On 18 March 2016 the European Commission (the ‘Commission’) published an issues paper on geo-blocking practices in e-commerce, containing the Commission’s initial findings on the prevalence of geo-blocking in the EU. The issues paper and the preliminary findings contained therein are part of a wider investigation into the EU e-commerce sector by the Commission, which was initiated in May 2015.
In the issues paper the Commission has come to the (preliminary) conclusion that geo-blocking is widespread in the EU, which will certainly encourage the Commission to further pursue its aims of tackling the existing barriers to cross-border e-commerce in the EU as part of its Digital Single Market Strategy.
Geo-blocking occurs where online retailers or digital content providers prevent consumers from purchasing goods or accessing digital content on the basis of their location or Member State of residence. Such practices may be the result of a unilateral decision of an online retailer or digital content provider. Provided that the company involved does not hold a dominant position on the relevant market, a unilateral decision not to sell abroad does not raise any issues from an EU competition law perspective. This has also been noted by the Commissioner in charge of competition, Margrethe Vestager, in the Commission’s press release announcing the publication of the issues paper. However, geo-blocking practices can also be the result of contractual arrangements between suppliers / producers and distributors. Such contractual arrangements can impose restrictions on cross-border selling by distributors that infringe EU competition law, which has to be assessed on a case-by-case basis.
Initial findings on geo-blocking
The Commission’s e-commerce sector inquiry focusses both on the online retail of consumer goods and the online distribution of digital content. With regard to the online retail of consumer goods, the Commission has sent questionnaires not only to online retailers, but also to providers of online marketplaces and price comparison tools. As regards the online distribution of digital content, the issue paper focusses exclusively on geo-blocking at the retail level.
Geo-blocking appears to be most prevalent in the online distribution of digital content, with 68% of providers replying that they use geo-blocking to prevent consumers located in other Member States from accessing digital content. Moreover, 59% of the content providers noted that they are contractually required by suppliers to do so.
Of the responding retailers 38% indicated that they use geo-blocking. The percentage of retailers that reported contractual obligations to use geo-blocking imposed by suppliers was considerably lower at 12%, although certainly not negligible.
The Commission did note that, due to the varying number of respondents per Member State, these findings are not statistically representative of the EU e-commerce market overall, but nonetheless offer valuable insight in the prevalence of geo-blocking practices in the EU.
E-commerce sector inquiry
As indicated above, the issues paper on geo-blocking is part of a wider sector inquiry into the e-commerce sector in the EU. The Commission expects to publish a Preliminary Report of its inquiry in mid-2016. This Preliminary Report will cover not only geo-blocking, but also other competition issues. A Final Report is expected in the first quarter of 2017.
Online distributors and suppliers
The online distribution of consumer goods, services and digital content has been one of the main focus points of the Commission and other (national) EU competition authorities for the last couple of years. To avoid investigations and possible sanctions by competition authorities, online distributors and their suppliers should ascertain that their contractual arrangements are compliant with EU competition law.