Geo-blocking is a discriminatory practice on a national or territorial basis used by online sellers and service providers to prevent online users from accessing content or using digital shops and services. By analysing the customer’s IP address online traders or content providers assess the place of establishment/residence or the nationality of the latter and impose unjustified price adjustments or absolute restrictions on benefiting from the goods or services. Traders also utilize copyright and licensing contracts in order to artificially establish varying prices between customers in different geographical locations around the globe. In this way, customers face differences not only when purchasing online but also when travelling to other Member States to buy goods or services physically.
Such barriers are segmenting the market artificially and are thus interfering with the development and the aims of the EU digital single market.
Geo-blocking and discriminatory practices in general should not be mistaken and identified with transactions which are justified in relation to a number of relevant factors such as financial implications and taxes, in particular: delivery prices, dynamic pricing practices over time, the free choice a business has to set up its distribution system in compliance with the European competition law, etc. Such practices, as long as they do not rely solely on the customer’s residence, are of non-discriminatory nature. Also, small businesses cannot be accused of discriminatory geo-blocking where they do not possess the financial and organizational resources to deliver their goods or services across the EU.
In an attempt to deal with geo-blocking the European Commission has proposed a draft Regulation in 2016 which clarifies the specific situations where there can be no justified reasons for geo-blocking or other discriminatory practices based on nationality, residence or location. The Regulation bans all cases of blocking the access to websites to users for geographical reasons. Furthermore, all automatic re-routing of the customer from the originally sought website to a nationally-specific version is prohibited without the explicit prior consent of the user. Sellers remain free to choose the type of acceptable payment but would not be allowed to “apply different payment conditions for customers for reasons of nationality, place of residence or place of establishment”. Finally, the Regulation defines specific cases where different conditions cannot be imposed to users in relation to their nationality or place of residence:
- owhen a customer buys goods, such as electronics, clothes, sportswear or a book, which the trader does not deliver cross-border;
- owhen a customer buys an electronically delivered service, such as cloud services, data warehousing, website hosting;
- owhen a customer buys a service which is supplied in the premises of the trader or in a physical location where the trader operates, such as a hotel room or a rental car.
The draft rules remain to be finalized with the European Parliament.