On 25 May 2016 the European Commission published draft legislation aimed at restricting the use of geoblocking and similar practices by websites selling to into the European Union.
The European Commission has published1 a draft regulation aimed at restricting traders from blocking access to websites by customers from other European countries, preventing geographic discrimination through use of different online terms and conditions or refusal of means of online payment.
Key points are:
- The regulation needs to pass through the legislative process with the European Parliament and the Council of Ministers, but is expected to be in force in 2017. It will become immediately effective in all European Union states without the need for national implementing legislation.
- The regulation does not apply to audio-visual services (e.g., Netflix, ebooks) as these are being dealt with separately. Other electronic services, such as cloud computing, will be covered from 2018.
- It has extra-territorial effect. The regulation applies to any website which sells to European customers, regardless of the place of administration of the site or location of the seller’s business.
- It applies to sales to both consumers and businesses, although there is an exclusion for purchasers for resale.
- The provisions which outlaw discriminatory terms do not apply where the seller also arranges delivery of the purchased goods. This will take a large number of sites outside the scope of this provision.
- As the Commission has acknowledged2, European anti-trust law does not prevent unilateral geographical discrimination by suppliers who do not have market power. Therefore, the proposed legal basis for the new regulation is a European Treaty provision allowing measures to be taken to complete the European internal market. The provision, however, essentially deals with harmonisation measures, so its use appears somewhat strange and may be open to challenge.
The Commission sees the internet as a powerful tool for removing national trade barriers and completing the European internal market, and is concerned by the relatively low level of cross-border internet transactions3. The geoblocking regulation is part of the emerging results of the Commission’s wide ranging investigation into ecommerce within the European Union4.
- Commission Staff Working Document – Geo-blocking practices in e-commerce, Brussels, 18.03.16, SWD(2016) 70 final, paragraph 192 www.ec.europa.eu/competition/antitrust/ecommerce_swd_en.pdf.
- See for example Commission Staff Working Document – Geo-blocking practices in e-commerce referred to in note 2, paragraph
- See http://ec.europa.eu/competition/antitrust/sector_inquiries_e_commerce.html.
Client Alert 2016-149