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The Geoblocking Regulation – what businesses need to know

The so-called Geoblocking Regulation was published earlier this year and will apply across the EU from 3 December 2018.

Ultimately, the regulations are likely to make it easier for customers and consumers to shop around and more difficult for retailers selling across the EU to maintain distinct national markets with differential pricing. The key provisions are as follows:

  • If your business is selling online in a number of EU member states (wherever you are located) then you cannot prevent a customer or consumer in one member state from using your website in another member state (a.k.a ‘geoblocking’). Customers can choose whether to follow redirects and their preferences should be remembered (subject to data privacy considerations).
  • Whether selling off-line or online, conditions of access to goods or services (including use of payment cards) should not be different across EU member states on the basis of nationality, residence or place of establishment.
  • If your business does not deliver to a customer’s member state, you must make products available for delivery or for a customer to collect but you are not obliged to set up pick-up points if these are not offered in the home territory or deliver to other member states where you were not previously doing so.

Will they limit a business' ability to trade?

It’s not anticipated that the regulations will limit a business’ ability to trade in absolute terms, but will impact how businesses trade and they could have a particularly large impact on certain businesses. 

For example, if you run a business that has multiple national websites, you can keep that going but you must in principle make all websites available to all EU residents and ensure that any price differences reflected on those websites do not result from discrimination on the grounds of nationality. That may (as intended) limit a business’ ability to price differently by territory if there is a ‘discriminatory’ reason for such differences. 

In terms of the businesses which could face the largest impact, if you are an exclusive distributor who has invested to bring a product to a territory and rely on territorial protection to recoup such investments, the increased ability for customers in your territory to shop around based on the rights conferred in the geoblocking regulation could limit your ability to recoup.

What are the areas of uncertainty surrounding the regulation?

There are a number of areas of uncertainty. One acknowledged area is the potential for a change of scope after two years to include copyright protected services (which are currently excluded). 

More generally there is uncertainty at the very heart of the regulation. The rules preventing geoblocking are relatively clear but it is going to be much harder for retailers to determine the distinction between lawful and unlawful differential pricing. Until there are cases providing greater guidance, uncertainty will remain. So in clarifying uncertainties, the nature and extent of enforcement will be key.

In the UK, as with most areas of EU-related law, the dreaded ‘B’ word is also likely to be relevant. The regulation will certainly apply to UK businesses selling across the EU, even if Brexit sees the UK leaving the EU, but the extent of UK enforcement and the protections for UK consumers after any UK exit is as yet unclear.

What are the consequences of failing to comply?

It is for each member state to implement ‘effective, proportionate and dissuasive’ measures and so the precise consequences are currently uncertain. As in other areas of consumer and competition law enforcement, consequences are likely to include investigations, fines and directions to end infringing practices.

How will these consequences be enforced? Will it be more successful than its predecessor, the Services Directive?  

Given that implementation will take place separately in each member state, businesses should expect to see some divergence in the nature and extent of enforcement. We also expect some provisions to be more enforced than others. It is likely to be relatively straightforward to detect, monitor and take action against geoblocking practices. On the other hand it may be much harder to detect instances of discrimination on the grounds of nationality given, for example, that there may be legitimate, objectively justified reasons for any price differences.

Whether you consider it a ‘success’ or not may depend on your perspective - but it will be more widely applied than the Services Directive and businesses should certainly take note, and where they are uncertain take advice on what it means for them.

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