Unjustified Geoblocking Regulation

Can a business block EU consumers from accessing their website to purchase goods or services?

The background

Geo-blocking is a system which tracks the location of an internet user and blocks access from certain countries.  Online sellers geo-block overseas customers for a wide range of reasons.  These include difficulties conforming with local laws and accepting foreign payment methods. 

On 28 February 2018, as part of its Digital Single Market initiative the European Commission adopted a Regulation on “addressing unjustified geo-blocking and other forms of discrimination”.  It will apply to businesses from 3 December 2018. 

The Regulation aims to reduce fragmentation in the single market, currently estimated to cost around €415bn per year.  It seeks to do this by preventing businesses from geo-blocking their websites in other EU Member States.  The restrictions should provide sellers with more cross-border sales and give EU consumers greater access to choice.

The Regulation builds on the existing Services Directive (Directive 2006/123/EC).  Key provisions of the new Regulation include:

• a ban on blocking or limiting access to websites in other EU Member States (except as required by national or EU law);
• a ban on discriminating against EU citizens or businesses in other ways (for example by charging different prices, or offering more favourable deals in the home territory than in other Member States); and
• a ban on applying different payment requirements where the card used is in the same category, fulfils authentication requirements and is in a currency that the seller accepts. 

Scope

The Regulation applies to traders who are selling goods and services in the EU through the use of an online interface.  It applies to business to consumer (B2C) and business to business (B2B) transactions equally, as long as they are on standard terms and are not for resale.  The wide definitions of goods and services mean that most online sales will be caught by the provisions.

There are partial exemptions for audiovisual services which supply copyright protected works (eg Netflix) and retail financial services.  These services are exempt from the non-discrimination requirements for price and payment.  However, they are not permitted to geo-block in other Member States.  The Regulation is due to be reviewed in December 2020 and audiovisual services may be added to its scope. 

The Regulation does not require businesses to comply with non-contractual Member State laws (such as labelling or sector-specific requirements).  Businesses are not required to deliver to new countries or accept new currencies. 

What is the impact of Brexit?

As part of their preparations for a no deal Brexit, the UK Government has released a draft Statutory Instrument (SI) which deals with geo-blocking.  If there were to be a no-deal Brexit, the SI would allow businesses selling online in the UK to apply different conditions to the EU.  Sellers would however, still be subject to the Regulation when selling in different EU Member States. 

The SI could provide more flexibility for online businesses.  However, given the current uncertainty around Brexit, it is far from an outcome which sellers can plan for. 

Why is this important?

Many online businesses are still grappling with the implications of the EU’s General Data Protection Regulation.  The Geo-blocking Regulation adds yet another point on the list of compliance requirements. 

The Regulation will require businesses to stop geo-blocking and allow consumers across the EU to have access.  They will also need to ensure that their international pricing strategies and payment requirements are not discriminatory. 

The good news is that businesses still have some time.  Member States are required to appoint an enforcement body and legislate in relation to the level of penalties.  There is no enforcement policy in the UK (as of yet) and other Member States are in the early stages of their legislative processes.  Germany’s fines of up to €300,000 provide an early indication of the level of penalties we are likely to see elsewhere.  

Any practical tips?