Geo-blocking is rampant across the European Union, a recent e-commerce sector study undertaken by the European Commission has concluded. It is common practice for online retailers and digital content providers to prevent consumers from purchasing goods or accessing digital content online because of the shopper’s location or country of residence.
In May 2015, the European Commission launched an e-commerce sector inquiry with the objective of establishing if and to what extent barriers erected by businesses effect the e-commerce market. The conclusions reached also indicate whether such restrictions to trade could give rise to competition concerns and hence require action by the European Commission as the EU’s competition watchdog. Geo-blocking is one of the issues covered by the sector inquiry.
The sector inquiry concluded that 38 per cent of the responding retailers selling consumer goods, such as clothes, shoes, sports articles and consumer electronics online implement geo-blocking. For these products, geo-blocking mainly takes the form of a refusal to deliver abroad. Refusals to accept foreign payment methods, and, to a lesser extent, re-routing and website access blocks are also used.
Unjustified restrictions found in distribution agreements which simply serve to restrict competition … will simply not be tolerated by the European Commission
As regards online digital content, the majority of providers replied that they geo-block users located in other EU member states. This is mainly done on the basis of the user’s internet protocol (IP) address that identifies and gives the location of a computer or smart phone.
The study concluded that geo-blocking is due not only to unilateral business decisions taken by companies not to sell abroad but also to restrictions in agreements between suppliers and distributors. Such agreements may be a cause of concern if they restrict competition in the market in breach of the EU’s anti-trust rules. The Commission has, in fact, conceded that such agreements need to be assessed on a case-by-case basis in order to ascertain whether any further action is required by virtue of the fact that they are in breach of competition law.
A detailed analysis of all the conclusions reached from the ongoing e-commerce sector inquiry will be presented in a report due to be published for public consultation in mid-2016. The European Commission also intends to issue some legislative proposals in May with the objective of addressing unjustified barriers to cross-border e-commerce as part of its digital single market strategy.
There are a number of reasons as to why retailers and service providers may decide not to sell cross-border. Freedom to trade remains a sine qua non right and no authority may impinge on the right for a trader to choose its own trading partner. Nonetheless, unjustified restrictions found in distribution agreements which simply serve to restrict competition to the detriment of both businesses and consumers alike will simply not be tolerated by the European Commission as the promoter of a free single market economy. Maintaining a level playing field within the EU has always been and will remain one of the main objectives of the Commission.
mariosa@vellacardona.com
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.