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Geo-blocking Regulation: What does it mean for competition law?

  • United Kingdom
  • Competition, EU and Trade

21-12-2018

The Geo-blocking Regulation (the “Regulation”), part of the EU’s Digital Single Market Strategy, entered into force in the UK on 3 December 2018 through the Geo-blocking (Enforcement) Regulations 2018.

The Regulation prevents businesses from discriminating between customers based on their nationality, place of residence or place of establishment within the EU. It aims to avoid the artificial segmentation of the Single Market and to give customers better cross-border access to goods and services within the EU. Importantly for competition law, under the Regulation, any restrictions on traders from using the Internet to sell goods (“passive sales”) will be automatically null and void, regardless of whether the restrictions satisfy the terms of the EU’s Vertical Agreements Block Exemption Regulation (“VABER”).

This briefing focuses on the relationship between the Regulation and competition law.

What is geo-blocking?

The Regulation prohibits geo-blocking. This describes any discriminatory practice that prevents customers located in one EU Member State from accessing and purchasing goods or services from a website based in another EU Member State. Furthermore, the Regulation prohibits traders from applying discriminatory terms and conditions to foreign customers or discriminating against customers on the basis of their payment method.

Restrictions on passive sales

The Regulation prohibits passive sales restrictions on traders. This includes blocking website access, automatically re-routing a customer to a local website site or refusing delivery or payment based on the location or place of residence of the customer. All such restrictions will be automatically null and void.

As the VABER exempts passive sales restrictions in certain circumstances, the implementation of the Regulation means that such restrictions will now need to be assessed not only from a competition law perspective but also under the terms of the Regulation.

The Regulation applies to business to consumer relationships and may apply to business to business relationships as long as the transaction takes place on the basis of general conditions of access and for the sole purpose of end use by the business customer. It is not, however, necessary to assess restrictions on passive sales against the provisions of the Regulation where they apply to sales to customers who intend to resell the goods, i.e. where the customers are not the end users. These customers are outside the scope of the Regulation. Passive sales restrictions in these agreements will still, however, need to be assessed under competition law.

Enforcement

The Competition and Markets Authority is responsible for enforcing the Regulation in the UK alongside every local weights and measures authority in Great Britain and the Department for the Economy in Northern Ireland.

The prohibition concerning restrictions to passive sales applies now in respect of distribution agreements entered into from 2 March 2018, and from 23 March 2020 for distribution agreements entered into before 2 March 2018.

Comment

In the context of competition law, businesses should review their distribution agreements for any restrictions of passive sales. While the restrictions may be acceptable under the VABER, it is important to assess whether they are compatible with the Regulation to avoid potential sanctions.

Given that the Regulation will not apply until 23 March 2020 for agreements entered into before 2 March 2018, businesses are encouraged to take the opportunity to proactively review their agreements and any restrictions of passive sales.

More generally, businesses should review the access to their websites to ensure that technical modification is not required, for example, in relation to auto-forwarding of customers in online shops, to ensure compliance with the Regulation.

Finally, businesses should review their current terms and conditions to ensure that they are not discriminatory to foreign customers. It should be considered whether any new terms and conditions are needed to distinguish between customers who are outside of the scope of the Regulation and those customers who are protected by the Regulation, i.e. end users.

For more information contact:

Ros Kellaway - roskellaway@eversheds-sutherland.com

Annabel Borg - annabelborg@eversheds-sutherland.com

Connor Atkinson - ConnorAtkinson@eversheds-sutherland.com

For more information contact

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