What the new geo-blocking laws mean for website operators

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Deirdre Kilroy and Clodagh Crumlish of Matheson explain the new ‘Geo-blocking regulation’ and what impact it will have for website operators across the EU.

What is geo-blocking?

Geo-blocking is the practice of using territorial licensing restrictions in online and offline transactions of physical goods and the provision of electronic services. In practice, geo–blocking stops customers in one country from accessing websites in other countries through the use of geofactors such as location of IP addresses. From the traders’ perspective, geo-blocking facilitates treating markets differently online. However, consumers within the EU, where there is an expectation of a common market, were frustrated by this approach.

Regulation (EU) 2018/302 on addressing unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment within the internal market (the ‘Geo-blocking Regulation’) entered into force on 22 March 2018 and will apply across the EU from 3 December 2018. From this date the Geo-blocking Regulation will have the effect of increasing price transparency by allowing customers to access different national websites if they wish.

How this impacts on traders in the EU

The Geo-blocking Regulation aims to provide the same opportunities to consumers and businesses transacting across the European Union. It applies to all traders of goods and services, including online marketplaces, operating in the EU. These traders must review their trading terms, distribution operations and digital sales organisation before the 3 December 2018 deadline in order to ensure compliance.

On a practical level, the new rules will entitle buyers to shop online in the EU without being blocked from the retailers’ EU websites, or without being automatically rerouted to a website aimed at their country of residence, location or nationality. A customer’s express consent is required in order to reroute. The ban on geo-blocking allows customers to review websites across the EU, and to compare prices in different countries if they wish. So a French customer must be able to access the Irish version of the same website should they choose to do so and may not be forcibly redirected to the French equivalent without explicit consent.

Deirdre Kilroy, Partner and Head of Intellectual Property, Matheson

Traders operating in the EU may also not distinguish on the basis of the location of a customer’s payment service provider or bank account. The Geo-blocking Regulation precludes instances where access to a website is granted, but the customer is prevented from finalising the purchase unless they pay with a debit or credit card from a certain country.

Enabling cross-border access to a website does not necessarily require a trader to transact business in another Member State; it just means that a customer in a different EU country must have equality of treatment to a person in that country. Also, the Geo-blocking Regulation specifically excludes audio-visual services, transport services and retail financial services from its scope.

What do traders need to know about the Geo-blocking Regulation?

The Geo-blocking Regulation calls out three transaction types when there can be no geo–blocking:

• The sale of goods without physical delivery; An Irish customer can buy a television in the UK if she/he collects it or organises her/his own delivery.
• The sale of electronically-supplied services; A French consumer can buy hosting services for her/his website from an Irish company without having to pay additional fees compared to an Irish consumer; and
• The sale of services provided in a specific location; A German tourist can buy a sightseeing trip in Ireland on an Irish website without being redirected to a German website.

In these circumstances using geo-blocking or other geographically based restrictions is only possible in exceptional situations defined in the Geo-blocking Regulation.

The Geo-blocking Regulation applies to both B2C (business-to-consumer) and B2B to (business-to-business) transactions, where transactions take place on the basis of conditions of access that are not individually negotiated and it is for the sole purpose of customer end use.

Every Member State must designate a body or bodies responsible for providing assistance to consumers in the event of a dispute with a trader connected to the Geo-blocking Regulation. This assistance could be provided by explaining consumers’ rights, helping consumers settle a dispute with a trader located in another Member State or explaining future steps for a consumer to take should the consumer assistance body be unable to help. Each Member State must also specify one or more bodies responsible for ensuring the adequate and effective enforcement of the Geo-blocking Regulation.

What about Brexit?

Given Ireland’s strong trade links with the UK, some consideration must be given to the impact of Brexit. The Geo-blocking Regulation comes into force pre-Brexit, meaning that UK businesses must comply with it from 3 December 2018. It is impossible to predict with any certainty what will happen following Brexit. The EU Commission has published a Notice to Stakeholders on 21 March 2018 on the impact of Brexit on the geo-blocking rules, noting that UK customers could be subject to various discriminatory practices by online traders when the UK ceases to be subject to the Geo-blocking Regulation. UK commentators have countered that UK businesses be able to discriminate using geofactors and will gain some competitive advantage over their EU trading partners.