The Geo-blocking regulation is almost finalised; it is expected to be published in February so that it can enter info force per the end of 2018. This regulation is especially relevant for internationally active traders selling fast moving consumer goods online in different EU member states. They will have to carefully reassess their trading terms, logistics and distribution operations, as well as their digital sales organisation, in order to ensure compliance.
The new Regulation fills a void between the Services Directive, which aims to stimulate free movement of services in the EU, and competition rules that prohibit restrictions of competition by agreements or coordination between companies and unilaterally by dominant companies. Under the Geo-blocking regulation, also unilateral restrictions of competition by non-dominant companies can be prohibited when they affect trade between member states.
Ban on discrimination based on location
The Geo-blocking regulation prohibits geographic discrimination between customers located in different member states with regard to sales terms (including prices) in cases where such cannot be objectively justified (i.e. geodiscrimination) for the online sales of three specific services: i) goods, ii) electronically supplied services, and iii) services provided in a specific physical location. This means that a sales refusal based on the customer's location is not permitted. In practice, this rule may impact international logistics and distribution arrangements, where those are geared to specific countries. Sales terms may also have to be updated. Although the regulation does not oblige suppliers to deliver their goods/services in other countries, it ensures that customers from other EU countries should be able to order goods under the same terms as local customers and removes barriers by prohibiting requirements like a local place of residence, local bank account or payment methods and online redirection or
IP address blocking.
Consequently, under the Geo-blocking regulation, blocking of access to online interfaces and redirecting to other online interfaces for reasons related to the nationality, place of residence or place of establishment of a customer will also no longer be allowed. In practice, redirecting a customer to a specific country-website, solely based on the country of residence of the customer, will no longer be permitted.
Further, unjustified discrimination of customers in relation to payment methods will be prohibited under the Geo-blocking regulation.
The regulation does not indicate specific sanctions. Pursuant to the regulation, each EU member state may decide on appropriate measures in case of non-compliance by traders.
Nine months to take action
Next week, the European parliament will be voting on the final text of the Geo-blocking regulation, based on an informal compromise between EP and Council last November. After the voting by the Parliament, the draft regulation will be formally approved by the Council of Ministers. Nine months after publication in the EU Official Journal, the Geo-blocking regulation will be applicable, so most likely per the end of 2018.
Traders do well to use this period to adapt to the new rules. For traders in products and services, which fall within the scope of the Geo-blocking regulation, it is important to reassess and amend, where required, sales terms, logistics and distribution systems and website set-ups.
We will notify you on further updates with regard to the Geo-blocking regulation.