12 Apr 2018

As part of the European Commission's Digital Single Market Strategy (DSMS), the EU has finally published legislation to prevent companies from geo-blocking (the Regulations). Companies geo-block when they block or limit access to their websites or have different general conditions of sale for their goods and services for customers in different member states. The EU considers that geo-blocking prevents unhindered cross-border trade across the EU. 

Importantly, the Regulations do not require traders to deliver goods to all member states. They are only required to deliver where they have a presence or already deliver in a particular country. Companies are still allowed to not sell certain goods or services or apply different conditions for reasons that are not related to the location of the customer, eg stocks or commerciality. 

Although traders are not obliged to harmonise prices across the EU, customers will be able to see the prices charged in other member states so there is a risk that this will put pressure on retailers to move to standardised pricing. 

Key provisions 

The Regulations will apply to traders established in the EU and third country traders selling goods or services in the EU. Consumers and enterprises as end-users are protected. It applies from 3 December 2018.

The main provisions are:

  • Geo-blocking of a website or app based on the nationality, residence or place of establishment of the customer is prohibited
  • Automatic redirection to a local version of a website is prohibited; customers must be given a choice on redirection (and be free to change their minds later)
  • Conditions of access to goods or services should not be different across member states on the basis of nationality, residence or place of establishment of the customer in three specific situations: 
    • if the trader does not deliver to the customer's member state, the trader must make products available for delivery or collection in their home territory for a customer to collect but is not obliged to deliver to other member states;
    • the sale of electronically supplied services should be available on the same conditions to customers across the EU, eg cloud services and data warehouse services. This excludes services where the main feature is access to or the use of protected content; and
    • services provided at the trader's premises should have the same conditions for customers from other member states as domestic customers, eg hotels and car hire
  • Payment conditions cannot be different because of a customer's nationality, residence or place of establishment. 

As part of the wider DSMS, the Regulations include exclusions that are either covered by other means or policy has not been decided yet. These are:

  • Audio visual services that are covered by other proposals eg films, television programmes and sports broadcasts
  • Financial services, healthcare services, certain social services, gambling activities and transport services that are all excluded from the Services in the Internal Market Directive 2006
  • Certain prohibitions do not apply to traders that are exempt from VAT.

What retailers should do now

In advance of 3 December 2018, retailers should:

  • Check your website and apps to ensure that they comply. If you need advice on making sure that your online interfaces comply with the Regulations, please get in touch
  • Review accepted payment methods and conditions to make sure that they are available to all customers. There may be charges to make this consistent, which you need to absorb
  • There will be an additional burden of complying with local VAT rules.
  • Logistics hubs in a member state will be considered a presence there and the company will be expected to deliver there. This could cause problems where manufacturing is in one place but delivery systems are only set up in other member states
  • Be aware that even though prices do not have to be harmonised across the EU, customers will be able to see what you charge in other member states and could pressurise you to make prices consistent. 

The impact of Brexit

Following recent negotiations, the latest draft withdrawal agreement states that EU legislation will apply to the UK during the transition period (ie to 31 December 2020). As we know, what happens at the end of that period is not yet clear. According to the latest position paper, should the Regulations cease to apply at the end of the transition period, this would mean that UK customers would not benefit from the provisions of the Regulations but UK traders operating in the EU would need to continue to comply with them.