Geo-blocking and other geographically-based restrictions undermine online shopping and cross-border sales by limiting the possibility for consumers and businesses to benefit from the advantages of online commerce. In 2015, a Commission survey found that only 37% of websites actually allowed cross-border customers to reach the final step before completing the purchase by entering payment details.
Preventing unjustified geo-blocking is one of the actions of the Digital Single Market strategy. The Commission made a legislative proposal after assessing the responses from a public consultation held in 2015. The proposed regulation addresses the problem of customers not being able to buy goods and services from traders located in a different Member State, or being discriminated in prices or sales conditions compared to nationals.
The problem equally affects consumers and businesses as end users of products and services and exists both in the online environment and in real-world situations.
The proposed Regulation is now under discussion in the Council and European Parliament.
Main elements of the proposal
The proposal defines specific situations when there can be no justified reasons for geo-blocking or other discriminations based on nationality, residence or location:
- when a customer buys a good, such as electronics, clothes, sportswear or a book, which the trader does not deliver cross-border;
- when a customer buys an electronically delivered service, such as cloud services, data warehousing, website hosting;
- when a customer buys a service which is supplied in the premises of the trader or in a physical location where the trader operates, such as a hotel room or a rental car.
Furthermore, the proposal bans blocking of access to websites and the use of automatic re-routing if the customer has not given prior consent.
The proposal also provides for a non-discrimination rule in payments. While traders remain free to offer whatever payment means they want, the proposal includes a specific provision on non-discrimination within those payment means.
What is geo-blocking?
Companies and online retailers apply barriers and impose restrictions to consumers on the basis of their nationality or place of residence. Some examples are:
- blocking access to websites across borders;
- denying the possibility to complete an order, to purchase goods or to download content when accessing a website from abroad;
- denying delivery or shipment across border;
- providing different prices and conditions depending on nationality, country of residence or location of the customer.
There might be justified reasons for traders not to sell cross-border, such as the need to register at the tax authority in the country of destination, higher shipping costs or costs arising from the application of foreign consumer law. While outside barriers create additional complications and extra costs for the trader, differences in the treatment of customers are based on objective criteria.
However, discrimination between EU customers based on the desire to segment markets along national borders, in order to increase profits to the detriment of foreign customers, is considered as unjustified geoblocking.