Geo-Blocking Regulation

On 3 December 2018, Regulation (EU) 2018/302 on addressing unjustified geo-blocking and other forms of discrimination based customers' nationality, place of residence or place of establishment within the internal market (the "Geo-Blocking Regulation") will become applicable for cross-border sales to customers resident or established within the EU.

Background and scope

The Geo-Blocking Regulation sets forth certain requirements which must be taken into account in B2C and B2B end customer relationships, in particular when distributing products or services via e-commerce channels. As part of the strategy for a digital single market for Europe, the Geo-Blocking Regulation specifies the prohibition of discrimination based on the nationality or place of residence pursuant to Art. 20 of the EU Services Directive 2006/123/EC for cross-border online sales by the prohibition of access restrictions to online user interfaces. In addition (and irrespective of whether products or services are distributed via online or offline channels), it also prohibits discrimination in standard business terms and discrimination in payment methods.

Access restrictions to online interfaces

As to access restrictions to online interfaces, it will not be allowed, when setting up separate web shops for different regions within the EU, to block or limit a customer's access to local web shops through the use of technological measures or otherwise for reasons related to the customer's nationality, place of residence or place of establishment. Moreover, it will be not permissible to automatically redirect a customer to a version of the web shop that is different from the version to which the customer initially sought access. The redirection of the customer to another version of the web shop is only permissible if (i) the customer explicitly consents to such redirection and if the version of the web shop to which the customer initially sought access remains easily accessible to that customer, or (ii) the blocking or redirection is required in order to comply with local legal requirements. In the latter case, customers must be provided with a clear and specific explanation regarding the reasons why the blocking or redirection is necessary to ensure such compliance.

Discrimination in standard business terms

The prohibition of discrimination in standard business terms shall ensure that the same terms and conditions of sale apply to the customer irrespective of the customer's nationality, place of residence or place of establishment where the customer seeks to (i) buy goods at the place of delivery offered in the standard business terms or agreed with the customer, (ii) receive electronically supplied services other than copyrighted electronic content (e.g. streaming offerings, online games and software), or (iii) receive services in a physical location within the member state where the trader operates (e.g. hotel bookings, car rentals, concert tickets). This means that the customers may freely choose which local version of a web shop they wish to use for their online purchases or which local store within another member state they wish to use for their offline purchases. The terms and conditions may not differ if, for example, a German customer chooses to purchase products on the UK website.

This does not imply that the local web shops or local offline stores may not set forth different terms and conditions (e.g. in relation to prices or the delivery area) but such terms and conditions must be equally applied to any customer visiting such web shop or store. If, as in the example given, the German customer buys a product on the UK website which - in accordance with the delivery area stated on the website will only be delivered within the UK - it is permissible to restrict the delivery to mailing addresses within the UK and to have the German customer organise delivery from the UK to Germany at its own expense.

Discrimination in payment methods

The third pillar of the Geo-Blocking Regulation is the prohibition of discrimination in payment methods: it is not allowed to apply different conditions for a payment transaction for reasons related to the customer‘s nationality, place of residence or place of establishment, the location of the payment account, the place of establishment of the payment service provider or the place issue of the payment instrument within the EU.

Additional prohibitions regarding the restriction of online sales and geo-blocking

It should further be noted that the Geo-Blocking Regulation will not affect additional prohibitions regarding the restriction of online sales which are not directly applicable in the relation to the end customer, in particular regarding the restriction of passive sales via e-commerce channels in distribution systems which is prohibited by Regulation (EU) No 330/2010 on vertical restraints. In addition, the provision of online content services (e.g. streaming of audio-visual contents) is subject to Regulation (EU) 2017/1128 on cross-border portability of online content services in the internal market.

Consequences

As a consequence of the Geo-Blocking Regulation, businesses should verify that they have not any procedures in place which may lead to discriminations of customers from other EU countries. In particular, any technological measures to limit or restrict access to local web shops, including the automatic redirection of customers to another local web shop, should be refrained from. Otherwise, businesses run the risk of possible sanctions which may be imposed by the member states in accordance with the relevant implementing legislation.

In Germany, the Federal Network Agency (Bundesnetzagentur) is to be responsible for enforcing the Geo-Blocking Regulation pursuant to the draft law of the federal government amending the Telecommunications Act (Telekommunikationsgesetz - TKG). For this purpose, the Federal Network Agency is to be granted the authority to request the businesses concerned to make a statement and remedy the situation and to threaten to impose a penalty payment in order to enforce this demand. In addition, violations of the Geo-Blocking Regulation will be punishable as an administrative offence with a fine. Further to the official enforcement of the Geo-Blocking Regulation, competitors, consumer protection associations and other institutions will be entitled to take action against unfair market practices and/or violations of consumer protection laws on the basis of the Unfair Competition Act (Gesetz gegen den unlauteren Wettbewerb - UWG) or the Unfair Terms and Conditions Act (Unterlassungsklagegesetz - UKlaG).

Contact

If you have any questions, please feel free to contact Sara Bandehzadeh (sara.bandehzadeh@fieldfisher.com) or Anke Saßmannshausen (anke.sassmannshausen@fieldfisher.com) for commercial and distribution law matters. For competition and antitrust law matters, please contact Michael Adam (michael.adam@fieldfisher.com), Christian Bahr (christian.bahr@fieldfisher.com) or Sascha Dethof (sascha.dethof@fieldfisher.com).