13 Jul iConsumer #1 – The Pros and Cons of the new EU Geo-blocking Regulation
For the launch of iConsumer, I discuss about the new EU Geo-blocking Regulation and how it impacts on the operation of businesses and consumers.
Everyone knows that State frontiers were a serious challenge to the exchange of products and services within the European Union. Then, after reaching the so-called Schengen acquis, Member States managed to tear down internal borders and ensure a well-functioning circulation of products over the Union. The new EU Geo-Blocking Regulation is a further step towards the freedom of services thourgout the European Union.
Beside State frontiers, in the digital age there are more obscure barriers that may significantly restrict free movement of goods and services. The most evident one is the trend of blocking or limiting access to online interfaces, such as websites and Apps, by customers from other Member States wishing to make cross-border purchases of products or services – in a word, “geo-blocking“. Indeed, figures show that such trend is widespread. A recent survey demonstrates that consumers cannot buy or access services in around 60% of the websites if they come from another EU Member State. In February, the European Parliament approved a Regulation that attempts to tackle these issues.
The new Geo-blocking Regulation and its “Defusing Clause”
The EU Geo-Blocking Regulation (EU) 2018/302 entered into force on 22 May 2018 and is applicable starting from 3 December 2018. The Regulation unpacks Geo-blocking into two different set of provisions, that concern
- access to products and services and
- access to online interfaces.
Access to Products and Services
With respect to products and services, a company cannot 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. Excellent. But what kind of goods and services? Well, the scope application of the Geo-Blocking Regulation is rather narrow. Indeed, the following categories of products and services are clearly excluded:
- The so-called “purely internal situations“, i.e. when the relevant elements of the transaction are restricted to a single Member State (e.g. an Italian consumer purchases online a good in the Italian territory);
- Audiovisual services, including those that aim at providing access to broadcasts of sports events and are regulated through exclusive territorial licenses;
- Retail financial services; and
- Services in the field of transport (e.g. purchases of plane tickets).
This “Defusing Clause” confines the Regulation only to a limited range of products and services, including, inter alia, non-audiovisual services and physical goods. In practice, a company that sells its products in another Member State cannot block online purchases of physical goods in other Member States (e.g. electronic tools, house furniture) or the provision of electronically supplied services (e.g. cloud services) and non-electronically (e.g. hotel accommodation, concert tickets etc.). It is debated whether non-audiovisual copyrighted works (such as music, e-books etc.) are included or not in the scope application.
Access to Websites
Further, companies cannot block or limit a customer’s access to their online interfaces “for reasons related to the customer’s nationality, place of residence or place of establishment“, or redirect a customer to a different version of their website, unless the customer gives his/her consent. In more practical words, for example, an Italian company must not restrict access to its original Italian website from a Spanish customer and redirect him/her automatically to the Spanish version of the website – the customer must choose to do so. Moreover, even if customer’s explicit consent is sought, the version of the online interface to which the customer initially sought access must remain easily accessible to the customer.
What’s the impact on business and consumers?
The Geo-Blocking Regulation may encourage business to spread goods and services over the EU and allow consumers to enjoy a wider range of products. However, the “Defusing Clause” – and, in particular, the potential exclusion of audiovisual works – considerably limits such (potential) positive impact. Furthermore, the Regulation only requires companies to make purchases of goods available, and not the delivery of such products, too which might not lead to a full benefit for the eCommerce market in the EU. For example, if a French company cannot deliver a washing machine to a Greek customer, the customer should plan the delivery of such product on his/her own. This further limits the application of the Regulation. In short, we should wait for the next 3 December 2018 and see how the companies will comply with these new rules and the States will harmonize the national provisions.