updated on 07 May 2019
QuestionCan a business prevent online purchases by consumers in other EEA member states?
Geo-blocking is a system which tracks the location of an internet user and blocks access from certain countries. Online sellers geo-block overseas customers for a variety of reasons. These range from challenges with local laws and payment methods, to territorial exclusivity clauses in distribution agreements.
On 28 February 2018, as part of its Digital Single Market initiative, the European Commission adopted a Regulation on “addressing unjustified geo-blocking and other forms of discrimination”. The Regulation aims to reduce the barriers to trade between different EEA member states, currently estimated to cost around €415 billion per year. It prevents businesses from blocking EEA access to their websites. The restrictions should provide sellers with more cross-border sales and give consumers greater access to choice.
Key provisions of the new Regulation include:
The Regulation came into force on 3 December 2018. The Competition and Markets Authority (CMA) has announced that it will act as the enforcement body for the UK. Germany's fines of up to €300,000 provide an early indication of the levels that we are likely to see throughout the EEA. However, member states have been left to decide on their own “effective, proportionate and dissuasive” penalties.
There are partial exemptions for audio-visual services that supply copyright-protected works (think Netflix) and retail financial services (such as personal banking and consumer loans). These services are exempt from non-discrimination requirements for price and payment. However, these businesses are still not allowed geo-block in other member states.
Another exception is where the goods or services are illegal in the relevant member state. For example, if cryptocurrency were to be banned in an EEA country, online sellers would be able to block their website to customers in the offending locations.
The Regulation does not require businesses to comply with non-contractual member state laws (such as labelling or sector-specific laws). Businesses are also not required to deliver to new countries or accept new currencies.
So why is the Geo-blocking Regulation important for those with aspirations for a career in law? To be a successful lawyer, you need to be commercially aware. This means understanding the factors that impact your client's business and advising them in a way which takes these into account.
The proportion of businesses selling their wares online continues to grow every year. Online sellers have to navigate an increasingly complex field of legal requirements to remain compliant. Many had to undertake considerable legal reviews as a result of 2018's General Data Protection Regulation and will be impacted by the EU's ePrivacy Regulation. The Geo-blocking Regulation represents yet another challenge to contend with. Businesses and their legal advisors need to be aware of the potential pitfalls.
As a lawyer in a commercial firm, your clients will have to be careful about which countries they choose to geo-block in. This will need to be reflected in a client's terms and conditions with distributors and agents and in the way that their website is set up. Clients may also be entitled to demand access to their own supplier's websites and pricing terms, as the regulation applies to business-to-consumer and business-to-business sales (as long as the sale is on standard terms and is not for resale).
As a consumer, you should get greater access to a range of goods sold across the EU. If you want to buy that hat from Italy, or that soup pot from Bulgaria, this Regulation should help you to do so! (Though it won’t necessarily help you get it delivered.)
Hannah Ridzuan-Allen is a trainee solicitor at RPC.