengthen the single market. Geo-blocking refers to practices used by online sellers that result in the denial of access to websites from other Member States. It also includes cases where access to a website is granted but customers are automatically redirected to another website. Under the Geo-blocking Regulation (EU) 2018/302, geo-discrimination (such as offering different terms and conditions to customers from other Member States and/or preventing a customer from finalizing the purchase or restricting payment by a debit or credit card from a different country) will, in addition to geo-blocking, also be prohibited. 

This regulation does not apply to purely internal transactions within a country, i.e. where all the relevant elements of a transaction are fulfilled within a single Member State.

The Regulation

The Regulation targets unilateral behavior of companies that is in some way discriminatory on the basis of where a person is from, where they live or where a business is established. 

The rules of the regulation apply in principle to both B2C and to B2B transactions, to the extent that the latter take place on the basis of general conditions of access and the transaction is for the sole purpose of end use, hence made without the intention to re-sell, transform, process, rent or subcontract.

The regulation will take effect on 3 December 2018 and be applicable in all Member States of the EU.

What Does the Regulation prohibit?

Geo-blocking: A trader must not block or limit customers’ access to online interfaces because of a customer’s nationality, residence or place of establishment. 

Redirecting a customer without permission: A trader must seek explicit permission from a customer before redirecting a customer based on their nationality or location. Even if the customer agrees to being redirected, the trader must provide a straightforward option to return to the originally sought website.  

Applying different conditions: Discrimination on the grounds of nationality/residence/place of establishment is prohibited. In a nutshell a trader cannot use different terms and conditions for customers based in different Member States. This applies to:

•    sales of goods when the trader is based in a different Member State to the customer;

•    all electronically-supplied services (except access to copyright-protected content); and

•    physical services provided in a physical location where the trader operates provided those premises are in a different Member State to where the customer is a national, is resident or is established.

It always raises interest whether this provision would prevent a trader charging extra for delivery outside a Member State. In short, where there is a clear objective justification, for example additional costs of delivering cross-border such extra charges would be compliant with the regulation.

Applying different conditions of payment: Differential treatment on the basis of nationality, residence or 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, is in each case prohibited. 

Prohibition of passive sales: The regulation further provides that any agreement which requires traders to act in violation of the regulations in relation to passive sales (i.e. sales where the trader does not actively solicit the customer’s business) is automatically void.

Are there any exceptions?

The regulation is broad and there are few carve-outs except for where required by law. There are certain further exceptions, including transport services, audio-visual services, gambling activities and healthcare services.