The European Commission published on 18 March 2016 three different reports on the “geo-blocking” phenomenon: the report on the public consultation launched in 2015, the initial findings from the e-commerce antitrust sector inquiry and the report on the mystery shopping survey on territorial restrictions in the Digital Single Market.
Antitrust sector inquiry: initial findings
The Commission declared that “geo-blocking is widespread in the EU”, according to the initial findings from sector inquiry. Ecommerce Europe believes, in principle, that consumers buying products and/or services online should not be subject to restrictive business practices when there are no justified grounds for the seller to do so. However, we want to stress the importance of recognizing online merchants’ fundamental rights to economic and contractual freedom based on reasonable grounds and this means that a web shop may decide not to sell or deliver to a consumer in another Member State or apply a different price for the same product sold online.
On the one hand, according to the initial findings, it seems that in some cases consumers are subject to restrictive business practices because of agreements between suppliers and distributors. Ecommerce Europe believes – as the Commission – that such cases fall under the scope of EU competition law and need to be assesses on a case-by-case basis. On the other hand, the Commission’s findings indicate that 38% of online retailers prevent or restrict consumers from shopping online cross-border in EU based on their location. Normally, this is a result of a unilateral business decision of retailers. As already stated above, there mostly will be objective reasons for a merchant to decide not to sell or deliver to the consumer’s location or to restrict distribution to a certain geographical area.
In particular, Ecommerce Europe is pleased to see that also the European Commission is convinced that differing legal frameworks across the EU is one of the main causes for traders deciding not to sell/deliver to certain consumers’ locations. According to the preliminary analysis of the Ecommerce Europe’s Cross-border E-commerce Barometer 2016, differing legal framework is still one of the most difficult barriers to overcome for 59% of the companies that sell cross-border. Dealing with 28 different sets of rules for data protection, privacy, consumer and contract law does turn out to be burdensome for online merchants and this is one of the main reasons why many of them prefer not to sell to a specific market if it is not worth from a business or service perspective.
Results of the geo-blocking public consultation not statistically representative
After having analyzed the report on the public consultation on geo-blocking – launched in 2015 – Ecommerce Europe agrees with the Commission that the results are not statistically representative and, in our opinion, they do not give a complete picture because the majority of responses came from consumers or consumers’ representatives and respondents were mainly based in Germany and three other Members States.
Ecommerce Europe, as well as other stakeholders, was critical of the European Commission’s perceived understanding of geo-blocking in the context of the consultation. In particular, stakeholders from the business side criticized the wide and unspecified definition and forms of geo-blocking with as result that many of them decided not to participate in the consultation. In our view, it is essential to frame the geo-blocking phenomenon in the good terms, to ensure that the economic freedom of the merchant will be guaranteed and that only unjustified forms of geo-blocking and geo-differentiation practices will be tackled (see Ecommerce Europe’s Position Paper for more details).
According to the results, “two out of three companies surveyed consider re-routing or refusal of access to a website to be important or very important barriers”. However, Ecommerce Europe understands these results in a slightly different way, namely that two out of three companies need to reroute consumers or refuse them the access to the website because of important barriers to cross-border e-commerce. Ecommerce Europe believes that normal rerouting with the choice for the consumer to go back to the preferred website (even though he/she might not be able to complete the purchase) should not be considered geo-blocking ‘in the strict sense’. Online merchants mostly reroute to give consumers a better, tailor-made shopping experience – for instance, in their own language and currency, and adapted to the local distribution and payment systems. Ecommerce Europe views this practice as personalization and differentiation of the offer, and not as discrimination.
However, totally denying access to a web shop or automatic rerouting without any choice to go back to the preferred website – based on the location of the consumer – are, in principle, unjustified practices, unless there are legal justifications for it, for example age restrictions for minors or specific national gambling legislation. Therefore, Ecommerce Europe recommends that any new legislative proposal should focus only on the geo-blocking in the strict sense.
First key findings of the mystery shopping survey on territorial restrictions and geo-blocking
The European Commission’s large-scale mystery shopping survey, carried out in December 2015, sampled more than 10,000 web shops to document territorial restrictions and geo-blocking in the EU. In its initial report, the Commission defines three forms of “territorial restrictions”: the refusal to sell to another Member State at any stage in the process of placing an order; automatic and forced re-routing to a different country website; or changing the terms and conditions and pricing according to the country of residence of the consumer.
Ecommerce Europe is pleased to note that also in this case the Commission has a common understanding that ‘geo-blocking’ practices “may be necessary to comply with legislation”, as already stated above. However, in its report, the Commission seems extending too much the notion of “geo-blocking”, in particular in relation with parcel delivery and online payments. Therefore, we want to point out that cross-border parcel delivery systems as well as differences in online payment security systems, should be clearly considered as ‘objective criteria’ that could justify the fact that traders apply different prices or decide not to sell/deliver to a certain geographical area. In fact, in Ecommerce Europe’s view, high shipping costs, high level of fraud risks in online payments in certain Member States and high after-sales service costs do justify geographical sales restrictions by online merchants or make them decide not to direct their commercial activities to certain areas.
Overall, Ecommerce Europe welcomes the survey’s findings that only 2% of surveyed websites engaged in automatic re-routing or the complete blocking of access, as they confirm our figures that the majority of online merchants do allow consumers to access their website and inform them, at a reasonable point in the process, of geographical restrictions in place. Ecommerce Europe, however, believes the blocking of a consumer at the payment stage, as was in 26% of cases, to be at a point too late in the purchase process. Consumers should be informed in a transparent and easy way on geographical restrictions before they enter the actual ordering process, as already established by the Consumer Rights Directive.
The European Commission is supposed to present its legislative proposal (most likely, a Regulation) on 25 May 2016. Ecommerce Europe is currently meeting with all policy makers and other stakeholders involved in this process to ensure that the interests of the e-commerce sector will be taken into account and that the proposal will not impose excessive burdens on the business.
For more information, please read the Ecommerce Europe’s Position Paper on Geo-blocking.