Editorial of April 2018

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 by Joana Whyte, Associate Lawyer at SRS Advogados and member of CEDU


Fashionistas rejoice, it’s the end of Geo-Blocking!

In a vote of 557 for and 89 against, Regulation 2018/302 of the European Parliament and the Council of 28 February 2018, which addresses unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market, was approved. The new set of rules will apply from December 2018.

The end of Geo-Blocking has been a priority for the EU in the creation of a digital single market. This Regulation aims to address unjustified geo-blocking by removing certain barriers to the functioning of the internal market.

This is good news not only for fashion consumers but also for consumers of other services/ industries. The new set of rules also applies to the offline provision of services by hotels and car rental companies and the online sale of event tickets, as well as to the provision of electronic services (cloud services, data storage, website management).

Put simply, Geo-blocking is the practice that prevents consumers in one Member State from buying a good or service sold online in another Member State. This practice has been harming fashion consumers by preventing them from purchasing from websites and apps from other Member States and also by the application of different general conditions of access to goods and services to customers from other Member States – e.g. refusal to deliver abroad, to accept payment, rerouting and website access blocks.

According to the European Commission’s E-Commerce Sector Inquiry, Geo-Blocking is widely used in the EU. As far as consumer goods are concerned, more than a third of online retailers collect information on the users’ location for geo-blocking purposes.

Even though, in some cases, this different treatment might objectively be justified, in other cases, some traders’ practices deny or limit access to goods or services from customers wishing to engage in cross-border transactions, or some traders apply different general conditions of access, which are not objectively justified.

There are different underlying reasons why companies – particularly microenterprises and small and medium-sized enterprises – apply different general conditions of access. In many cases, divergent legal environments, the legal uncertainty involved, the associated risks with regard to the applicable consumer protection laws, the environmental or labelling laws, taxation and fiscal issues, delivery costs or language requirements, contribute to traders’ unwillingness to engage in commercial relations with customers from other Member States.

In other cases, traders artificially segment the internal market along internal frontiers and obstruct the free movement of goods and services, thereby restricting the rights of customers and preventing them from benefitting from a wider choice and optimal conditions. Such discriminatory practices are an important factor contributing to the relatively low level of cross-border transactions within the Union.

According to Article 3 of the Regulation, a trader shall not: block or limit a customer’s access to the trader’s website for reasons related to the customer’s nationality, place of residence or place of establishment; redirect that customer to a version of the trader’s online interface that is different from the online interface to which the customer initially sought access, unless the customer has explicitly consented to such redirection.

Pursuant to Article 4, a trader shall not apply different general conditions of access to goods or services, for reasons related to a customer’s nationality, place of residence or place of establishment, where the customer seeks to:

a) buy goods from a trader and either those goods are delivered to a location in a Member State to which the trader offers delivery in the general conditions of access or those goods are collected at a location agreed upon between the trader and the customer;

b) receive electronically supplied services from the trader;

c) receive services from a trader, other than electronically supplied services, in a physical location within the territory of a Member State where the trader operates.

Furthermore, according to Article 5 a trader shall not, within the range of means of payment accepted by the trader, apply different conditions for a payment transaction for reasons related to a customer’s nationality, place of residence or place of establishment, the location of the payment account, the place of establishment of the payment service provider or the place of issue of the payment instrument within the Union. The trader, however, is allowed to withhold the delivery of the goods or the provision of the service until it has received confirmation that the payment has been properly initiated.

The text, however, does not bind e-commerce websites to deliver their products in all EU countries, neither does it impose an obligation to sell or harmonise prices. Even if the retailer does not ship overseas, consumers can still arrange for delivery themselves or pick it up from the retailer’s premises.

As far as passive sales are concerned, Article 6 of the Regulation prescribes that it shall not affect agreements restricting active sales or agreements restricting passive sales within the meaning of Regulation 330/2010 that concern transactions falling outside the scope of the prohibitions laid down in this Regulation. However, provisions of agreements imposing obligations on traders to act in violation of the prohibitions laid down in this Regulation shall be automatically void.

This Regulation fills the void between the Services Directive – whose main objective is to stimulate the free movement of services within the EU – and, of course, competition law – prohibiting restrictions of competition by agreements or coordination between companies and unilaterally by dominant companies. Under this innovative set of rules, unilateral restrictions of competition by non-dominant companies can also be prohibited when they affect trade between Member States.

Regarding its enforcement, the Regulation establishes that Member States must put one or more authorities in charge of advising consumers and supervising compliance with the geo-blocking rules (the imposition of fines and their amount is also left to Member States).

In 2020 the Commission will carry out the first evaluation of the Regulation. This evaluation will focus on the scope of the Regulation, its prohibition and whether it should also apply to electronically supplied services.  This means that in two years’ time, the scope of the Regulation could expand to online services such as video games, music, and e-books.

Although some may advocate that this new set of rules is not enough – as it does not apply to services whose main feature is the provision of access to and use of copyright protected works or other protected subject matter, including the selling of copyright protected works or protected subject matter in an intangible form – we cannot deny this is a first step forward and very good news for fashion consumers across the EU.

Picture credits: 403 forbidden…  by Emanuel Hallklint.

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