Geo-blocking: new online sales regulations

The Geo-blocking Regulation entered into force late last year. Since then, certain forms of geo-blocking and geo-discrimination have been prohibited. Geo-blocking means the blocking of access to websites and apps, among other things, on the basis of the user’s geographical location. Geo-discrimination means, briefly stated, that a company treats customers from different EU Member States differently. The main consequences are addressed in this blog.

To whom does the Regulation apply?

Please note that the new rules apply only if the other party is a consumer or a company that purchases services or products exclusively for end use. The Geo-blocking Regulation does not apply if products are sold to business customers that process those products. The Geo-blocking Regulation furthermore does not impose a blanket ban on geo-blocking and geo-discrimination: it prohibits only certain forms. Moreover, the Regulation does not apply to many companies that operate in the transport sector.

What is no longer permitted?

The Geo-blocking Regulation prohibits geo-blocking and geo-discrimination in three situations. First, it is no longer permitted to deny visitors of a website access to that website, or to automatically reroute them to a different website, on the basis of their location. Rerouting is permitted, however, with the visitor’s consent. Similar rules apply to apps: it must be possible to download and use them throughout the EU.

Secondly, rules apply to the means of payment accepted by the site. A means of payment may not be refused because the customer or his or her bank is from another EU Member State or because the means of payment was issued in another EU Member State. Applying different payment conditions and charging higher transaction costs is also prohibited.

Thirdly, it is no longer permitted in certain situations to apply different general conditions to foreign customers:

  • when providing digital services, such as cloud services and webhosting;
  • when providing services at a physical location, such as renting out machines or selling tickets for an event; and
  • when selling products and offering either to deliver them in a certain area or to have them collected at a certain location (such as a store).

The latter prohibition sounds extreme and complicated, but the implications are not that great in practice. It is still permitted to charge different prices and apply different general conditions to different areas. A supplier that offers products on a Dutch website is therefore not required to deliver them in Germany. Such a supplier also need not charge the same price on (for instance) the Dutch and German websites. But a German customer must be able to place an order on the Dutch website. That customer must then have the product delivered at a Dutch address or (if Dutch customers are offered the same option) must collect it in the Netherlands.

Exception for the transport sector?

Many carriers will be pleased to hear that the Geo-blocking Regulation does not apply to Dutch and international transport services, including port services. If the company’s operations do not fall under the Services Directive, the company does not need to worry about the Geo-blocking Regulation. A company that provides other services to end users in addition to transport activities must nonetheless comply with the Geo-blocking Regulation.

It cannot be said, however, that geo-discrimination is a non-issue for carriers. The Convention on the Functioning of the European Union prohibits carriers from charging different freight prices and applying different transport conditions for the same goods on the same routes depending on the country of origin or the country of destination. Non-discrimination requirements furthermore already apply to the providers of air services and to passenger transport by water, bus or coach.

Competition law?

Depending on the distribution system, certain types of geo-discrimination (such as active and passive sales restrictions) may be prohibited under competition law. A company that is considering applying different sales conditions to customers from different Member States should carefully consider the possible risks involved.

The European Commission recently fined clothing company Guess for prohibiting its distributors (among others) from selling products outside the area allocated to them. The resellers were also prohibited from advertising outside that area. The European Commission furthermore fined Nike for making it impossible for its football merchandise licensees to sell products outside their country or via the Internet. It also ordered several film studios and a pay-TV operator to change their licence agreements. They may no longer agree that only customers who reside in the broadcaster’s territory have access to pay-TV channels. See also our earlier blog on e-commerce and competition law.

The Netherlands Authority for Consumers & Markets (“ACM”) has called on businesses and consumers to report companies that act in breach of the rules. ACM can impose fines of up to EUR 900,000 on breaches of the Geo-blocking Regulation. The fines for breaching the competition rules may be many times higher. Forewarned is forearmed!

Detailed information on dawn raids by ACM and the European Commission can be found at invalacm.nl.

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