Proposed Geo-Blocking Regulation Faces Backlash

Following a proposal which was put forward by the Commission in May 2016, on the 6th February, 2018, the European Parliament voted in favour of a proposed regulation on addressing unjustified geo-blocking. Geo-blocking is defined in the proposed regulation as when “traders operating in one Member State block or limit access to their online interfaces, such as websites and apps, by customers from other Member States wishing to engage in cross-border transactions.” Geo-blocking also occurs when “certain traders apply different general conditions of access to their goods and services with respect to such customers from other Member States, both online and offline.”

The proposed regulation is aimed at tackling instances of what is considered to be unjustified geo-blocking. However, there are certain instances where such different treatment of customers may be justified, such as in the exemptions listed below.

Exemptions

In reality, not all geo-blocking will be prohibited. The following activities are exempted from the scope of the proposed regulation:

  • Non-economic services of general interest;
  • Financial services;
  • Electronic communications services and networks;
  • Transport services;
  • Services of temporary work agencies;
  • Healthcare services;
  • Audio-visual services;
  • Gambling activities;
  • Activities connected with the exercise of official authority;
  • Social services;
  • Private security services; and
  • Services provided by notaries and bailiffs.

Most notably, in the case of copyright protected works such as video games, music and video services, geo-blocking will remain legal. In fact, the proposed regulation specifically exempts “audio-visual services”, as outlined above.

Prohibition on discrimination based on Residence:

Through the proposed regulation, traders will no longer be allowed to block or limit a customer’s access to the traders’ online interface on the basis of their nationality, place of residence or place of establishment (“Residence”). In addition, traders may not automatically redirect customers to a different version of the online interface which is specific to the customer’s Residence, unless the trader has obtained the customer’s explicit consent for such redirection. In instances where it is necessary to redirect the customer in order to comply with Union or Member State law, the trader must provide the customer with a clear and specific explanation as to why the customer is being redirected.

The specific situations where discrimination of customers based on Residence is prohibited are the following:

  • Where the customer would like to buy physical goods (such as household appliances and electronics) from a trader and either:
    • The trader offers delivery in the general conditions of access; or
    • Those goods are collected at a location previously agreed upon between the trader and the customer in a Member State in which the trader offers such an option in the general conditions;
  • The customer would like to receive electronically supplied services (e.g. cloud services, firewalls and website hosting) from the trader (other than services which give access to and use of copyright protected works);
  • The customer would like to receive services other than electronically supplied services from the trader, in a physical location within the territory of a Member State where the trader operates – such as in the case of car rentals and hotel accommodation.

The above-mentioned will not apply to the sale of books as traders may apply different prices to customers in different Member States insofar as they are required to do so by Member State law. This is due to the fact that VAT rates on e-books differ in every country.

It is pertinent to note that there is no obligation for traders to supply cross-border delivery where this is not already provided.

Non-discrimination in the context of payments

Although traders may choose their own accepted methods of payment, they may not apply different conditions for customers where:

  • The payment is made by credit transfer, direct debit or a card-based payment instrument within the same payment brand and category;
  • Authentication requirements with respect to the Second Payment Services Directive are fulfilled; and
  • The payment is made in a currency which is accepted by the trader.

However, if there are justified and objective reasons, the trader may withhold the delivery of the goods or the provision of the service until he has received confirmation that the payment transaction has gone through.

Provisions of vertical agreements (i.e. agreements between traders) imposing obligations on traders in respect of passive sales (i.e. sales which were not solicited by the selling trader) which are in violation of the proposed regulation will be automatically void.

A small step forward

With reference to the proposed regulation, MEP Róża Thun, said: “This new EU law on geo-blocking is an important step towards an even more competitive and integrated Digital Single Market, for both consumers and traders. It also represents another milestone in the fight against the discrimination of consumers based on their nationality or place of residence, which should never be taking place in our united Europe. We have proven that the European Union can deliver concrete results for the citizens all over Europe, bringing positive changes in their daily lives.”

Although the proposed regulation is a step forward in terms of limiting geo-blocking, many have expressed their dissatisfaction at the fact that since the proposed regulation exempts audio-visual services from its scope, services such as YouTube, Netflix and Spotify will not be affected and will still be able to geo-block customers. MEP Julia Rede voiced her concerns on the matter on Twitter: “Don’t be fooled if a speaker says that we abolished #geoblocking though. We didn’t. Only for buying goods & services, but not for digital media like videos, games, ebooks. Progress is slow.”

Andrus Ansip, the European Commissioner for Digital Single Market and Vice President of the European Commission, replied to criticisms by pointing out that the scope of the proposed regulation will be reviewed 2 years after its entry into force, and therefore the exemptions (including audio-visual services) are not set in stone.

He also urged Members of the European Parliament and Member States to come to an agreement on a separate set of rules on cross-border access to audio-visual content online. He added: “Making more audio-visual content available online in other EU countries will ease the cultural straitjacket that exists in Europe”.

The proposed regulation was approved in Parliament with 557 votes in favour and 89 against, with 33 abstentions. It will not become binding law until it has been formally approved by the Council. Following this, once the regulation is published in the Official Journal, the rules will become directly applicable after a period of nine months from the date of publication.

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