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Competition Law

Analysis - debate - current awareness

Field Fisher Waterhouse , 01 APR 2016

Geo-blocking dangers

John Cassels


Geo-blocking dangers

The initial findings of the EU's e-commerce inquiry point to an imminent clampdown on the practice of "geo-blocking": preventing consumers from viewing or buying goods and services online outside their home territory.

The inquiry was launched in 6 May 2015 to allow the Commission to identify possible restrictions or distortions of competition in European e-commerce markets. Currently, only 15% of consumers purchased online from a seller based in another EU Member State and the Commission considers that to be a problem. The inquiry will be relevant to every business that sells or facilitates the sale of goods or services online in the EU.

Since launching the inquiry, the Commission has sent questionnaires to several thousand online retailers, marketplaces, suppliers/manufacturers and digital content providers. Its initial findings are based on replies from more than 1,400 retailers, marketplaces and digital content providers from across the EU. Responses from suppliers/manufacturers will be covered in a formal Preliminary Report expected to be published in mid-2016.

The message from the initial findings is clear: geo-blocking is widespread. On an EU-wide basis, some form of geo-blocking is used by:

  • 38% of retailers of consumer goods and services
  • 43% of marketplaces when selling online
  • 68% of providers of digital content
Geo-blocking is not necessarily unlawful. Much geo-blocking is undertaken unilaterally by retailers for reasons such as language, delivery costs or payment costs. Unilateral business decisions are not regulated by the EU competition rules, except in the case of businesses that are dominant, and that is not the main focus of the inquiry.

Importantly, though, a number of retailers (12% average across the EU) reported that they face direct or indirect contractual restrictions on their ability to sell cross-border. Contractual restrictions on cross-border sales are a serious infringement of EU competition law and can lead to substantial fines being imposed.

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The product categories most affected by such restrictions were:

  • Clothing, shoes and accessories
  • Consumer electronics
  • Sports and outdoor equipment
Contractual restrictions were also identified in cosmetics and healthcare, household appliances, toys and childcare, house and garden, computer games and media.

Competition enforcement action can be expected against contractual geo-blocking restrictions. All companies active in these sectors, and online sales generally, would be well-advised to review their distribution and sales practices.

In addition to enforcement action, the inquiry is also expected to lead to a revision to, or clarification of, the EU competition rules affecting resale and distribution.

If you would like to discuss these issues further, please contact us.
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