Copyright escapes Geo-Blocking Regulation but other retail websites will need to comply in 2018

Written on 23 Nov 2017

EU negotiators agree to “end” unjustified geo-blocking

Eighteen months after publication of the legislative proposal on geo-blocking, the European Parliament, the Council and the Commission have reached a political agreement to end unjustified geo-blocking between member states for consumers wishing to buy products or obtain services online within the EU.

In a press release published on 20 November 2017, the Commission confirmed that by the end of 2018, sellers of physical goods, electronically supplied services, and services provided in a specific physical location will no longer be able to discriminate unfairly against customers from different EU member states.

While the agreement has been heralded as “an end to unjustified discrimination when shopping online” by Vice-President Andrus Ansip, the notable exclusion of copyrighted materials from the ban on geo-blocking is a significant retreat for the Commission from its initial vision of what the “end” of geo-blocking in the European online market should look like.

What does this agreement mean in practice?

On Monday, the Council, Commission and the Parliament agreed a provisional agreement on the file which will prevent certain forms of geo-blocking. The new rules define three specific situations where different treatment of customers from different EU Member States cannot conceivably be justified:

These specific situations are:

  • The sale of goods without physical delivery.
  • The sale of electronically supplied services.
  • The sale of services provided in a specific physical location.

In its press release, the Commission sets out three examples of how the ban will operate to assist consumers wishing to buy products or obtain services from different member states:

  • A Belgian customer wishes to buy a refrigerator and finds the best deal on a German website. The customer will be entitled to order the product and collect it at the trader’s premises or organise delivery himself to his home.
  • A Bulgarian consumer wishes to buy hosting services for her website from a Spanish company. She will now have access to the service, can register and buy this service without having to pay additional fees compared to a Spanish consumer.
  • An Italian family can buy a trip directly to an amusement park in France without being redirected to an Italian website.

While the agreement still has to be approved by Council and Parliament, the new rules are due to come into force nine months after the publication in the EU Official Journal, so online retailers will have to comply before the end of the 2018.

What do you need to do?

Before the Regulation comes into force, online sellers will need to make sure that their online services do not discriminate against customers on the basis of their nationality or place or residence where it cannot be objectively justified, including:

  • Re-routing customers to a different website according to their IP address, without consent.
  • Blocking customers with certain IP addresses.
  • Charging additional fees to customers from different Member States.
  • Providing a different service to customers from different Member States.
  • Providing different terms and conditions.

However the Regulation does not ban all types of discrimination and will not:

  • Impose an obligation to sell.
  • Impose an obligation to harmonise prices.
  • Prevent justifiable discrimination, for instance VAT or legal costs.
  • Require sellers to offer physical delivery across borders.

This means that it will be possible to charge different prices on different national websites, but it will not be lawful to prevent a customer in a higher price country from accessing the website (and prices) in a lower price country.

A notable absence…

After months of negotiation, the agreement reached on Monday means that the new Regulation will not prevent the geo-blocking of copyrighted materials, including video and music streaming, video games, and e-books.

Nevertheless, while copyright is currently excluded, this exclusion may be short lived: within two years of the Regulation coming into force, the Commission must assess whether to extend the scope to non-audio visual copyrighted content. We are also awaiting the final decision in the Pay TV case and potentially a Statement of Objections in the video games investigation, which may impact on the ability of rights holders to agree that their distributors will geo-block.

The “end” of geo-blocking?

The Regulation to end unjustified geo-blocking was identified as a legislative priority for 2017, and while the Commission has undoubtedly been hampered in its desire to “end” geo-blocking in all its forms by the removal of copyright from the scope of the legislation, the Regulation will nevertheless have an impact on suppliers of physical goods and other electronic services, and increase transparency of pricing in different member states.

To discuss your distribution arrangements and how to comply with the Geo-Blocking Regulation, please get in touch with one of the experts listed below, or your usual Osborne Clarke contact.