In February 2018 the EU adopted new rules (Regulation 2018/302) to prevent so-called “geo-blocking”. We have written previously on the geo-blocking proposal which can be found here: http://www.corderycompliance.com/eu-proposal-to-ban-geo-blocking/.
These new rules could have important implications for anyone doing business online.
What’s this all about?
In short, these new rules prohibit unjustified geo-blocking and other forms of discrimination based on customers’ nationality, place of residence or place of establishment in the EU – this does not mean however that the same goods or services must be offered at the same price and conditions throughout the EU.
Geo-blocking can occur both offline and online – typical online geo-blocking would be where users are rerouted and offered differing conditions and prices in relation to their IP address.
What are the key things I need to know about the new rules?
The new rules deal with the following key areas:
- (a) Access to goods and services – traders must not apply differing trading conditions in relation to the nationality of a customer, or where they live or where they are established if a customer seeks to:
- Buy goods from a trader and either those goods are delivered to a location in an EU Member State to which the trader offers delivery in the general conditions of access (T&Cs, including net sale prices, etc.) or those goods are collected at a location agreed between the trader and the customer in the EU Member State in which the trader offers this option in the general conditions of access;
- Receive electronically supplied services (e.g. cloud services, firewalls etc.) from a trader, other than services the main feature of which is the provision of access to and use of copyright protected works or other protected subject-matter (e.g. on-line films and games, e-books etc.);
- Receive services from a trader, other than electronically supplied services in a physical location in an EU Member State where the trader operates (e.g. car rental, entrance tickets for leisure parks etc.);
- The above prohibition on applying differing general conditions of access to goods and services does not prevent traders from offering general conditions of access, including net sales prices, which differ between EU Member States or within a Member State and which are offered to customers on a specific territory or to specific groups of customers on a non-discriminatory basis;
- (b) Online interfaces – traders cannot, in relation to the nationality of a customer, or where they live or where they are established:
- Through the use of technological measures or otherwise, block or limit a customer’s access to the trader’s online interface (e.g. website, mobile aps etc.);
- Redirect that customer to a version of the trader’s online interface that is different to the interface to which the customer initially sought access, by virtue of its layout, use of language or other characteristics that make it specific to customers with a particular nationality, place of residence or establishment, unless the customer has specifically consented to that redirection;
- The above prohibition on online interfaces blocking or limiting or redirecting does not apply if these actions are necessary to ensure compliance with legal requirements;
- (c) Non-discrimination for reasons related to payment – traders must not, within the range of means of payment accepted by the trader, apply, in relation to the nationality of a customer, or where they live or where they are established, the location of the payment account, the place of establishment of the payment service provider or the place of issue of the payment instrument in the EU, different conditions for a payment transaction where:
- The payment transaction is made through an electronic transaction by credit transfer, direct debit or a card-based payment instrument within the same brand and category;
- Authentication requirements are fulfilled in line with certain EU rules; and,
- The payment transactions are in a currency that the trader accepts;
- The above prohibition on payment discrimination does not prevent a trader from: withholding the delivery of goods or the provision of services until the trader has received confirmation that the payment transaction has been properly initiated; or, requesting charges for the use of a card-based payment instrument for which interchange fees are not regulated under certain EU rules, and for those payment services to which certain EU rules do not apply unless the prohibition or limitation of the right to request charges for the use of payment instruments in accordance with certain EU rules has been introduced in the law in the EU Member State to which the trader’s operation is subject – those charges must not exceed the direct costs borne by the trader for the use of the payment instrument;
- (d) Passive sales – obligations on a trader requiring them to not respond to unsolicited requests from consumers, i.e. restrictions on so-called passive sales, concerning access to online interfaces, access to goods or services or payment discrimination are automatically void and so unenforceable under the new rules (to apply from March 2020 where certain conditions are met).
Are any specific areas excluded?
The new rules do not apply to certain areas currently excluded by certain EU rules on services, including transport, financial services, healthcare services, audio-visual services etc.
Do these rules only cover B2C transactions?
No. The new rules apply in principle to both B2C and B2B transactions insofar as B2B transactions take place on the basis of general conditions of access (T&Cs, including net sale prices, etc.) and the transaction is for the sole purpose of end use (i.e. made without the intention to re-sell, transform, process, rent or sub-contract).
Do these rules apply if I am outside the EU?
Yes. The new rules have extra-territorial effect, i.e. they will apply to traders in third countries selling (or intending to sell) goods or services to customers in the EU.
When do these new rules apply from?
These new rules will come into full effect from 3 December 2018.
What about enforcement?
It is for the EU Member States to set penalties for non-compliance and enforce these new rules – divergence on enforcement can therefore be expected.
In light of Brexit will these new rules apply in the UK?
In anticipation of the UK’s expected withdrawal from the EU (as of 29 March 2019) the European Commission released an official Notice in March 2018 about the geo-blocking rules and the UK, which can be found here: https://ec.europa.eu/info/publications/geoblocking_en. This indicates that, subject to any transitional arrangements that may be in place at the time of withdrawal, the new rules will not apply to the UK. The Brexit negotiations are still on-going at the time of this article being published and so the Commission’s Notice doesn’t seem to take into consideration that the UK intends to have all EU law existing prior to withdrawal to apply in the UK – as with so many aspects of Brexit we will just have to see how this all plays out but it is likely that the rules will apply to the UK.
These new rules can be found here:
There are more general comments on the effects of Brexit on areas like retail in our film and alert here http://bit.ly/brexfilm.
What should I be doing next?
Businesses should review their existing terms and conditions, payment mechanisms/requirements, distribution agreements/policies, and, logistics and delivery systems, (and especially whatever they may be doing in terms of website rerouting), in order to ensure that they don’t fall foul of the rules.
For more information please contact André Bywater or Jonathan Armstrong who are commercial lawyers with Cordery in London where their focus is on compliance issues.
|Jonathan Armstrong, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH||André Bywater, Cordery, Lexis House, 30 Farringdon Street, London, EC4A 4HH|
|Office: +44 (0)207 075 1784||Office: +44 (0)207 075 1785|