Geo-blocking is the practice used by online sellers to restrict or deny access to websites from other countries. For example, a consumer from another country may be rerouted from a brand’s main website to the consumer’s country specific website, or may be granted access to a website as a whole but is unable to access certain products or services, or is asked to pay with a bank card from a particular country.
Fashion brands and online sellers with multiple national websites often restrict or deny access to consumers in order to partition geographical markets or as part of pricing policies.
Geo-blocking is a widespread practice across the EU. Indeed, 90% of participants of the European Commission’s e-commerce sector inquiry and geo-blocking consultation responded that they had experienced geo-blocking when shopping online.
In an attempt to address these barriers affecting the European e-commerce market, the European Commission has proposed a new Regulation to ensure the consumers wishing to buy products (or services) in other EU member states are not discriminated against by reference to their nationality, country of residence, or establishment within the EU.
The proposed Regulation seeks to ensure that consumers will not be discriminated against in respect of access to prices, sales or payment conditions, unless there is an objectively justified reason for doing so. The three main elements of the proposed Regulation are:
- Access to prices – Website owners must not for reasons related to the nationality, place of residence, or place of establishment of the customer, block access to, or automatically re-route a customer from one country version of their website to another without the customer’s prior consent. The aim of this prohibition is to increase price transparency by giving the customer access to the local website and, in turn, the local prices.
- Sales of products and services – Three specific situations are identified where discrimination of customers based on their nationality, country of residence, or establishment within the EU is prohibited. These are (i) the sale of physical products when the trader is not involved in the delivery of the product to the EU member state of the consumer, (ii) the sale of electronically supplied services, and (iii) the sale of services provided by a trader in an EU member state different from that of the customer’s member state of residence. In these situations customers from another member state should have the same access to goods and services as local customers.
- Non-discrimination in the context of payments – Whilst traders are free to accept any payment method, the payment method chosen must not be applied in a discriminatory manner. Traders are prohibited from rejecting or otherwise discriminating against a customer with regards to payment, such as credit or debit cards.
Brands and online sellers who infringe the Regulation will be subject to penalties.
In addition, the proposed Regulation provides that agreements imposing obligations on traders, in respect of passive sales, to act in breach of the proposed Regulation will automatically be void.
Following approval by the European Parliament and the Council of Ministers, the European Commission envisages the Regulation coming into force in 2017.
Given the above, the clock is ticking for brands and online sellers within the EU to revise their distribution policies to avoid infringing the Regulation.