EC Investigation Leads to New Regulations on Geo-Blocking

According to a new report by the European Commission, two-thirds of European digital content providers are blocking cross-border online sales into certain other EU member states. It was also estimated that 40 percent of physical goods retailers engage in this practice as well. What is geo-blocking? Geo-blocking is the practice of either blocking access to websites from customers that are located outside a particular jurisdiction, or rerouting them to a different website.

In an effort to manage cross-border e-commerce between its member states, the European Commission launched an investigation. The purpose of this investigation – which took place last year – was to examine the prevalence of geo-blocking and evaluate if there was a competitive basis to investigate certain, key companies. The main concern of the European Commission is the contractual agreements between companies that result in geo-blocking (of digital content and physical goods).

Even with their concerns, the European Commission acknowledged the reasons why these businesses may feel the need to refuse to sell into another country. First, the costs incurred by these businesses to expand an online business cross-border. Second, a company’s online payment provider might refuse to accept payment from IP addresses in certain countries, in an effort to reduce fraud.

According to commissioner in charge of competition policy, Margrethe Vestager, “Where a non-dominant company decides unilaterally not to sell abroad, that is not an issue for competition law. But where geo-blocking occurs due to agreements, we need to take a close look whether there is anti-competitive behavior, which can be addressed by EU competition tools.”

After its initial reports were released in March, the EC continued working on its final report. On May 25th, the European Commission published a draft of the new regulation. This regulation proposes prohibiting geo-blocking and various related acts by traders that discriminate (by nationality, country of residence or establishment within the EU). While the scope is broad, it would ultimately prevent geo-blocking and discrimination in sales, pricing or payment conditions for online sales.

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